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Reports: Osborne poised to extend energy intensive compensation

Chancellor George Osborne is reportedly set to extend a £250m scheme designed to help businesses operating in energy intensive sectors cope with the financial impact of carbon pricing schemes.

At least 17 companies including Tata Steel, Celsa Steel and chemical firm Ineos Chlor Vinyls have been handed millions of pounds since the relief scheme was launched earlier this year, to offset the indirect cost associated with the EU Emissions Trading System (ETS).
The policy, due to end in 2014/15, also covers costs arising from the UK’s controversial carbon floor price, which is set at around £16 per tonne this year but is expected to rise to £30 in 2020 and £70 in 2030.
According to the Financial Times, the government will this week extend the relief package to 2017, in response to concerns that some businesses will face competitiveness issues as a result of higher energy prices that could result in them migrating overseas – a phenomenon known as “carbon leakage”.
However, the manufacturers’ association EEF has called for the scheme to be extended for another four years. It also wants energy intensive companies to be exempt from the costs incurred by renewable energy subsidy schemes.
Tom Crotty, director of Ineos, told the newspaper that the industry was “at a crisis point”, warning the UK would not have an energy intensive sector in 20 years’ time if the cost of climate policies continued to rise.
Karl Koehler, chief executive of Tata Steel Europe, also urged the Chancellor to show “real commitment to fair energy costs for foundation industries such as steel”.
Figures released by the government earlier this year show policies such as the EU ETS and carbon floor price will add between 10 and 30 per cent onto large energy intensive firms’ energy bills in 2020, depending on how much energy they generate on site, rising to 21 to 48 per cent by 2030.
The £250m package has been labelled a kickback to polluters by some green groups, but the government has consistently argued that it has been targeted to ensure compensation is only made available to those sectors that face the risk of carbon leakage.
A study for the EU published last month found no business in Europe has relocated to another country without greenhouse gas restrictions since the ETS was launched in 2005.