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Current issues - Green taxes

Climate change and energy policies

The UK cement industry supports the policy of market mechanisms rather than direct taxation to help improve energy efficiency and reduce carbon emissions. As an energy intensive industry the UK Cement sector is subject to a number of climate change and energy policies:

EU Emissions Trading Directive (EU ETS)

The third phase of EU ETS started on 1st January 2013 and will run to 2020. Free emissions allowances are granted to participants based on historic emissions.

MPA Cement members welcomed the EU agreement on the Energy and Climate Change package at the end of 2008. This acknowledged the need to recognise the potential economic effects on energy critical sectors such as cement and hence not expose them to unfair international competition leading to carbon leakage – where manufacturing is moved to less carbon-restrained countries.

Climate Change Levy and Climate Change Agreements:

The climate change levy (CCL) applies to a number of energy and fossil fuels used by businesses but there are certain exclusions/reductions. One reduction in the level of tax is via participation in a Climate Change Agreement (CCA).

CCA’s allow energy-intensive industries to obtain a 65% discount from the Climate Change Levy applied to fossil fuels and a 90% discount from the CCL applied to electricity, provided they meet challenging targets for improving their energy efficiency or reducing their carbon emissions.

MPA Cement members have participated in a CCA since the scheme started in 2001. The first phase of CCA’s required the cement sector to achieve a 30% improvement in specific energy consumption (energy consumed per tonne of cement produced) by 2010 compared to 1990, The actual improvement achieved was 44.8%.

MPA Cement welcomed the announcement by the Chancellor in Budget 2013 to exclude mineralogical processes from the Climate Change Levy.

Energy Efficiency Directive

The Directive aims to create a common framework for the promotion of energy efficiency in the EU to reach the target of 20% energy savings by 2020. Initially the main impact on cement manufacturers is the requirement to undertake regular mandatory energy audits at the latest by 30 June 2014 and then every four years.

In addition to policies that directly affect UK Cement Manufactures the sector is also burdened by the costs passed on by other sectors, such as power generators, as a result of climate change and energy policies. Policies such as Carbon price Support, Feed-in-Tariffs and Contracts for Difference could result in a cost to cement manufacturers of €80m by 2020 if no compensation is received.

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