By Paul Homewood
The price of carbon not only pushes up electricity prices, but also hurts energy-intensive industries, such as steel:
Taxes caused by climate change are forcing British steelmakers to cut output after the cost of carbon emissions doubled in just nine months.
According to UK Steel, record carbon prices are making it “all but impossible to increase production competitively” as emissions permits are already in place as steelmakers struggle to take on producers. produced in less climate-friendly countries, according to UK Steel.
The industry group estimates that costs will increase by £175 for every additional ton of steel produced on their free emissions permit, which is equivalent to about 30pc of current global steel prices.
However, ministers refused to intervene to ease the pressure on steelmakers due to the sudden and unexpected rise in climate costs.
The price of carbon in the UK’s emissions trading scheme has doubled to just under £90 per tonne of emissions since May 2021, increasing pressure on steelmakers due to energy costs. high.
Gareth Stace, UK Steel General Manager, said: “The problem is so severe that some UK steel producers are cutting output accordingly when electricity prices are low enough to make a profit.
“The price of carbon not only increases the cost of steel production in the UK, but also significantly increases the price of electricity.”
The British steel industry has had to fight to survive after being cut prices by competitors in the global market, especially from China.
Output has fallen from about 18 million tonnes two decades ago to 7 million tonnes today, meaning major steelmakers including British Steel and Tata Steel have lost their jobs.
Earlier this month, 3,000 jobs were threatened at Sanjeev Gupta’s businesses after the HMRC issued brought lawsuits against four subsidiaries of his Liberty Steel empire.
Mr Stace warned that the “long-term viability of steel production in the UK” would be impaired unless ministers acted to reduce electricity and carbon costs to increase the industry’s competitiveness.
He added: “Steel producers in countries with carbon and electricity pricesboth within and outside Europe, have a significant competitive advantage over UK steel producers. “
UK kicks off its own post-Brexit emissions trading scheme (ETS) last year but the price of carbon has gone from around £45 per tonne of emissions to £90 in less than a year.
According to the ETS, a ceiling has been set for the amount of carbon emissions generated in the UK and the limit will gradually decrease over time. Each ton of emissions generated by an insured business must correspond to an allowance.
The government provides free carbon allowances and companies can buy them through auction or trade with permits on the secondary market.
This cap and commercial scheme is considered important in cutting emissions but currently applies only to energy-intensive companies, the power and aviation industries.
With the market price of carbon so high, steelmakers face high costs per tonne of emissions that exceed their free carbon allowance.
Ministers turned down the opportunity to ease pressure on companies affected by high carbon prices. The Cost Control Mechanism allows the Government to intervene but ministers are still waiting in December and January when it is activated.
The steel industry contributes £2 billion to the UK’s economic output in 2020, about 0.1 per cent of total GDP and supports more than 30,000 jobs.
A spokesperson for the Department of Business said: “We remain fully committed to ensuring a competitive future for our energy-intensive industries, including the steel sector, and in recent years. this has given them extensive support..
“UK ETS is monitoring the market closely and is prepared to take commensurate and timely actions if the Cost Control Mechanism is activated.”
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