UK plans low-carbon energy cost breaks for industry

LONDON Thu Nov 29, 2012 4:26am EST

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LONDON (Reuters) - Britain plans to exempt industrial energy users from extra costs arising from its electricity market reform following complaints from industry that the costs would harm their international competitiveness.

Details of the plan have not been decided, a spokesman for the energy ministry said. The government will launch a consultation next year.

"It is important that the UK's energy intensive manufacturing industry remains competitive whilst significant investments are made in the UK's energy infrastructure," said Business Secretary Vince Cable.

Businesses with high energy consumption, such as chemicals, steel or cement producers, said they might have to leave Britain if they faced higher costs due to climate change policy, to move to countries without such costs or which provide subsidies.

Britain's Energy Bill, which will be introduced to parliament later on Thursday, aims to introduce contracts for low-carbon power producers that guarantee a minimum electricity price, a cost which will be passed on to suppliers and ultimately to consumers.

The proposal to exempt intensive energy users from this scheme will be subject to European Union state aid approval.

The government also continues to consult on a 250 million pound ($400 million) scheme to compensate certain energy intensive users for higher costs incurred due to a carbon tax which will be introduced at 16 pounds per tonne of CO2 in April next year.

Britain's Energy and Climate Change Secretary Edward Davey on Thursday will also propose measures aimed at cutting demand for energy in homes and businesses, including financial incentives for the use of efficient lightbulbs, appliances and machinery.

"We have schemes already in place but there are more avenues to be explored and that's what these ambitious proposals, a first for the UK, are designed to do," he said in a press statement.

Further consultation on energy efficiency measures dashes the hopes of some environmental campaigners, who during the drafting of the bill earlier this year had called for specific energy efficiency measures to be included as law.

($1 = 0.6257 British pounds)

(Reporting by Karolin Schaps; Additional reporting by John McGarrity; Editing by Elaine Hardcastle and Mark Potter)

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