Tata Steel May Exit U.K. as Climate Protection Rules Boost Cost of Power

Companies including Tata Steel Ltd. and GrowHow U.K. Ltd. may leave the U.K. as climate-protection policies boost electricity and natural-gas costs.

Factories will pay 18 percent to 141 percent more for gas, electricity and carbon-reduction programs by 2020, adding about 7 million pounds ($11 million) to the bill for a typical large energy consumer, the London-based Energy-Intensive Users Group and Britain’s Trades Union Congress said in a report on the impact of climate policy released today.

“The combined impact of the government’s climate change policies is imposing significant costs on the U.K.’s energy- intensive industries, and without urgent review could see some companies leaving the U.K. for good,” according to the report.

The government subsidizes renewable power from sources such as wind, solar and biomass via levies on electricity bills. It plans to extend funding to carbon-capture technology and renewable heat sources as well as impose a minimum price for emitting carbon dioxide. Britain’s power stations and factories must also comply with Europe’s emissions trading program, which requires purchases of carbon permits.

“Many of the taxes and costs identified in this report are U.K.-specific and will reduce the competitiveness of Corus’ British operations,” Kirby Adams, managing director and chief executive officer of Tata Steel Europe said in an e-mailed statement sent with the report. Corus, Britain’s largest steel manufacturer, is part of Tata Steel Group.

Second Report

The U.K.’s manufacturing industries, which include steel, ceramics, paper, cement and fertilizers employ about 225,000 people and could produce components such as wind turbines, electric cars and home-insulation materials needed to slash the nation’s emissions, according to the report. It’s the second report this month suggesting potential job losses in Britain because of climate policy.

The U.K. has committed to slash its emissions by 34 percent below 1990 levels by 2020, beyond a European-wide initiative to cut emissions by 20 percent. The country’s CO2 emissions fell by 8.6 percent in 2009 as the economic crisis curbed production at power stations and factories, according to a report published by the U.K.’s Commission on Climate Change, set up in 2008 to advise the government.

GrowHow, a fertilizer maker, said current policies “will almost certainly” make carbon leakage a reality. Carbon leakage is a term used to describe factories moving operations to countries where permits for emitting carbon dioxide are not needed.

Britain’s climate policies make it harder for U.K. factories to compete, Wayne Sheppard, chief executive of Ibstock Brick Ltd., said in the statement.

“We want to invest more in the U.K., but we are competing for funds from our parent company with our other plants in Europe and around the world,” said Sheppard, who is also president of the British Ceramic Confederation.

Corus U.K., GrowHow, Ibstock Brick, Sheffield Forgemasters and Rio Tinto Alcan Inc. were among companies with factories in Britain who took part in the report, written by London-based consultant Waters Wye Associates.

To contact the reporter on this story: Catherine Airlie in London via cairlie@bloomberg.net.

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