Two Ineos companies are among the UK’s most energy-intensive industries to receive millions of pounds in compensation for the costs of carbon emission schemes.
A committee of the UK parliament voted this afternoon to continue payments for another year to Ineos Chemical Grangemouth Ltd and Ineos ChlorVinyls Ltd, both majority owned by the billionaire, Sir James Ratcliffe.
The companies, which will receive £30m-£300m, also include British Steel Ltd, Celsa Manufacturing (UK) LTd, CF Fertilisers UK Ltd, DS Smith Paper Ltd, Kimberly Clark Ltd, Outokumpu Stainsless Ltd, Palm Paper Ltd, Runcorn MCP Ltd, Sabic UK Petrochemicals Ltd, Tata Steel UK Ltd and UPM-Kymmene (UK) Ltd.
The UK is leaving the main scheme, the EU’s Emissions Trading System (ETS), on 31 December 2020. The government has not yet confirmed whether a UK emissions trading scheme or a carbon emissions tax will operate from 1 January 2021 if no agreement is reached with the EU.
But a motion in the name of the energy minister, Nadhim Zahawi, sought approval for compensation payments to continue under the Industrial Development Act until the end of the 2021-2022 financial year.
Amanda Solloway, a junior energy minister, said the companies on the list employed about 250,000 people and represented about 2% of the UK economy. In 2018, they generated 27% of total UK exports, she said.
The government had compensated certain energy intensive industries for the indirect emissions costs from the EU ETS since 2013, Ms Solloway said.
She said carbon pricing policies created “a cost differential between the UK and other countries”. This increased the risk of “carbon leakage”: where businesses transferred production or investment to other countries with laxer emission constraints or lower carbon pricing policies. The minister said:
“This could in turn increase global greenhouse gas emissions.”
The government recognised that carbon-intensive industries must play their part in reducing industrial emissions, Ms Solloway said. But she added:
“It is imperative that we continue to support these industries so vital to the UK economy.”
The shadow business minister, Matthew Pennycook, said Labour supported attempts to minimise carbon leakage by ensuring energy intensive industries were not put at a competitive disadvantage.
“It is obviously important that UK manufacturing is able to remain competitive during the transition to a low carbon economy.
“We recognise there is a need to continue to provide compensation for the indirect emissions costs of whatever carbon pricing policy replaces the EU emissions trading system.”
But Mr Pennycook said there were only eight remaining parliamentary sittings while the UK remained in the EU ETS.
“Surely the minister cannot believe it is fair that the emitters in question still have no idea what arrangements they will be operating under in just three-and-a-half weeks’ time.
“What is stopping the government making clear to those affected what fall-back carbon pricing arrangements will operate in the UK from the first of January.”