Policies could force paper industry abroad - CPI

Writing to the UK Chancellor on behalf of the country’s paper-based industries, David Workman said firms need internationally favourable energy prices to remain competitive and to continue to attract inward investment.  

He highlighted the Chancellor’s forthcoming Autumn Statement as a forum for addressing some of the concerns.

“An example of misguided policy is the forthcoming Carbon Price Floor (CPF), through which the cost of electricity in the UK will be inflated as additional taxation is applied to fossil fuels when used to generate electricity. ​

“This is ​presented as a green measure, but fails in two key areas. Technically, the aspiration to reduce carbon emissions will not be met because the overall EU emissions cap is not reduced, meaning industry elsewhere in the EU will benefit from lower costs.” ​

He added that UK industry will be locked into guaranteed higher energy prices than that elsewhere.

Increasing costs​

UK paper manufacturers face increases in costs amounting to several £100ms between 2013 and 2020, according to the CPI.

“National carbon accounting focuses on direct emissions in the UK, meaning swapping UK manufactured goods for imported ones simply offshores the emissions, resulting in no reduction in global emissions. ​

"Of course alongside the emissions being offshored, so also are the jobs and wealth creation that we should be benefitting from as we seek to re-balance the economy​,” said Workman.

The CPI acknowledged that the coalition government has helped to mitigate the effects of achieving carbon reduction and renewable targets and called the £250m support package for Energy Intensive Industries (EIIs) announced in the 2011 Autumn Statement “a welcome measure​” before adding it is a “mere drop in the ocean of what is needed​” to offset the cumulative cost impact of current policy.  

He advised the Chancellor that the Autumn Statement is critical because next year marks the start of the next phase of the EU ETS, the introduction of the CPF and new Climate Change Agreement targets.

Industry suggestions​

Workman proposed a number of measures industry want to see in the statement including abandoning the CPF.

• Rethink the CPF cost escalator – an increase in electricity related carbon costs from effectively zero in 2012 to £33 (per tonne carbon dioxide) in 2020 is simply competitively unsustainable.
• Reward and support investment in on-site electricity generation for self-use by exempting it from taxation – present policies are destroying the economic case to invest.
• Accept that for energy security a mix of generation technologies is required and that gas will have a major role to play through to at least the 2030s.

The CPI represents the supply chain for paper, including recovered paper merchants, paper and board, manufacturers and converters and corrugated packaging producers.