Industry calls for decarbonisation target at centre of Energy and Climate Change Policy

New approach to policy must be simpler, send clearer signals and pay greater heed to competitiveness says EEF

EEF, the manufacturers’ organisation is calling on government to introduce a decarbonisation target for 2030 as part of a revamped energy and climate change strategy to help deliver on its twin aims of promoting stronger more balanced growth and creating a low carbon economy.

The call is made in a major report published today entitled ‘Green and Growth Solutions for Growing a Green Economy’. According to EEF, this target would become the primary driver of the government’s energy policy and would help simplify the current confused and complex landscape. Furthermore, while EEF is not currently calling for the abolition of the Renewables Target it is looking for the government to produce more evidence that it is achievable, cost effective and that the claimed investments will be made in the UK.

Commenting, EEF Chief Executive, Terry Scuoler, said:

“Industry can play a major role in growing and greening our economy but until recently, there has been insufficient attention on helping to achieve this. Manufacturers have ambitions to be part of a low carbon economy but not enough of them currently see the UK as good place to invest in this area.

“We now need a newer, more positive approach that gives industry the certainty and incentives to invest and, understands the competitive pressures they are facing.

By developing this approach, the government can provide the best kind of leadership to the rest of the world by demonstrating that it can achieve success on both the Green and Growth fronts at the same time “

The report also sets out EEF’s ambitions for a Green Economy and ten recommendations that will help government work with industry to meet its challenging ambitions for reducing carbon emissions, generating continued investment for breakthrough technologies and achieving sustainable growth.

EEF believes that with the right approach, the UK can make significant progress in the following areas:

· Meeting the UK’s challenging targets for reducing carbon emissions

· Progressively decarbonising the energy supply across the economy

· Achieving more balanced growth with tangible progress in growing sectors where we have potential strengths such as Carbon Capture and Storage (CCS), marine renewable, low-carbon vehicles, engines and domestic heating solutions

· Generating continued investment by manufacturers in energy efficiency with the development of breakthrough technologies that will unlock significant reductions in emissions

· Developing much more effective international action to combat climate change with industry sectors working together on a global basis.

However its analysis suggests the current approach does not focus on the right energy targets, is over-reliant on measures that increase the cost of carbon and energy, fails to provide the certainty that business needs to invest in decarbonising the economy and contains too many complex and overlapping measures impacting on the price of carbon.

EEF backed its call with survey evidence which highlights the pressing need to provide industry and investors with long term certainty over government energy and climate change policy.

Whilst two-thirds of UK manufacturing companies see an emerging low-carbon economy as an opportunity, only one in eight viewed the UK as a favourable place to invest in this area, due to increased costs and uncertainty caused by unilateral climate change policies. Furthermore, three quarters say the cost of environmental policies has risen and will damage competitiveness whilst half see better incentives to invest in energy efficiency and low carbon technologies abroad

In response, amongst EEF’s key recommendations are:

1. Establish a 2030 energy decarbonisation target as the primary driver of its energy policy

Government should establish a 2030 carbon reduction target for energy supply to set long term ambition and certainty. The target must encompasses all forms of low-carbon energy on a time frame consistent with R&D and investment horizons.

2. Focus energy policy on Feed in Tariffs and scrap the Carbon Price Floor as soon as fiscally possible

Feed in Tariffs (FITs) provide a more cost-effective mechanism than a Carbon Price Floor (CPF) as consumers pay for low-carbon electricity only when it is generated. The government should scrap the CPF as soon as fiscally possible and deliver FITs based on Contracts for Difference planned as part the on-going electricity market reform programme.

3. Adopt just one UK carbon reduction scheme

By 2015, the government should establish just one UK carbon efficiency scheme aimed at all significant energy users regardless of energy intensity. It should achieve this by scrapping the CRC Energy Efficiency Scheme and extending Climate Change Agreements to all sectors prepared to agree to deals to improve their energy efficiency.

4. Move to Carbon Intensity Targets for certain sectors

The government should support the contribution sectors such as steel can make to reducing global emissions by developing carbon intensity targets for globally traded sectors. China already uses such targets and they have proved successful in encouraging investment in energy efficiency rather than the preferred EU approach of absolute caps on emissions.

5. Ensure the Green Investment Bank delivers for UK manufacturing

The ambition of the Green Investment Bank (GIB) should be expanded to include support for a wider range of projects including environmental technologies and not just infrastructure. In order to get the most out the GIB’s initial funding of £3bn, government should expand the scope of the fund to help manufacturing invest in further energy efficiency and low-carbon product development.

6. Seek to become a global leader in Carbon Capture and Storage

It is vital that we capitalise on the UK’s major strengths that could enable it to be a World leader in Carbon Capture and Storage (CCS) technology, which has significant global potential. The government should support industrial CCS by opening up its CCS competition and funding to industrial CCS projects.

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