Business Technology

Manufacturers call for green incentives, rather than taxes, to cut emissions

5 min read

14 September 2015

British manufacturers want tax breaks for new environmental-friendly technologies, alongside others for firms reducing emissions.

Manufacturers have called on the government to scrap green taxes which penalise business, and instead use tax incentives to “roller skate” a reduction in carbon emissions.

A report from manufacturers’ organisation EEF, called “The Low Carbon Economy – From Stick to Carrot”, comes in response to the review of carbon taxes announced by the chancellor in his recent Budget statement.

In it the EEF has urged the government to use the review to take a “bold new approach” to energy and climate change policy to cut costs for energy users, reduce red tape, as well as delivering major reductions in industrial emissions.

It has also called on ministers to recognise the use of new technologies by manufacturers which will dramatically reduce carbon emissions and widen the review of all aspects of business energy efficiency taxation. This should, it said, consider introducing tax credits as incentives for business to reduce emissions.

“The current system of energy taxation is too complex and is hurting Britain’s competitiveness. So instead of simply hitting firms with the big stick of ever-higher carbon taxes and levies, we should be offering them the carrot of tax breaks to invest in advanced low carbon technologies, “said EEF director of policy Paul Raynes.

“Government should use the energy taxation review as an opportunity to step back, and make some bold decisions that we believe can reduce energy costs as well as cutting back on carbon emissions, and improving the environment.”

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According to the EEF “following a decade of tinkering” the UK now has a bewildering mix of energy efficiency schemes and taxes that have pushed up energy costs and increased red tape without a big enough impact on emissions. This has also made the price of energy for many industries much higher than those faced by European competitors. 

EEF said the government should begin by scrapping the Carbon Floor Price and the “overly-complex” Carbon Reduction Commitment (CRC) energy efficiency scheme along with the introduction of a new energy efficiency tax discount to better drive investments in energy efficiency.

The EEF outlined figures which showed that the Carbon Price Floor will cost energy consumers £23bn between 2013 and 2020 but only £6.5bn of this will achieve its intended aim of supporting investment in renewables.

Similarly, the CRC energy efficiency scheme is estimated to cost businesses almost £900m in 2015/16 alone, but is only expected to deliver £334m of investment over the next decade. EEF said its research suggested a new incentive scheme could deliver ten times as much new green investment.

The report also called on government to develop decarbonisation action plans for key energy intensive sectors, explore financing options that can deliver the major investments required and develop a targeted innovation programme to bring forward the technological solutions required. 

“This year the government published research that indicates emissions reductions from the UK’s most energy intensive industries could be reduced by as much as 73 per cent by 2050. However, such reductions will not be easy and are estimated to cost up to £16bn, a figure UK industry cannot afford while remaining globally competitive. Substantial investment will be required in further research, development and ultimately deployment; the current policy mechanisms are ill equipped to bring forward this kind of investment,” Raynes said.

“Greening heavy industry can’t happen without rolling out radical new technologies that are still far from fully developed, or financially viable, and doing that quickly. Industry wants to step up to the plate but the economics say it cannot do so alone. This must be a partnership between business and government. If we can’t put roller skates under the new green technologies, existing tax policies will undermine these fundamental British industries to no environmental gain in the long run.”

In addition the EEF said it would like to see government increase the percentage of government R&D funding spent on energy and environment to the EU average, better signpost public money and support available and ensure that the wider regulatory environment encourages innovation.