MPA criticises exclusion of cement and lime from climate change compensation scheme

The MPA says the Government has missed an opportunity to support two essential industries during the current energy crisis, despite other industry sectors – which directly compete with cement and lime – receiving the compensation.

Under the Department for Business, Energy & Industrial Strategy (BEIS) scheme, some energy intensive industries – particularly those in internationally competitive markets – can apply for compensation from the indirect costs of the UK Emissions Trading Scheme (UK ETS) and Carbon Price Support (CPS) if they meet certain criteria.

In the Government’s 2021 consultation on the compensation mechanism, energy intensive industries needed to meet at least one of three tests to qualify, but the MPA says BEIS has since decided to change this to require that industry sectors meet all three tests. In the process of determining eligibility the Government also changed the thresholds of the tests, increasing two out of three but choosing to lower the ‘Indirect Emission Intensity’.

The MPA says evidence it submitted to the Government in response to the original consultation showed that cement and lime are well above the threshold on ‘Indirect Emission Intensity’ and cement is also clear of the threshold on the Indirect ‘Carbon Leakage Measure’.

The change in the test criteria means that both cement and lime sectors have been excluded from receiving compensation. The MPA says the impact of the decision is that these industries will continue to face energy costs millions of pounds higher than competitors in the EU as a result of paying the pass-through cost of the unilateral CPS as well as ETS costs.

The association adds that this places UK cement and lime producers at a competitive disadvantage in international markets. In turn this makes the UK a less attractive place for overseas investment, and in the long run risks pushing the industry into an uncompetitive position, contrary to the Government’s own stated ambitions.

Dr Diana Casey, Director for Energy and Climate Change at MPA, commented: “It is extremely disappointing that having met the criteria set out in the consultation, BEIS has decided to move the goalposts and exclude cement and lime from the scheme.

"UK manufacturers of all products face higher electricity and gas costs than European competitors, and this decision misses an opportunity to support the competitiveness of the UK cement and lime sectors, both essential foundation industries, especially during the current energy crisis and rapidly rising costs. Reaching net zero and delivering our economic potential requires huge investment from global businesses and it becomes harder to make the case for the UK as a location for such investment if policy costs make operating in the UK uncompetitive.”

The MPA says it remains engaged with BEIS ministers and officials to continue to press the case for UK cement and lime producers to be included in the scheme.