Government addresses climate change levy fears

Food minister Jim Fitzpatrick has agreed to look into the food industry’s criticism of proposed cuts to government incentives for reducing greenhouse gas emissions announced in the pre-budget report last week.

Fitzpatrick made his announcement at an event organised by the Food and Drink Federation (FDF) to report on results of the second year of its ‘Five-fold environmental ambition’ and on the same day the pre-budget report was presented. Among a range of environmental initiatives, UK food and drink manufacturers have reduced their carbon emissions by 19% since 1990 - equivalent to 1Mt of carbon dioxide.
Fitzpatrick was responding to concerns raised by FDF president Ross Warburton about plans to cut rate relief to businesses under the Climate Change Agreements (CCAs) from 80% to 65% for all fuels from 2011.
“The reduction in the Climate Change Levy (CCL) discount rate is an unwelcome development,” said Warburton. “We will keep reminding policy makers and regulators that any new environmental policies must promote and protect the international competitiveness of our food sector.”
Fitzpatrick responded: “I hear what you say about the pre-budget report and I will be very happy to listen to the concerns of the organisation.”
Following the Chancellor’s announcement last week, the FDF’s director of sustainability and competitiveness, Andrew Kuyk said: “We are surprised at the changes announced today to the CCAs that the Chancellor himself acknowledges are an effective way of reducing carbon emissions in industries that are high users of energy, including the food and drink manufacturing sector.”
Kuyk said that if the cuts go ahead as suggested: “It would mean that companies would have less money to invest in reducing their carbon emissions, which would seem to be at odds with the government’s claim to be supporting low-carbon economic growth with this pre-budget report.”
The FDF’s concerns were echoed by the dairy sector, which claimed it would cost dairy companies about £1M a year from 1 April 2011.
Gerry Sweeney, chairman of Dairy Energy Savings, a company set up by industry body Dairy UK to operate the dairy sector CCA, said: “The dairy industry has worked hard over the last 10 years to save over 130,000t of carbon from entering the atmosphere. We are therefore disappointed that the Chancellor has decided to reduce relief on the CCL from 80% to 65%.”
Meanwhile the Confederation of Paper Industries (CPI) argued that while it was true that the rate of CCL relief on gas and solid fuels would have to go down in 2011 to avoid EU rules on state aid, the rate of levy relief for electricity would not. Moreover, it claimed that it could have been increased to compensate.
David Morgan, CPI’s head of regulatory affairs, said: “CCAs have been proven to work well in improving energy-intensive industries’ energy efficiency and in reducing carbon emissions. Reducing the incentive associated with CCAs, particularly in the light of the current economic downturn, makes no sense whatsoever.”