Steel Mills in the UK are being shut down
*This is where the fight against climate change poses a threat to the UK industry.
This threat comes less from the ambition of whatever targets may get agreed in Copenhagen, than from the means used to achieve those targets. If climate change related costs are higher in the UK and Europe than other regions, then it is the industries in the more cost-competitive countries that will prosper.
Cost-effective decarbonisation is supposed to be central to the Kyoto protocol. Yet already we have seen the UK and EU together produce a complex patchwork of overlapping and costly measures. The government estimated last year that existing climate change policies (covering the Climate Change Levy, Renewables Obligation and the EU Emissions Trading Scheme) have increased industrial electricity bills by 21%, rising to 55% by 2020.
Since then the government has announced a new tax on the combustion of fossil fuels to fund the Renewable Heat Initiative and an additional levy on electricity to finance carbon capture and storage demonstration plants. Each new measure, albeit with the best of intentions, is a further wound in the side of UK industry.
In Europe, the primary instrument applicable to sectors like steel is the EU Emissions Trading Scheme. Despite the good intentions of the Directive agreed last year, we still do not yet know whether the detailed operation of the new scheme to take effect in 2013 will enable cost-effective carbon abatement, or increase our costs further.
The omens at present are not good.
*The largest UK producer, Corus, is a leading member of a European consortium investing in a multi-million euro project to develop a next generation, low carbon steelmaking technology.
*Steel is the most recycled material in the world. More waste steel is recovered in the UK and recycled than all other materials combined. Each tonne of scrap recycled by the steel industry saves 1.9 tonnes of iron ore and 0.6 tonnes of coal.
*One of the most traded materials in the world, competition in steel markets is intense. Today China accounts for around one half of global steel output. Other emerging economies, such as Brazil, Russia, Ukraine and India, all have large steel industries
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