Tata Steel is gaining increasing support in the British Parliament in its opposition to the Carbon Floor Price, introduced in last week's national Budget. Some politicians are concerned that the new measures could lead to firms such as Tata Steel exiting the UK market.
Britain is the first country in the world to introduce the CFP, “a levy on coal, oil, gas and other carbon-based fuels used to generate electricity for industries such as steel.”
Ms Nia Griffith MP, secretary of the All Party Parliamentary Group (APPG) on Steel and Metal Related Industry, whose constituency is home to Tata's Trostre plant, fears that the measures, which she describes as a ‘super tax on the steel industry,' could drive companies such as Tata Steel abroad.
“The real worry, of course, is that it's not even a level playing field within Europe — we need to make sure Britain is open for business and not driving business out of the country,” she told
Tata Steel has been a vocal critic of the CFP, which it has argued will make the British steel industry uncompetitive even within Europe, “a region that has already lost much of its competitiveness internationally due to a slew of regulations.”
Tata Steel has warned the CFP could cost its UK operations £20 million a year by 2020, while Chief Executive of Tata Steel's European operations, Mr Karl-Ulrich Koehler, warned the measures represented a “potentially severe blow to the sustainability of UK steelmaking.”
Tata Steel has not indicated any intention to leave the UK. “Tata Steel is fully committed to its UK operations, but is concerned about the effects the new Carbon Floor Price might have on its international competitiveness,” a Tata Steel spokesperson told Business Line .
In particular there is a possibility of the CFP further encouraging carbon leakage, whereby overseas steelmakers, most of them enjoying environmental regulations that are less strict than in the UK, are able to take advantage of this competitive advantage to win UK market share. The CFP would not reduce carbon emissions, but merely cause them to be generated offshore.
The issue is gaining increased public attention, with a debate taking place in Parliament last week.
“The government is asking the private sector, especially manufacturing, to create jobs, but that will not happen if we impose certain conditions and have carbon leakage,” warned Labour MP, Ms Jessica Morden, who chairs the APPG on Steel, who also warns that firms could exit the UK.
“They will be able to produce steel with the same amount of emissions and we will have lost the industry.”
Members of the APPG, along with the APPG on Energy Intensive Industries group, have been keeping up the pressure on the Government to rethink the CFP, through debates, Parliamentary questions and meetings with ministers, says Ms Griffiths.
“We want to see a willingness to re-think,” she said. “We want them to sit down with energy intensive users and work something sensible out. Emissions do need to be reduced, and the industry clearly recognises this, but I cannot see how they can go it alone. We need to unpick the proposals and see how we can create a level playing field.”