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CBI welcomes fourth carbon budget, but UK manufacturers say it will damage competitiveness

Louise Bateman
18th May 2011
The UK’s largest business group, the CBI, has come out in support of the Government’s decision to back independent advice to set ambitious new targets to reduce carbon emissions, but UK manufacturing body, the EEF, described the carbon budget as a "bad decision".
The CBI said it supported the Government’s decision, announced yesterday, to back the Committee on Climate Change (CCC)’s 'Fourth Carbon Budget’. The budget sets a legally-binding target to reduce greenhouse gas emissions by 50 per cent by 2025 on 1990 levels. However, UK manufacturers’ organisation, EEF, said it was disappointed by the decision because it risked damaging the UK’s competitiveness abroad.

"On its own this is a bad decision for manufacturing," said EEF chief executive, Terry Scuoler.

Yesterday, Energy and Climate Change Secretary Chris Huhne confirmed to Parliament that the Government would follow the advice of the CCC and set a limit on the total amount of greenhouse gases to be emitted by the UK between 2023 to 2027 to 1950 million tonnes of carbon dioxide equivalent, a cut of 50 per cent on 1990 levels. 

"Today’s announcement will give investors the certainty they need to invest in clean energy. It puts Britain at the leading edge of a new global industrial transformation as well as making good our determination that this will be the greenest government ever," said Huhne. 

Concerns over competitiveness
The carbon budget will put the UK on course to cut emissions by at least 80 per cent by 2050 and put the country at the forefront of the battle on climate change. But, it has also raised concerns – inside and outside Government – that it could put the UK economy at an unfair disadvantage with other economies with less stringent targets. 

Before yesterday’s announcement, it is understood Business Secretary Vince Cable, and the Chancellor, George Osborne, were both opposed to such tough targets, believing they might put UK jobs and the economy at risk. 

In an apparent bid to appease opposition from other Cabinet Ministers, Huhne told Parliament that the budget would be reviewed in 2014 and that the Government would be putting together a package of measures to help energy intensive industries adjust to the impact of the target on their competitiveness.

"As part of the transition to a low carbon economy, we need to ensure that energy intensive industries remain competitive and that we send a clear message that the UK is open for business," he told MPs. "Before the end of the year we will be announcing a package of measures for energy intensive businesses whose international competitiveness is most affected by our energy and climate change policies."

But, the EEF said the measures did not go far enough. "The Government must move quickly to address the competitiveness concerns faced across manufacturing, as well as energy-intensive industries," said Scuoler. 

Short-term policies
The CBI said it backed the Government’s decision to support energy-intensive businesses in the face of the tough carbon targets, but it also warned that the carbon budget wouldn’t be met unless short-term policies were "right".

"Ultimately, it is the success of measures such as the Green Investment Bank, electricity market reform and the Green Deal that will decide whether we meet ambitious emissions targets," said Katja Hall, CBI director of Policy. 

The CBI’s view was echoed by a number of other organsiations, including the Institution of Mechanical Engineers (IME). 

"The scale of the engineering deployment required to reduce emissions on this scale, in terms of energy, transport and other engineered infrastructure, is unprecedented and has never been seen in any industrialised nation before," said Dr Tim Fox, head of Energy and Environment at the IME. 
"There needs to be a radical step change [in policy] to make these ambitions a reality."

Richard Gledhill, head of climate change services at PricewaterhouseCoopers (PwC), said investors in renewables would see the carbon budget as "a very positive signal", while investors in "big ticket energy projects", such as nuclear and carbon capture and storage (CCS), would be encouraged by the Government’s decision. 

However, he said: "Energy companies will want to see the outcome of the Electricity Market Reform and how all the different policies tie together before they start making long-term investment decisions."

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