In its Energy Security Strategy, the government recognised that UK industrial electricity prices are higher than those of other countries and has acted to reduce this difference with the ‘British Industry Supercharger’ measures. The EIUG welcomes these measures and encourages government to deliver them as quickly as possible. However, the compensation rate of 60% for network charges means that the measures are still insufficient to close the electricity price gap, since certain EIIs in Germany and France receive a discount of up to 90%.The EIUG therefore calls on government to bring the compensation rate up to 90%.
Serious risks remain to the viability of EIIs in the UK though, particularly the risk of carbon leakage. The EIUG welcomes HMT’s announcement to introduce carbon border adjustment mechanism (CBAM) in a number of sectors. Designing the UK CBAM for the sectors in scope will be challenging, but it needs to be watertight to ensure it fully mitigates the risk of carbon leakage.
With regard to industrial decarbonisation, the Climate Change Committee’s decarbonisation pathway for manufacturing and construction, estimates that improvements in resource and energy efficiency lead to the largest emissions reductions in the early 2020s, with infrastructures for CCUS and hydrogen being deployed from 2025, starting near industrial clusters, and electricity network connection capacity increased to electrify industrial processes. It recommends that “the Government must move from the current piecemeal approach to a comprehensive transition support framework. Taxpayer funding will be key in early years to ensure industries stay internationally competitive while reducing emissions. [..]”.