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Mayer Brown comments on Carbon Floor Price exemptions announced in Chancellor's Autumn Statement

29 November 2011

London, 29 November 2011 - In his Autumn Statement today, the Chancellor announced plans to exempt certain energy-intensive sectors from the carbon floor price (CFP), due to be introduced on 1 April 2013.  He specifically referred to the steel, aluminium and paper sectors.  He also referred to reducing the impact of the Government's proposed Electricity Market Reform Proposals (which are intended to encourage investment in renewable).  There will be a consultation on the scope of the exemption in the New Year.

In addition, the Government has announced that those energy-intensive industries that meet energy efficiency targets under Climate Change Agreements will, from April 2013 get the benefit of an increased relief from the existing climate change levy of 90%; up from 80%.

Michael Hutchinson, head of Environment at global law firm Mayer Brown, said: "Whilst Osborne may have tamed the worst excesses of the Carbon Floor Price by exempting industries which would have suffered most, the problem with the policy is more fundamental and is directly at odds with the Chancellor's stated position that the UK should "move no faster on climate change legislation than our competitors.

"The unilateral introduction of the CFP also seems at odds with the position recently taken by the Government, and reiterated today, against the Tobin tax proposed by the EU, where the Government is insisting on a multilateral approach. Why is he taking this approach with regard to our financial services industry, but not our manufacturing sector?

"The difficulty with sector-based exemptions is that inevitably some businesses will find themselves on the wrong side of the line, unable to claim an exemption.  We will have to wait until the New Year for the details, but some businesses will lose out and may consider the rules discriminatory.  I wouldn't be surprised to see litigation on the point."

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