Ineos, Tata May Be ‘Uneconomical’ in U.K. on Carbon Tax

U.K. units of Ineos Group Holdings Plc and Tata Steel Ltd. (TATA) may be “uneconomical” after the government imposes a carbon tax in 2013, according to the Confederation of British Industries.

“We’re already seeing warnings from Ineos that its chlorine plant in Runcorn will be uneconomical under the sudden introduction of the proposed carbon floor price,” John Cridland, director general at the U.K. business lobby, said today in an e-mailed statement. Richard Longden, a U.K.-based spokesman for Ineos, couldn’t immediately be reached by phone.

Britain should exempt the country’s biggest power users from its plan to set a carbon tax at 4.94 pounds ($8.10) a metric ton in 2013 to raise revenue and promote power from wind farms, nuclear reactors and other low-carbon sources, the CBI said. The tax, known as a carbon floor, is based on the price of emission permits in the European Union’s trading system.

“Tata Steel is facing the same problem,” Cridland said. “One major construction company is now finding it cheaper to import its cement from Spain than to produce it at its U.K. plant.”

European governments should create incentives to help the steel industry reduce emissions instead of raising taxes, Tata Steel said today in an e-mailed statement.

“Taxing energy-intensive industries on their emissions is neither business-friendly nor an effective solution,” according to the statement. “The steel industry in Europe is already investing in the expensive and time-consuming process of developing breakthrough technologies, without which the best environmental performers here cannot significantly reduce their emissions further.”

The carbon tax will raise costs for power producers, which is likely to be passed on to consumers, the CBI said. It called for exemptions for industries most at risk and proposed a rebate based on energy efficiency.

The CBI, Britain’s biggest business lobby, said policies to reduce emissions may be “counter-productive” and hold back investment and growth.

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

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net

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