16:30 The Minister for Small Business, Industry and Enterprise (Anna Soubry)

As a nation, we face the twin demands of meeting our essential energy and decarbonisation targets—rightly so—and, at the same time, maintaining the conditions necessary for our economy to grow. Industries such as steel, oil refining, cement, ceramics, glass and paper—there are many others, and I could go on—are wonderful manufacturing industries, which are vital to our economic health. They contribute more than £50 billion to our economy and provide more than 18% of the nation’s total exports, as well as well-paid jobs, often in areas of economic disadvantage. With few exceptions, the workforce—to whom, as ever, I pay great tribute—are highly skilled.

For all sorts of great reasons, therefore, such industries are important and central parts of the British economy, but they are energy-intensive. Energy accounts for about 10% or more of their costs—for example, 20% of the fixed costs for concrete and cement come from energy use. That is against a manufacturing average of about 3%. Eight sectors, including steel, oil refining, chemicals, glass and cement, are responsible for about two thirds of industrial energy use and two thirds of greenhouse gas emissions. Having recently met with the cement industry and, indeed, the lime industry—I am becoming an expert in all such matters—I should note that 60% of those industries’ carbon emissions come from the process itself, over which there can be no control, because the emissions cannot be reduced. That is an important factor that is sometimes forgotten.

To meet our climate targets, we have implemented a number of policies designed to incentivise generation of energy from renewable resources. The costs of such policies are recovered through levies on suppliers, who pass the costs to end users, usually in their electricity bills. That is sometimes contentious, because businesses that use a lot of energy, such as those in energy-intensive industries, are disproportionately exposed to those costs, which has an impact on their competitiveness and creates a cost differential between the United Kingdom and other countries. All those industries tell me that they want not subsidies, but a level playing field. I absolutely agree with them about that.

As a result of the situation that I have described, the United Kingdom might not be as attractive an investment location as it could be. There is also increased risk of carbon leakage—a terrible expression, which it might not surprise the Committee to know apparently came from the European Union. Normally, in my view, the EU gets things right, but not in this case—the use of “carbon leakage” as an expression is stupid. What does it mean to ordinary people? Absolutely nothing. What it means is that we are in real danger of exporting jobs and importing carbon—in other words, people will stop doing stuff here and industries will not be located here, because they will move to other parts of the world that, frankly, do not have similar policies to ours. That is the “leakage” bit of the expression. It not only erodes the United Kingdom’s manufacturing base but means that emissions are exported to countries with less ambitious decarbonisation regimes.

We are also taking action to ensure that energy-intensive industries are well placed to develop greater energy efficiency in the longer term. The Department of Energy and Climate Change and the Department for Business, Innovation and Skills are currently working together with industry on what we call the 2015 industrial decarbonisation and energy efficiency road map, which is another unfortunate expression—what is a road map? Basically, it is a very good plan—a strategy—to help our EIIs reduce their costs in the long term. It has many features, and I commend it to the House.

The project focuses on sectors including iron, steel, paper, chemicals, glass, cement, refining, food and drink, and ceramics. The focus is on identifying the technologies needed for energy efficiency and decarbonisation in those sectors and understanding the major commercial considerations that they face. It is clear that we must do that in a way that maintains the competitiveness of UK manufacturing as we transition to a low-carbon economy.

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