Green costs are killing heavy industry in Britain

By Matt Ridley. Excerpt:

"Redcar and Port Talbot, remember Lynemouth, where Britain’s last large aluminium smelter closed in 2012. In aluminium, as in steel, China is now by far the largest producer, smelting five times as much as any other continent, let alone country. The chief reason aluminium left (though a small plant survives at Lochaber) was the sky-high electricity prices paid in Britain: electrolysis is how you make aluminium. For extra-large industrial users, British electricity prices are the highest in Europe, twice the average, and far higher than in Asia and America.

Britain has the highest electricity prices because it has the most draconian climate policies. Despite promises not to do so, the government insists on going faster than other countries in emissions reduction. As Lord Deben, chairman of the Committee on Climate Change, put it recently, apparently without intended irony, the British approach to climate legislation is the envy of most countries in the world. At green conferences maybe.

As well as paying huge and growing bills to subsidise those futile playthings of the rich, the wind and solar industries, energy-intensive industry also picks up the cost of the “carbon price floor”, a tax on fossil fuels used to generate electricity, which was introduced in 2013 and doubled last year to £18.08 per tonne of carbon, or more than four times the cost of the European emissions trading scheme, of £4 a tonne. This can have little impact on climate, however, not only because Britain’s emissions are less than 2 per cent of global emissions, but because it merely exports jobs and emissions.

Port Talbot’s blast furnace is less dependent on electricity than aluminium smelters, but those who say that high electricity prices are not contributing to steel’s collapse are missing three key points. First, downstream processes in the steel industry such as galvanising use a lot of electricity; second, steel production elsewhere is increasingly shifting to electric-arc furnaces, which recycle scrap steel — and generate fewer emissions. That’s not likely at Port Talbot because of Britain’s high electricity prices. The country’s one electric-arc furnace, run by Celsa in Cardiff, is struggling, and we mostly export rather than melt our mountains of scrap.

And third, as the Global Warming Policy Forum points out, climate policies affect the cost of all goods and services purchased by industry, including labour. According to government estimates, by 2030 medium-sized businesses would see prices 114 per cent higher than they would be in the absence of climate policies, and they would need to pass those costs on to customers.

So aluminium and steel are mere harbingers of heavy industry doom because of our costly energy. As the think tank Civitas reported at the time of Lynemouth’s closure, “There are still many other energy-intensive industries left in the UK, such as glass, chemical and ceramic manufacturing. 

Together these are worth £75 billion and employ 700,000 people and they are just as vulnerable to the future rises in energy costs.”"