EIUG responds to first auction of UK ETS Allowances and calls for joined up approach to decarbonisation


Yesterday (May 19), the UK held its first auction of Allowances under the UK Emissions Trading Scheme.

The clearing price was £43.99. This represents a more than threefold increase in the carbon price in the last 12 months.

In choosing to launch UK ETS first, with insufficient funding for transition, the Government loads the costs on to energy intensive industries up front, with the effect that they disinvest from the UK into competitor jurisdictions which already have support mechanisms in place.

It is this investment leakage that is at the heart of concerns about the UK policy and why a more joined up approach from industry, regulators and Government is required to ensure we can grow the UK’s foundation industries at the same time as reaching net zero.

Andrew Large, EIUG Chair, commented on the auction outcome:

“The results of today’s auction reinforce the need for UK Industry, Government and Regulators to work constructively and urgently together to develop and implement policies to combine the achievement of net zero by 2050 with foundation industry growth. A laissez faire policy, with uncontrolled carbon price increases and limited transitional support, will not reduce global emissions and can only lead to the UK importing carbon intense products from countries that do not match the UK’s ambitious carbon reduction targets.

It is unacceptable for any Government to acquiesce in the closure of UK foundation industries in the name of carbon emissions reduction only to make the UK economy dependent on imported materials, and for the UK to have no control over the carbon emissions embedded in those products.

EIUG looks forward to working with BEIS and Ofgem to deliver against the net zero challenge and make UK foundation industries globally competitive for the long term.

Editors notes

The Energy Intensive Users Group (EIUG) represents the UK’s energy intensive foundation industries including manufacturers of steel, chemicals, paper, glass, cement, lime, ceramics and industrial gases.

Our members produce materials which are essential inputs to UK manufacturing supply chains. This includes materials which support climate solutions in the energy, transport, construction, agriculture and household sectors. We make an annual contribution of £15bn to UK GDP, supporting 200,000 jobs directly and 800,000 jobs indirectly.

However, as foundation industries, we are both energy and trade intensive. We are also largely internationally owned. If we are to compete in the global markets in which we operate and remain located and investing in the UK, we need access to secure, internationally competitive energy supplies.

The UK’s Energy Intensive Industries (EIIs) want to decarbonise and work with the government to help them achieve their decarbonisation targets and to help reduce global carbon emissions. The EIUG believes that this can be achieved without forcing UK industry to leave.