16:00 David Williams (Labour)

Of course, a significant portion of those costs comes from non-commodity taxes and levies. Many ceramics companies pay high carbon taxes under the UK emissions trading scheme and ever-tighter restrictions on free allowances are pushing up costs even more. Because the industry is gas intensive, while still using a lot of electricity, very few manufacturers receive the energy-intensive industries exemption.

I am really proud that this Government take the climate crisis so seriously. A move towards green energy is desirable; if we can get to that point, wonderful. However, the reality at the moment is that companies face significant bills. That is a fixed cost that the companies cannot do anything about, and moving towards low carbon is not always straightforward. It is absolutely right, as I said, to push towards a clean energy transition, but energy-intensive industries need a higher level of support in switching to low-carbon methods. The technology to switch from gas to electricity firing is not readily available for many ceramics manufacturers, and connections to the grid are poor.

For ceramics manufacturers unable to switch from gas, could the Minister consider exempting the sector from new taxes and levies on gas, in recognition of the limited alternatives currently available? Ceramics really is the hardest of all energy-intensive industries to decarbonise. Although Great British Energy will reduce energy bills in the long term, failing to reduce energy costs for the sector now could put our ceramics industry at further risk, and that is simply not acceptable.

With carbon taxes hammering the sector, I also ask the Minister to consider the merits of introducing a temporary exemption from the UK emissions trading scheme for UK ceramic manufacturers until an effective carbon border adjustment mechanism is up and running and ceramics manufacturers can apply for CBAM phase 2.

Something that might also be of great help to our wonderful small and medium-sized enterprises in the sector would be the provision of ultra-low interest loans to help to finance more energy-efficient kilns, dryers and related equipment. Hydrogen presents an opportunity for the sector to decarbonise: Ceramics UK recently unveiled a custom-built pilot kiln that runs on hydrogen. Will the Minister evaluate the hydrogen supply chain and market currently available to the ceramics industry, and how that can be better distributed? I also ask the Minister that, as we discuss the support the sector needs, the Department for Business and Trade work collaboratively with colleagues in the Department for Energy Security and Net Zero, among others, to find a solution on a cross-departmental footing.

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16:15 Sarah Jones (Labour)

My hon. Friend also highlighted how electricity costs so much more than gas and the challenges that will bring as we decarbonise. He mentioned the emissions trading scheme and the ongoing consultation on free allowances. I also heard his well-made points about the low carbon transition and the challenges for sectors such as ceramics, where its up-front cost is potentially prohibitive.

One solution that the Minister could potentially take back to the Department is some sort of VAT exemption for energy-intensive industries and companies that are looking to move towards more low-energy, low-carbon equipment. Perhaps the public sector decarbonisation scheme, which is currently undersubscribed, could be used in some way to help energy-intensive private companies to access new technology that would reduce not only their carbon output but their long-term energy costs through efficiencies.

I thank my hon. Friend for those points, which he has previously raised with me. I can certainly take away the point about the public sector decarbonisation scheme. Bizarrely, as he knows, it is not part of my brief, but that does not matter. This Government work across Departments and across barriers, and I will endeavour to look into it. The point is well made that it can be challenging when a company has small margins and big up-front costs, especially in these industries where there has not been infrastructure investment for a long time. A lot of places need general infrastructure investment, and we are looking actively at this issue through the spending review process.

We are looking at subsidies on energy costs. My hon. Friend said that the Department for Business and Trade and the Department for Energy Security and Net Zero should work together. I sit in both Departments, so I have conversations with myself about these issues. There are competing vantage points that we need to grapple with, but the advantage of my sitting in both Departments is that officials from the two Departments meet to find solutions before speaking to me, which is helpful. They are working well together.

My hon. Friend talked about hydrogen, which is very important and is part of my brief in the Department for Energy Security and Net Zero. We are developing a kind of hydrogen network. We have had what we call HAR1, or hydrogen allocation round 1, which was the initial agreement to fund 11 hydrogen projects—electrolyser projects—around the country. There is hydrogen in the carbon capture and storage clusters that we are developing, and we are currently looking at what the next phase of the hydrogen roll-out will be.

My hon. Friend knows that hydrogen is currently very expensive. We need to work out a path to reduce costs, which is what we are grappling with at the moment, in a climate where it is difficult to bid for money in the spending review. How can we unleash the hydrogen industry and give certainty to businesses that want to invest but need the right signals? How can we do that and use money wisely? And who pays for it? People are very interested in hydrogen, whether in steel, in transport or in the green energy space—it has a lot of uses. We need to make sure we are making the right decisions. I will speak to the hydrogen team about ceramics, and I will ask what we are looking at in that space.

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