In a period of difficult economic recovery what the UK needs most is sustainable growth. However if this is to be truly sustainable, we need to both rebalance and decarbonise our economy. The problem is that policies in these two areas are often pulling in different directions: This may be a natural reaction to our lack of progress, but it needn't be like this. Our belief is that rebalancing our economy goes hand-in-hand with decarbonising it and today we have launched a report to show how this can be done.
We therefore welcome the government's announcement in the Autumn Statement of a package of measures to help protect the competitiveness of UK energy intensive industries.
The government have recognised that these industries will play an integral role at the heart of the UK's plans to decarbonise the economy. From the steel in wind turbines, to the chemicals used in energy-saving lighting and solutions in high speed rail, they will provide the building blocks for an energy-efficient and low-carbon economy.
The Chancellor has acknowledged that the current approach to UK climate change policy is increasingly putting their future at risk. Policies that push UK electricity prices above those of our competitors will undermine their ability to attract mobile investment and compete in international markets.
Industrial electricity prices in the UK are already far from the most competitive and additional pressure from unilateral climate policies risk investment in UK. Analysis carried out by EEF shows that in 2010 large electricity-intensive UK manufacturers paid approximately 10% more for their power than their German competitors and that in both countries, policy was a significant factor, accounting for 16% of the price. By 2013, based on existing and planned climate policies, the competitiveness gap is likely to widen to around 15% with the introduction of the UK's unilateral 'carbon price floor'. The result of this will be that by 2013 the impact of climate policies could account for about 25% of the price paid by the most electricity-intensive industries in the UK.