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Protection from green costs may save millions for Scottish firms

A £7 BILLION scheme to protect the UK's most power-hungry companies from green policies could save 17 energy-intensive facilities in Scotland an average of £2.6 million a year by 2018-19, according to Treasury figures.

Chancellor of the Exchequer George Osborne said: "Our steel-makers, chemical plants, paper mills and other heavy energy-users make up 35% of our manufacturing exports and employ half a million people.

"This scheme helps the companies most at risk of leaving to remain in the UK."

But the energy industry warned that his plan makes it less attractive for power companies to build new gas-fired power plants to replace old coal power stations that are being closed.

Fossil fuels used in electricity generation are subject to a "carbon price support rate" based on carbon content, which creates a carbon price floor.

The Government said it would cap the carbon-price support rate at £18 from the 2016-17 financial year to 2019-20 to limit any competitive disadvantage energy-intensive British companies face from power prices it estimates can be as much as 50% higher than in rival economies such as France.

It will also consider extending the cap into the 2020s.

The Government is to extend an existing compensation scheme for energy-intensive industries to offset carbon pricing, and the European Union emissions trading system to the 2019-20 financial year.

It is also to introduce a new compensation scheme costing £500m a year to help energy intensive industries with higher electricity costs resulting from the renewables obligation and small-scale feed in tariffs for renewable generation, from 2016-17.

The Government estimates its plans will produces savings totalling up to £7 billion by 2018-19.

Grahame Smith, Scottish Trades Union Congress general secretary, said: "Additional assistance for exporters and energy intensive industries is welcome but hardly signals the manufacturing renaissance promoted by the Chancellor."

The Confederation of British Industry said the package was "much needed".

"Our energy-intensive industries are crucial to building a low-carbon economy and it's right the Government is taking action to mitigate the cost for these firms," the CBI said.

Power industry trade body Energy UK cautioned: "In the overall interests of the UK the energy industry supports capping the carbon price floor to keep costs down for heavy industrial energy users, to reduce the potential to create a cliff edge for coal generation and to help make sure there is more capacity available.

"But it also has downsides - an important one is that it worsens the economics of the essential generation of electricity from gas."

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