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Carbon tax regime needs to be simplified

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Manufacturers have urged the government to reform current climate change policies and to introduce an economy-wide carbon tax.

The call came from the EEF, the manufacturing employers’ organisation.

The EEF described the present climate change system as “chaotic, over-crowded and complicated”, and posing a risk to the competitiveness of UK manufacturers.

It said that a new single levy based on energy usage to replace the existing mix of climate measures would simplify the system, help businesses to budget more easily and encourage them to move towards cleaner energy.

The EEF report argued that the Climate Change Levy should be reformed so that it applies throughout the economy, and taxes households and energy generators as well as businesses.

In a review of the current system, the EEF identified four key areas where the regime needs to improve.

These include making incentives to move towards cleaner energy clearer, more reliable and transparent; closer targeting of regulation; simplifying the regulations; and more accurate assessment of the impact of climate change rules on the competitiveness of the firms they affect.

Specifically, the EEF wants a reform of the CCL so that energy users are taxed according to the carbon content of the energy and fuels they use. This would provide a more consistent and more stable incentive to energy users to reduce high-carbon energy and fuel use, and would provide electricity generators with a stronger incentive to invest in lower carbon forms of energy.

Any carbon tax needs to be accompanied by voluntary negotiated agreements with industry sectors which provide tax incentives for carbon intensive industry to reduce emissions, the EEF added.

The costs of new regulations and measures should be considered in terms of their cumulative impact on manufacturers. And there should be a full review of the effectiveness of the Enhanced Capital Allowance scheme for low carbon products.

Gareth Stace, the EEF’s head of climate and environment policy, said: “Manufacturers have already made substantial reductions in emissions. However, there is now increasing evidence that they are struggling under the weight of legislation at European and national level which has produced a chaotic, over-crowded and complex landscape.

“We now need a fresh approach. This will help a vibrant manufacturing sector to make a sustainable contribution to reducing global emissions of greenhouse gases and, continue investing and creating jobs in the UK.”