The government had pledged to offer energy-intensive businesses a £100m compensation package to offset costs from the carbon price floor (CPF), a tax on fossil fuels used to generate electricity. However, EU approval for the compensation, which was expected this summer, has now been delayed until the end of this year at the earliest.
“The formal consideration and approval of the case has so far been delayed due to the novelty of the case and internal resourcing issues within the [European] Commission,” said a Department for Business, Innovation and Skills spokesperson. “Given the impact the Commission’s delay is having on business we will explore whether there is a way to ensure the eventual decision enables energy-intensive industries to claim back-payment of the compensation to April 2013 when the CPF scheme came into force.”
Businesses have come out in protest against the tax, which they claim will harm British competitiveness.
“It’s hard to see an upside to the policy,” a spokesperson for chemical company BASF told City A.M.
“It’s essentially a tax on manufacturing. Without the compensation we are facing a five per cent rise in our energy costs, as are most of our customers.
“We’ve made it very clear through various trade bodies that we think the policy should be scrapped.”
The Institute of Directors yesterday called for the tax to be reduced.
“Reducing green taxes would ease the burden on businesses and households, whilst also providing a more stable environment for long-term investment,” said a spokesperson.