The UK Government has declared that it is committed to moving to a low-carbon economy and meeting its carbon reduction and renewable energy targets however, the indirect cost of supporting renewable electricity deployment measures, such as the Renewables Obligation and Feed-in Tariff, risks certain energy intensive industries being placed at a significant competitive disadvantage where they operate in international markets. These industries are often large employers and form a vital part of the UK economy.
The Scottish Government supports these measures in reducing indirect costs from climate polices to help to ensure the international competitiveness of Energy Intensive Industries (EIIs) as they seek to reduce their direct emissions under policies such as the EU Emissions Trading System, as part of the transition to a low carbon economy. Given that elements of the UK Government’s proposals would require amendments to the operation of the Renewables Obligation in Scotland, which is devolved, the Scottish Government is now consulting alongside the UK Government on the changes necessary to legislation to enable the exemption.
Current support includes a compensation scheme for the indirect costs of the RO. In the Spending Review 2015, the Chancellor stated that the government will move to provide an exemption for Energy Intensive Industries, including the steel industry, from the policy costs of the Renewables Obligation and Feed-in Tariffs, to ensure that they remain competitive. The Department of Energy and Climate Change (DECC) has launched a consultation to seek views on how the Government proposes to implement the exemption.
In summary the consultation proposes to:
- change each scheme so that a supplier’s market share does not include a certain portion of its supply to each (if any) of its eligible EII customers;
- make the RO and FIT scheme exemption available to the same EIIs that are eligible for the existing RO and FIT compensation scheme and CFD exemption; and
- implement the exemption in relation to the FIT scheme in Great Britain and in relation to the RO in England and Wales.
DECC’s consultation closes on 27 May 2016 and further details can be found here http://goo.gl/atvlg8.
The operation of the RO Scotland is overseen by the Scottish Government. To implement the proposed EII exemption scheme across GB, changes to the Renewables Obligation Scotland legislation will be required. In order to ensure that EIIs operating all or in part within Scotland can benefit from the proposed GB-wide exemption, the Scottish Government has expressed its intention to follow the same approach as DECC and introduce identical provisions and requirements as in England and Wales – unless compelling evidence or arguments are presented to the contrary.
The deadline for response is 30 June 2016. We are formulating our response to the consultation and would welcome your feedback to incorporate into this. To have your say, please email the compliance team at compliance@carbon2018.com or alternatively complete the contact form. To discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.