11:22 Alex Cunningham (Stockton North) (Lab)

That this House welcomes the measures announced in the 2014 Budget Statement which reduce cost pressures created by the imposition of carbon taxes and levies; notes that without such measures, there is a serious risk of carbon leakage; further notes, however, that UK manufacturing still pays four times as much for carbon compared with main EU competitors because of taxes such as the carbon floor price; and calls on the Government to build on the measures announced in the Budget by producing a strategy for energy-intensive industries, as recommended by the Environmental Audit Committee in its Sixth Report of Session 2012–13, HC 669, in order to produce a fairer and more efficient system which delivers genuine potential for investment in a low-carbon economy.

Before I get into the main body of my speech, I formally declare my membership of the all-party parliamentary group for energy-intensive industries, which campaigns on the issues to be raised today and whose members helped to secure this debate. Much of the debate will centre on the impact that carbon taxes and levies are having on our energy-intensive industries—EIIs—and will seek to encourage progress in working towards a strategy for EIIs that will deliver genuine potential for investment in a low-carbon economy.

Whether it be through petrochemicals, nitrate fertiliser or steel production, the Tees valley, where my Stockton North constituency sits, has long been synonymous with heavy industry and the thirst for energy that it necessarily entails. The town of Billingham, which is home to a large chemical centre, has played a particularly significant role in Britain’s industrial back story. The cooling towers and chimney stacks that still adorn, if not dominate, parts of the region’s skyline—along with the famed transporter bridge—are testimony to Teesside’s proud industrial heritage, but the decline of those industries will be hastened if actions are not taken to lessen the burdens imposed by carbon taxes and levies.

If I may borrow a phrase from my hon. Friend the Member for Southampton, Test (Dr Whitehead), the next Government will come to power at a time when the three prongs of an “energy trilemma” are driving potentially competing agendas that must be addressed by any emerging energy policy. That means that, at the same time as taking steps to guarantee that our energy supply is secure, we require measures to ensure that energy prices for consumers, both domestic and industrial, are affordable, as well as movement towards decarbonising supplies to ensure that the energy sector contributes to carbon reduction rather than undermining it.

While the decarbonisation of electricity generation will be critical, along with measures to improve the energy efficiency of homes and transport, industry—which accounts for about a quarter of UK emissions—is rightly expected to make a substantial contribution. Given that EIIs account for more than 50% of industry-related emissions, they are expected to deliver reductions of at least 70% from 2009 levels by 2050. However, those obligations, although noble and justifiably ambitious, come with a set of associated difficulties.

The situation is set to get much worse over the next decade. The Department for Business, Innovation and Skills forecasts that UK energy and climate change policies will add around £30 to every megawatt of electricity for EIIs by 2020, substantially more than for any other country in the world. Needless to say, that is a huge threat to the entire energy-intensive sector—a threat that the next Government, regardless of colour or composition, must take steps to meet.

I congratulate my hon. Friend on securing this debate. Does he agree that the huge energy security and energy affordability issues that we face place our manufacturing industries right at the cutting edge of how this debate is to be taken forward, but we must also not lose sight of the need in the long term to decarbonise, and in doing that we will be making our manufacturing industries more competitive? As my hon. Friend rightly says, there is a short-term issue in terms of transition to that low-carbon economy and it is for that reason that the Environmental Audit Committee, which I chair, recommended that there should be a particular strategy for companies that are intensive users of energy. We have not really seen any progress on that, and I hope that when the Minister replies to the debate we can really look at how we can make our manufacturing companies competitive, losing no time in making sure that we have an international agreement on climate change—because we must not lose sight of that—but keeping our manufacturing processes there in the short term to be there for the long term.

Of course, the situation with regard to these energy costs is set to get much worse over the next decade. As I have said, the Department for Business, Innovation and Skills forecasts that UK energy and climate change policies will add around £30 to every megawatt of electricity for energy-intensive industries by 2020—substantially more than for any other country in the world.

I have a great deal of sympathy with what the hon. Gentleman is saying. Does he agree that it is now time to scrap these ludicrous carbon taxes?

Carbon taxes have been imposed by consecutive Governments for very good reason, but if our industries are to be competitive, the time has come to examine them carefully and to determine how we go forward. This is not just about taxation, however; we must also take into account the issues that my hon. Friend the Member for Stoke-on-Trent North (Joan Walley) raised a moment ago.

In my role as a member of the all-party group—not to mention as an MP representing an industrial centre—I have regular contact with those in the energy-intensive sector and frequently listen to the issues that they find themselves contending with. Through those conversations, I understand that no other country has imposed a policy similar to the carbon price floor here in the UK, nor are there plans to do so. It has been widely acknowledged that the carbon price floor does not, in fact, reduce emissions from power generation; those are capped at EU level. Instead, the carbon price floor significantly increases the proportion of decarbonisation costs that is borne by UK electricity users. Those are costs that drive investment decisions and can lead to companies relocating overseas rather than developing their businesses in the UK.

Indeed, as industries approach the limits of what is realistically achievable with current technologies, the capacity of businesses to invest in the UK is ultimately undercut and the sustainability of the entire sector in the UK placed under threat. That, of course, brings with it the simultaneous possibility of the loss of jobs and investment to other countries with less vigorous climate change policies. That is disheartening, not just because of the obvious negative impacts for local economies and for the national economy more broadly, but because it overlooks the necessity to safeguard our existing industries and the employment they provide in order to make that all-important transition towards a low-carbon economy. Only through the continued provision of support to these industries can we hope to attract new investment.

We need look no further than Air Products in my constituency for an example of the types of investment in low-carbon industries that successful industrial clusters can attract. Shortly after committing to invest in building one of the world’s largest renewable energy plants on Teesside, the company announced investment in a second similar plant, influenced no doubt by the favourable business conditions that will see the wide availability of feedstock while allowing for local knowledge, skills and infrastructure to be used constructively and competitively. It speaks volumes that Sembcorp is developing with SITA a similar 35 MW plant on Teesside also to provide electricity from waste, further highlighting the potential for investment in the low-carbon economy that can result from the development of strong industrial clusters.

There can be no doubt that the UK must strive to avoid meeting its carbon targets by offshoring state-of-the-art energy-efficient EIIs. The objective must be sensible and economically sustainable decarbonisation, not de-industrialisation. In that respect, the UK’s status as the least energy-intensive economy in the G7 should perhaps be treated with caution rather than celebration.

We must think outside the box and look beyond punitive taxation schemes for alternative means to decarbonise, sending a signal to the rest of the world that it is possible to retain industry and decarbonise simultaneously and leading by example. A report last year by the American Chemistry Council found that 97 chemical industry projects worth a staggering $71.7 billion have been announced as a result of the US’s shale gas boom.

Our EIIs need support through this place, with a re-examination of taxes, carbon capture development and new energy sources. As recommended in the Environmental Audit Committee report, we need to set that path for maximum feasible decarbonisation, and I hope that we will do that soon.

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11:47 Mark Pawsey (Rugby) (Con)

I want to add my concerns to those already expressed by the hon. Member for Stockton North that the cost pressures of the imposition of carbon taxes will mean that it will become uneconomical to manufacture cement in Rugby. Part of the problem, as he has set out, derives from EU legislation and it is good that the Government have recognised the pressure on UK manufacturers caused by EU environmental legislation and that they have applied to the EU for compensation to mitigate the impact. The problem for cement manufacturers is that the European Commission, which published environmental protection and state energy guidelines on 19 May 2014, failed to include the cement sector among those that will receive compensation against the cost of the carbon price support. Regrettably, only those sectors eligible to receive support against the EU emission trading scheme’s indirect CO 2 costs, which are listed in annex II, can qualify for support for other carbon-related costs. Cement manufacture is not included and therefore will not benefit.

The cost to the cement sector of the ETS over the period 2014-20 is an estimated £82.7 million and the cost of carbon price support over the same period has been estimated at £104 million. The cement manufacturing sector will have to meet those costs if no compensation is received and they will merely add to the cumulative burden that the sector is facing as a result of energy and climate change policy.

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11:57 Chi Onwurah (Labour)

Newcastle university, also in my constituency, was founded on local strengths such as marine, electrical, civil and chemical engineering, as well as agriculture and medicine, and they remain key strengths of the city and the university today: global reach and local roots. Today, the region remains a global base for manufacturing innovation. It is the only English region with a positive balance of trade. As well as the industries and companies that my hon. Friend the Member for Stockton North spoke of, we have fantastic facilities such as the National Renewable Energy Centre in Blyth and the Centre for Process Innovation on Teesside, which were both set up with the help of One NorthEast—regrettably abolished by this Government. In Newcastle, we have recently opened the Institute for Sustainability.

Energy-intensive industries and carbon reduction are crucial to the north-east economy. There is not, and should not be, any contradiction between the two. The transition to a low-carbon economy is a huge opportunity for the UK, with the potential to be a major source of jobs and growth. However, that transition is being put at risk as a direct result of this Government’s failure to develop a long-term, sustainable energy policy. They have failed to get behind green businesses. The UK is falling behind with investment in green growth, meaning that jobs and industry that should be coming to this country are now going overseas. I have spoken to the senior management at companies that would prefer not to be named who have said that the lack of a clear long-term energy strategy is putting off investment that could create jobs tomorrow, next month and next year. That is clearly detrimental to our economy overall.

The lack of an overall energy strategy and an integrated strategy for supporting energy-intensive industries is putting jobs and investment at risk. Conflicting signals from this Government about support for green energy versus terminology such as “green crap”—I think that was it—has seen the UK’s attractiveness to renewables investors slide down international tables. If we want to support the real economy and to build a long-term, sustainable economic environment, businesses need to know what they can expect from Government. They need long-term regulatory and policy certainty, and they are not getting that from this Government.

As my hon. Friend said, the carbon price floor was intended to create a floor underneath the EU emissions trading scheme, but since the collapse of the ETS price, energy-intensive British firms have been faced with far higher energy bills than European competitors. We need to know how Government are going to support these vital industries over the next five, 10 and 20 years, because that is the kind of life cycle they have for building plant and investing in countries. We need a long-term energy policy that supports and drives green growth and creates jobs in a low-carbon economy—a policy that gives investors the certainty and confidence they need to invest by committing to decarbonising the power sector by 2030. Yet as a direct result of this Government’s mixed messages, we are falling behind.

The industries need support from Government and a clear, long-term direction of travel. They need action in a number of areas, including fixing the broken energy market, as Labour has promised to do; exploring new sources of green energy, such as clean coal; and specific and long-term support so that they can continue to compete internationally.

In government, the Labour party was more courageous in this area than many others. The Climate Change Act 2008 made us the first country in the world to introduce a legally binding framework to tackle climate change.

I am listening with interest to the hon. Lady, but does she not agree that the Climate Change Act is actually one of the reasons why we got ourselves into this awful situation in the first place? We are taxing industries in order to try to solve a problem that I am not even sure exists.

I thank the hon. Gentleman for his intervention, but his final comment gave away his position. He said that we are taxing a problem he is not even sure exists, but the consensus on the need to address climate change is global and we certainly owe it to our children and our children’s children— [ Interruption. ] The hon. Gentleman is chuntering, but I am afraid I cannot follow him. The Climate Change Act is not responsible for climate change; it is a response to climate change and one that is necessary for the long-term sustainability of our economy and the global economy.

I have been listening very carefully to the hon. Lady. To say that members of the energy-intensive industries want us to go further and faster than other countries with the green stuff is a bit of a leap. Although no one disputes that we must decarbonise, the issue we need to address—the hon. Lady has not yet done so—is the extent to which we need to do that more quickly and more unilaterally than others. That is a fair question.

I shall soon bring my remarks to a close, but I wanted to say that the previous Labour Government established the Sustainable Development Commission, the Committee on Climate Change, and the Warm Front scheme to tackle fuel poverty, and they invested in low-carbon industries. The economy was growing, but the air quality in our towns and cities nevertheless improved. Our CO 2 emissions fell by 10.8 million tonnes in our final year in government, when our greenhouse gas emissions were 66 million tonnes lower than in 1997. We helped 5 million households to get better insulation and keep warm, which reduced emissions and saved consumers money at the same time.

The next Labour Government will carry on that work. We recognise that a secure, clean energy mix is vital to powering our economy, meeting our climate change obligations and protecting customers from bill rises driven by events overseas. A long-term strategy should look at and support innovative new techniques, such as carbon capture and storage and underground coal gasification. Five-Quarter, a company spun out from Newcastle university, is leading the world in looking at the development of underground coal gasification as a clean way to deliver electrical power.

My key point is that aggressive action to tackle climate change is not incompatible with a strong manufacturing base. With the right strategies and support in place, the north-east can be the vanguard for a UK that competes globally in manufacturing and labour-intensive industries, while also setting an example in tackling climate change.

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12:13 Ian Swales (Redcar) (LD)

When I first became an MP, one of the key requirements for me was to get the steel works in my constituency going again. It will be of no surprise to Members that I therefore had to meet Ministers at the Department of Energy and Climate Change. The new owners wanted reassurance about the UK’s energy policy and an assurance that they would get the emissions allowances that were required to restart the plant. The owners were probably slightly naive and did not ask enough questions about how many issues they would face on the energy front. They have been surprised by the depth and breadth of the various environmental obligations on them.

As Members have said, Governments in other parts of the world are nowhere near as aggressive towards energy-intensive industries as ours seem to be. The former Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), who was recently moved out of office, was told by his civil servants that energy costs in the UK were not out of line with those in other countries. That is the line that Ministers were being sold. He visited Germany because of the representations that he kept hearing from industry and was shocked by what he found. He had not realised that industry gets such a lot of support in Germany and that industrial energy costs can be as low as half the cost of domestic energy. The comparisons that the hon. Member for Stockton North has given became clear to him.

UK businesses that are involved in the generation and consumption of energy are saddled with up to seven different carbon taxes from the UK and Europe. Interestingly, even the senior executives of those businesses cannot always describe clearly what all the taxes are and what they do. Despite the action that the Government are taking, the trends are not great. It is estimated that political costs will increase the electricity bills of industry by a third by 2019-20. Policy makers do not seem to understand that if a company spends millions of pounds a year on energy, it already has quite an incentive to use less. It does not need to be beaten with a stick by the Government to persuade it to use less energy, let alone seven sticks. These companies know that they are spending a lot of money on energy, and are already doing a lot about it. They know that energy costs are a competitive issue, whether there are taxes or not. The irony of a heavy tax burden is that it removes cash from those companies that they could otherwise devote to energy-saving initiatives. Many companies work on thin margins or in commodity businesses that do not have high margins. The more taxes they pay, the less likely they are to be able to invest in reducing carbon consumption and generation.

A Minister from the Treasury rather than from the Department of Energy and Climate Change is responding to this debate, and I wish to ask about the attitude of the Treasury towards these taxes. Does it take the broad view about business competitiveness, look at the overall picture, and compare the taxes being rendered with those rendered from Europe, or is it just a way of raising money? These businesses are almost all competitive and traded internationally, so in this regard the UK is no more an island than the EU is. Our policy decisions affect these businesses on an international basis.

Businesses can do many things to reduce energy use, but as the hon. Member for Newcastle upon Tyne Central said, there are physical and chemical limits. I do not disagree with some of the EU moves on best available technology, or with new moves to look at what is technically feasible and ensure that companies in the EU move towards that best available technology. I hope that we do not get regulatory regimes that drive everybody else out of business if they are not the best, as that will not help anybody. However—I hope the Government will take notice of this—when the best available technology frameworks are established for different businesses, that will at least show what is possible with regard to reducing energy consumption and contribution to climate change. If a company is doing something in another country, we can do it here; if it is not being done anywhere, we must ask whether it is sensible to try to drive a company to use 50% less energy, for example. I would like to see constructive work with the EU on that, ensuring that we are as bold as we should be when dealing with its requirements.

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12:31 Angela Smith (Penistone and Stocksbridge) (Lab)

It is a pleasure to follow the hon. Member for Redcar (Ian Swales). I pay tribute to my hon. Friend the Member for Stockton North (Alex Cunningham) and congratulate him on securing this important debate. I echo his comments on the relative emptiness of the Chamber. To emphasise the point, the relative emptiness is not because Parliament does not recognise the importance of carbon taxes and energy-intensive industries, but because all hon. Members are aware of the huge constitutional issues we face. Many of our colleagues are in Scotland trying to save the Union, and I pay tribute to them for doing so.

The role of foundation industries in developing a green economy should not be overlooked, as I said in an earlier intervention. I was not saying that we should move faster than the rest of Europe; in some ways, I was making the reverse point. We must be careful not to damage the competitiveness of the foundation industries in this country, precisely because they are critical to delivering the green economy we need, not just in the UK but across European and globally. We know that the foundation industries have an important role to play in developing renewable energies, such as carbon capture and storage, and we know that they play a valuable role in the production of energy-efficient construction materials, particularly in respect of chemicals. The chemicals sector is doing a good job of developing wonderful new materials for use in construction projects, not just for commercial but for domestic building, as I saw when I visited a research project at Nottingham university involving several chemical companies, including BASF. That project is doing impressive work to cut the carbon footprint of domestic building projects and to cut energy costs across the board, especially for home owners.

British Glass is developing new trading standards and is keen to see glass play its part in developing a green economy, and new glass technologies are being developed all the time. Let us not forget either that wind turbines require a lot of steel in order to help reduce our carbon footprint and produce green energy. The steel industry also points out that the development of the lightweight vehicles we increasingly see on our roads is largely down to work by the steel industry to reduce the weight of construction materials. The foundation sectors are doing a great deal of work to develop the green economy, but the costs being incurred by our industries as a result of our carbon-intensive industrial past must not be forgotten.

Let me move on directly to the impact of carbon taxes and levies on our foundation industries. My hon. Friend the Member for Stockton North made the point, which should be reiterated, that Tata Steel, for instance, has estimated that year-ahead wholesale electricity prices are 70% and 45% higher than in Germany and France respectively. That is driven in large part by policy-driven taxes and levies for the most intensive users; those were 2.5 and 6.5 times higher than in Germany and France respectively in 2011.

Finally, I want to hear the Minister’s response to the argument that a consolidation of the taxes and levies on the table at the moment would be a sensible way forward. A significant number of taxes and levies are being placed as a burden on our foundation industries. Indeed, one company in my constituency has to employ a highly skilled individual full time just to deal with compliance with the range of levies and taxes that need to be delivered year on year. The Government need to think again about the impact on industry of having to work through so many different schemes and so many different levies year on year. Nobody is arguing against the principle of carbon taxation—

That might not quite be comprehensive, but most Members in the Chamber today agree with the principle of carbon taxation. What we want is sensible carbon taxation, delivered efficiently but at the same time ensuring that we have a level playing field with the rest of the European Union. That is not the case at the moment. I hope that the Minister has listened carefully to what has been said, and that she will come up with some constructive responses in her speech.

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12:58 David T. C. Davies (Monmouth) (Con)

The hon. Member for Penistone and Stocksbridge (Angela Smith) has just said that nobody will argue against the principle of carbon taxation. First of all, I am going to argue absolutely against the principle of carbon taxation, and I shall briefly set out why. It is interesting to note that while not many people will argue against that principle, everyone in the Chamber has been arguing about the practical consequences of carbon taxation.

The elephant in the room, however, is global warming. No one wanted to talk about that, but the whole rationale for these taxes is that we are going to stop runaway global warming. Why does no one mention it, given that it is the root cause of all these carbon taxes? We need to start thinking about the rationale for them, because there has been no increase in temperature since 1998. No one disputes the fact that carbon dioxide is a global warming gas—it is a scientific fact—and no one disputes the fact that there has been an increase in temperatures over the last 200 years, although the increase is less than 1° C; in fact, it is about 0.8° C. It is reasonable to assume that some of that increase is a result of the carbon dioxide that has gone into the atmosphere. However. it is equally reasonable to assume that not all of it is, and even that not much of it is.

Let us be honest. We have a sort of pseudo-religion of global warming—no one can even begin to question it—and the Intergovernmental Panel on Climate Change publishes the bible of that pseudo-religion in the form of the report that it produces every couple of years. In its latest report, the IPCC itself says that it can only state with certainty that half the temperature increase in the second half of the 20th century is due to man-made carbon emissions. Well, in the second half of the 20th century the actual increase in temperature was 0.5°, so what the IPCC is saying is that it can only state with certainty that man is responsible for a 0.25° increase, which is about a quarter of the figure that we are constantly given. So what is the problem that we are trying to address with all these taxes on our industries?

I fear that the hon. Gentleman has misunderstood the subject of the debate, which is, specifically, carbon taxes on energy-intensive industries. Those taxes have not been supported by Greenpeace, and are not considered to be green taxes at all.

Greenpeace does not support anything as far as industry is concerned. None of the environmental groups do. They call for us to decarbonise completely, but whenever we offer them some handy solutions—such as nuclear power, which generates large amounts of electricity without carbon dioxide—they do not want to know. And what about shale gas? I was interested to hear the hon. Member for Penistone and Stocksbridge call for us to export it, as well as mentioning a company in her constituency that supports nuclear. Exporting shale gas is a good idea. It produces half the amount of carbon dioxide that is produced by coal, and it is vital for the wind industry that we have gas to back it up. However, the greens do not want to know about that. What about the Severn barrage, which was proposed in my constituency? I would have some concerns about the cost, but I believe that it would generate 20% of the UK’s electricity supply without any carbon dioxide. The greens are more worried about the fact that some wader birds would be inconvenienced. They have wings—they could fly somewhere else—but the greens do not want to know about it.

My point to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is this. She will never, ever satisfy the green movement. Let us forget about pandering to the green movement. Let us forget about pandering to all those who call for carbon taxes and who are a little more sensible, such as Opposition Members, because they will not support the consequences either. Let us remember that, at this moment in time, it is not the meteorological climate that we need to worry about, because that has not changed for about 18 years. It is the economic climate that we should be concerned about.

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13:09 David Mowat (Warrington South) (Con)

It is a pleasure to follow my hon. Friend the Member for Monmouth (David T. C. Davies). I seem to recall that I had the opportunity to follow him in the energy debate two weeks ago, so perhaps we are getting to be a bit of a double act. My premise is that we do need to decarbonise, but he makes a valid point about the hiatus: it is true that the climate has not changed, certainly in the last 15 years. There are statistical reasons why that might be possible and the balance of science is still that there is probably an issue. I am not a scientist—nor is any other Member present to the level of being able to interpret these data—but my position is that, at least on the precautionary principle, it is right that we decarbonise.

The shadow Minister, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), said that the debate was about the carbon price floor. It is not just about that. It is about carbon taxes in general. I do not support what happened on the carbon price floor. I think it was an error, and I am glad the Chancellor took the opportunity to fix it. It is a little bit hard to take the Labour party lecturing us on that. We talked previously about what happens whenever we debate an energy measure— through which we can tangibly affect energy prices—in this Chamber. There is always a judgment to be made between speed of decarbonisation, how we act unilaterally, costs and jobs. Whenever we have to make that judgment, however, the Labour party has always, during my time in Parliament, belligerently taken the view that the Government are not being green enough and we need to go further. I remember the debate of three years ago on the reduction of solar PV from six times grid parity to four times grid parity. That was a perfectly reasonable proposal, but the Labour party resisted that and fought it in a striking way.

We are now out of sync with the EU. In a good speech, the hon. Member for Penistone and Stocksbridge (Angela Smith) told us about Germany and France having forward energy prices that are 40% and 70% lower than ours. That is not a sustainable position from which countries can agree to invest in industry. The odd thing about EU energy policy is that it has not emphasised reductions in carbon. What EU energy policy has done is emphasise renewables, which is not quite the same thing. The consequence of an energy policy that is about not reducing carbon but having more renewables is that we get behaviour such as that in Germany. Some 40% of its electricity comes from renewables, which is a huge and difficult thing to achieve, yet it now burns so much coal that its carbon usage per capita and per unit of GDP is a third higher than ours. The consequence of EU policy is that we have not decarbonised and we have misallocated revenue that should, perhaps, have gone to carbon capture and storage, which is not a renewables technology. We have not decarbonised. Instead, we have misallocated capital to renewables. I am not against renewables, but I am for—this is the policy—decarbonisation. The hon. Member for Redcar (Ian Swales), who is not in his place, talked about state aid and the fact that the Germans in particular, but also the Belgians and the Dutch, cross-subsidise industrial jobs in order to keep these foundation industries going.

On that point, although the world increased its renewables—our renewables—by a reasonable chunk, the increase in coal was three times greater than the increase in renewables in absolute terms. We must take account of such issues when setting our own carbon taxes and our own policies, reflecting on the 800,000 jobs that exist in the industry, and which we all would agree we want to continue to exist.

The Climate Change Act 2008, passed by the last Government, contains a requirement for us to reduce carbon emissions by 80% by 2050. The issue, however, is that the world has not followed us. Some people might say, “Ah, isn’t it good that we are out in the lead on all this stuff? Isn’t it good that we are demonstrating soft power? Isn’t it good that we are setting an example for the rest of the world?” That might be true—I do not have an argument with that—but the world has not followed us. Nobody else has passed anything like a Climate Change Act, and nobody else, as far as I can see, looks as if they are going to. The consequence is that, rightly, we have the Committee on Climate Change, which produces carbon budgets, and carbon budgets produce behaviour and all that goes with that.

Let me leave the House with this point. I had what I thought was a very scary conversation, in which I mentioned our penalising our energy-intensive industry, with somebody who works for the Committee on Climate Change. He said to me, “Ah, it’s all about comparative advantage.” Comparative advantage means this: if Britain wants to be an industrialised economy into the future, we need to be thinking about which industries we are in, and we need to be choosing—this was the position of this person from the Committee on Climate Change—and prioritising other industries over these foundation industries because they are not the future. I do not agree; I disagree profoundly. Those 800,000 jobs are very important and the number can grow, but that is the atmosphere in which part of this debate is being conducted and for me at least it is quite scary.

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13:19 Catherine McKinnell (Labour)

I congratulate my hon. Friend the Member for Stockton North (Alex Cunningham), the hon. Member for Redcar (Ian Swales), who is no longer in his place, and the Backbench Business Committee on securing this important and pressing debate on the impact of carbon taxes on energy-intensive industries. I speak in my capacity not only as a shadow Treasury Minister but as a fellow north-east MP. The north-east is one of the most energy-intensive areas of the country, and a base for the many companies that have been mentioned today: Wilton International, INEOS and Tata Steel are just a few of the largest. I am therefore aware of the importance of this issue for the future of our productive industries, for jobs and for economic growth in the region and across the UK.

The motion before us today refers to the imposition of carbon taxes and levies, and rightly welcomes the relief announced in this year’s Budget to limit future rises in the carbon price floor. However, the bottom line is that this support—capping the future costs of carbon and providing an exemption for combined heat and power plants—has come too late. It is more than 12 months since the measure was meant to begin compensating energy intensives, but that was certainly too late for one company on Teesside, which told me that it had had to close one of its coal boilers in 2014, resulting in 100 job losses. There have been other cases in which manufacturers, steelworks and brickworks have fallen victim to the ill-thought-out carbon price floor, as my hon. Friend the Member for Stockton North has shown.

I understand that the hon. Member for Warrington South (David Mowat) thoroughly resents what he describes as crowing from the Labour Benches on these issues, but many of the problems that these companies are facing in relation to the changes in the taxation system have arisen under this Government, and we warned of the consequences throughout this period. The carbon price support rates of the climate change levy, which underpin the carbon price floor, were entirely the creation of this Conservative-Liberal Democrat coalition Government. They were introduced in the Finance Act 2011, despite the deeply held and loudly voiced concerns of Opposition Members who tried to amend the legislation on a number of occasions before its implementation.

My hon. Friend the Member for Bristol East (Kerry McCarthy), then shadow Economic Secretary to the Treasury, tabled an amendment calling on the Government to at least consider the impact of this carbon tax on a whole range of affected parties, from energy bills and fuel poverty to renewables and the energy sector more widely. More importantly, the Opposition also asked the Government, in carrying out that review, to take stock of the impact of the carbon price floor on energy-using manufacturing industries and on employment in those industries. My hon. Friend said at the time that there was a danger, particularly in the absence of a credible Government plan for growth, that growth and jobs would be exported to other countries, that UK industry would be at a disadvantage, and that jobs and growth would be put at risk. Those concerns, and our amendment, were dismissed at the time, but unfortunately many of them have been realised. The Government’s U-turn in this year’s Budget has recognised that fact, but for some it has come too late.

In March this year, for example, Thai-based steelmaker SSI, located in the constituency of the hon. Member for Redcar (Ian Swales), revealed that it had yet to turn a profit despite producing 5 million tonnes of steel. It has regularly raised concerns about the risk to jobs. Indeed, SSI raised concerns about the carbon price floor, along with the rest of us, back in 2012. In March 2012, we lost Rio Tinto Alcan’s aluminium smelter plant in Lynemouth on the Northumberland coast with the loss of more than 500 jobs. It had been a source of employment in the area for more than 40 years. Rio Tinto Alcan had estimated that its energy costs would jump from £7 million to £100 million as a direct result of carbon taxes—including, of course, the carbon price floor.

Energy-intensive industries, having being promised by the Chancellor in 2011 that, thanks to Government support, they would not be priced out of the world economy, have now been waiting for around 18 months for help on the coalition’s carbon tax, but that help remains out of sight. It seems that, due to the delays, the Government have paid only about £31 million of the £250 million compensation that they promised in the 2013 autumn statement. Will the Minister clarify whether the Government intend to pay out the full £250 million by the end of this Parliament, as was originally promised? The Chancellor talked about the world economy, but what about the European economy? The Government’s own figures suggest that our heavy industry has been priced out there, too, as the motion before us today notes.

A recently published consultation paper included estimates from the Department for Business, Innovation and Skills and the Department of Energy and Climate Change of electricity prices faced by energy-intensive companies in the absence of Government intervention, compared with other countries around the world. Given that there is effectively an absence of Government intervention at the moment—aside from EU ETS compensation to just 53 of the thousands of companies affected—the Government’s figures drive home the stark reality of the impact on our productive industries. UK energy-intensive industries face the highest costs of any country in the world. The figures predict that in 2015 our energy-intensives’ electricity costs will be almost double those of their counterparts in Germany—a country already known for its high energy prices—let alone of those further afield in Japan, the US or China, whose electricity prices are dwarfed by ours.

Earlier this year the Opposition commissioned Mike Wright, executive director of Jaguar Land Rover, to conduct an independent review of advanced manufacturing in the UK. His report clearly set out the challenges we face, including, most importantly for this discussion, on how we have a proper long-term industrial strategy that promotes investment and helps us realise our full productive, innovative potential. Inherent in that is striking the right balance between becoming world leaders in tackling climate change, and in the technical solutions that come with it, and not putting our businesses at a competitive disadvantage compared with other advanced industrial economies.

I could not agree more, but unfortunately that has been the consequence of many of the Government’s ill-thought-through carbon taxes to date, which, in the absence of any comprehensive support or compensation, have damaged our competitiveness, cost vital jobs and served only to export carbon emissions abroad and not to eliminate them.

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13:32 Priti Patel (Conservative)

I welcome today’s debate and congratulate the hon. Members for Stockton North (Alex Cunningham) and for Redcar (Ian Swales) on securing it, not least because it puts me through my paces in understanding the remit, this whole field and carbon taxes. It has been an insightful debate. The Government’s position has been discussed by a number of hon. Members, but we are clear in recognising the significant role that energy-intensive industries play in the UK economy. As my right hon. Friend the Chancellor said back at Budget 2011, we are committed to ensuring that manufacturing is able to remain competitive during the shift to a low-carbon economy and have pledged to do everything we can to help manufacturers play a valuable role.

On carbon pricing, over the next decade we need to attract investment worth more than £100 billion to replace and upgrade our energy infrastructure and to diversify the energy mix. The investment will help to ensure that the UK meets our long-term legally binding greenhouse gas emissions reducing targets and, importantly, to safeguard the country’s long-term energy security, on which we have only just touched in this debate. Establishing a minimum carbon price sends a credible signal to help drive that level of long-term investment in low-carbon electricity generation—a point that was made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). But diversification is not concerned with renewable energy alone. The Government are committed to developing a wide range of energy sources to ensure that energy prices remain competitive in the future, and of course nuclear energy and shale gas are central to that.

We are also continuing to look into the issues faced by energy-intensive industries. Today, Members have touched on the issues of carbon-reducing options and the competitive impacts. My hon. Friend the Member for Rugby (Mark Pawsey), who talked about CEMEX and the cement plant, touched on the fact that there are a range of sectors that are not on the European Commission’s list when it comes to exemptions and approval of indirect costs. Let me reassure Members that this is about not just an occasional conversation with the European Commission but about being absolutely firm and clear with it and pressing it on this issue. The Government, too, will look at the competitive impacts of their carbon reduction options through a series of road maps. I am talking here about the involvement not just of the Treasury but of the Department of Energy and Climate Change and the Department for Business, Innovation and Skills. This will help focus policy making more on the opportunities and barriers that energy intensive industries face, and allow Government and industry to agree on actions to deliver cost-effective decarbonisation while safeguarding competitiveness.

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13:48 Alex Cunningham

That this House welcomes the measures announced in the 2014 Budget Statement which reduce cost pressures created by the imposition of carbon taxes and levies; notes that without such measures, there is a serious risk of carbon leakage; further notes, however, that UK manufacturing still pays four times as much for carbon compared with main EU competitors because of taxes such as the carbon floor price; and calls on the Government to build on the measures announced in the Budget by producing a strategy for energy-intensive industries, as recommended by the Environmental Audit Committee in its Sixth Report of Session 2012–13, HC 669, in order to produce a fairer and more efficient system which delivers genuine potential for investment in a low-carbon economy.

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