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Energy-intensive industries CfD exemption

The government plans to make energy-intensive industries exempt from any additional costs that will arise from the ‘contracts for difference’ proposed in the Energy Bill.

Contracts for difference (CfDs) are designed to encourage investment in low carbon energy infrastructure, like new wind farms and nuclear power stations.

The scope of the exemption is yet to be decided – DECC and BIS will run a consultation in 2013, and it will also have to get state aid clearance from the European Commission.

This is in addition to a separate £250m scheme to compensate certain energy intensive industries for the additional costs associated with the Carbon Price Floor and EU Emissions Trading System, are currently under consultation.

Ed Davey, Secretary of State for Energy and Climate Change commented: “Decarbonisation should not mean deindustrialisation. Energy intensive industries are an important part of the UK economy, in terms of economic output and employment throughout the supply chain. There would be no advantage – both for the UK economy and for global emissions reductions – in simply forcing UK businesses to relocate to other countries.

“The transition to the low carbon economy will depend on products made by energy intensive industries – a wind turbine for example needing steel, cement and high-tech textiles. This exemption will ensure the UK retains the industrial capacity to support a low carbon economy.”

While the Business Secretary Vince Cable said:

“Britain is now leading the way to a low carbon economy and investing in exciting growth sectors of the future. By giving an exemption to industries that use high levels of energy, we are ensuring that the transition to the green economy is a genuine win-win for Britain. So this exemption is a critical reform. It is important that the UK’s energy intensive manufacturing industry remains competitive whilst significant investments are made to the UK’s energy infrastructure.”

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