UK climate change policy is a crowded area. Manufacturers are directly subject to the Climate Change Levy. Some will be regulated by the EU Emissions Trading Scheme (EU ETS) and/or have a Climate Change Agreement (CCA). Many now fall under the Carbon Reduction Commitment Energy Efficiency Scheme (CRC).
Good regulation in this area should be judged against four key tests. It should be as simple as possible and not administratively burdensome. It should provide clear, reliable and transparent incentives. It should be well targeted. And it needs to take clear account of the impact on competitiveness.
The current policy framework fails when judged against all of these tests. Manufacturers face a confusing mix of regulatory sticks and incentives. Policy overlaps are frequent and reporting requirements are not harmonised, creating immense complexity and administrative burden. And the cumulative impact of these policies on international competitiveness, particularly in the absence of an international agreement on climate change, is the source of intense concern to many sectors.
We are challenging government to rethink how it regulates manufacturers in this area. We recommend that government rethink price signals, policy incentives and targeted support. At the heart of our proposals is a call on government to take into account the unique challenges faced by individual industrial sectors. It comes also with a warning shot: Competitiveness concerns must be taken more seriously. In particular, government must routinely consider the cumulative impacts of its policy on manufacturers’ ability to compete and remain profitable.