Tata Steel welcomes energy costs relief in UK

Tata Steel has welcomed as “vital” measures introduced in the British budget last week, designed to help the country’s energy-intensive industry cope with spirally energy costs.

Speaking as Britain’s Chancellor of the Exchequer George Osborne visited the company’s steel plant in Port Talbot, South Wales, Karl Koehler, the Chief Executive of Tata Steel’s European operations, welcomed measures he said would help forge a “more competitive and sustainable future” for the company’s British steel plants at a time when European demand remained well below pre-crisis levels.

“The measures announced in the Budget to introduce relief against the rapidly rising costs of energy taxes, which pose a very real risk to Britain’s foundation industries, are welcome. The Government has listened to the concerns of the foundation industries by introducing a limit on these costs, particularly the renewables obligation – after they have peaked over the next two years.”

Capping measures In the face of urgent calls from industry about the impact that Britain’s high energy costs could have for the competitiveness of its manufacturing sector, British Chancellor included a package of energy cost savings worth an estimated £7 billion. Crucially for the energy-intensive industry, these included capping the carbon floor price, a tax on energy usage, from 2016 onwards at £18 a tonne of C02 to the end of the decade. The Government estimates the cap could save the industry £1.5 billion in 2018 alone, and has said it will examine whether to maintain the cap into the next decade, depending on progress in reforms to the EU Emission Trading Scheme.

Compensation package The Government also said that it would extend a compensation scheme given to energy intensive users for the costs of the carbon floor price and the EU emissions trading scheme to 2019-2020. It will introduce a new compensation package from 2016 to cover the costs of higher electricity resulting from renewables obligations and feed in tariffs. As a result, energy-intensive users would be “compensated for all government policy designed to support low carbon and renewable investment up until 2019-20.” The Treasury estimates it would save the average energy intensive user up to £19 million by 2018-2019.

Tata Steel has been a vocal critic of the carbon floor price (CFP). Three years ago, when the CFP was announced, Koehler warned it represented a “severe blow to the sustainability of UK steelmaking”.