Britain’s Steel Industry Hammered by Climate Change Taxes

From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

Not only do carbon prices push up electricity prices, they are also extremely detrimental to energy intensive industry, such as steel:

Crippling climate change levies are forcing Britain’s steelmakers to cut production after a doubling in the cost of carbon emissions in just nine months.

Record carbon prices are making it “all but impossible to increase production competitively” once emissions permits have been used as steelmakers struggle to take on producers in less climate-friendly countries, according to UK Steel.

The industry group estimates that costs are increased by £175 for every additional tonne of steel produced above their free emissions permits, equivalent to around 30pc of current steel prices globally.

However, ministers have refused to intervene to ease the pressure on the steelmakers caused by the sudden and unexpected rise in climate costs.

Carbon prices on the UK’s emissions trading scheme have doubled to just under £90 per tonne of emissions since May 2021, ramping up the pressure on steelmakers already hit by high energy costs.

Gareth Stace, director general of UK Steel said: “The problem is so significant that some UK steelmakers are having to curtail production to suit when power prices are low enough to produce profitability.

“The price of carbon not only drives up the cost of producing steel here in the UK but also significantly increases the price of electricity.”

The British steel industry has been fighting for survival after being undercut on global markets by competitors, particularly from China.

Production has slumped from around 18m tonnes two decades ago to 7m today, which has meant heavy job losses at major steelmakers including British Steel and Tata Steel.

Earlier this month 3,000 jobs were put in jeopardy at Sanjeev Gupta’s businesses after HMRC issued winding up petitions against four subsidiaries of his Liberty Steel empire.

Mr Stace warned that the “long-term viability of UK steel production” will be undermined unless ministers act to reduce electricity and carbon costs to boost the sector’s competitiveness.

He added: “Steelmakers in countries with considerably lower carbon and electricity prices, both inside and outside Europe, have a significant competitive edge over steelmakers here in Britain.”

The UK launched its own post-Brexit emissions trading scheme (ETS) last year but carbon prices have increased from around £45 per tonne of emissions to £90 in less than a year.

Under the ETS, a ceiling is set for the amount of carbon emissions created in the UK and the limit is reduced over time. Every tonne of emissions generated by a covered business must be matched with an allowance.

The Government hands out free carbon allowances and companies can buy them at auction or trade with the permits on the secondary market.

This cap and trade scheme is deemed vital in cutting emissions but currently only covers energy intensive firms, the power industry and aviation.

With market carbon prices so high, steelmakers face high costs for every tonne of emissions emitted above their free carbon allowances.

Ministers have turned down the opportunity to ease the pressure on firms hit by high carbon prices. The Cost Containment Mechanism allows the Government to intervene but ministers stood by in December and January when it was triggered.

The steel industry contributed £2bn to the UK’s economic output in 2020, around 0.1pc of total GDP, and supports more than 30,000 jobs.

A spokesman for the Department for Business said: “We remain absolutely determined to secure a competitive future for our energy intensive industries, including the steel sector, and in recent years have provided them with extensive support..

“The UK ETS Authority is monitoring the market closely and remains prepared to take timely and proportionate action should the Cost Containment Mechanism be triggered”.

https://www.telegraph.co.uk/business/2022/02/26/britains-steel-industry-hammered-climate-change-taxes/

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LdB
February 27, 2022 10:45 pm

You just move the industry to a country without the taxes … wonder where they are 🙂

Vuk
Reply to  LdB
February 28, 2022 1:43 am

Not much of it if any is British, owners are Chinese multi-industrial company Jingye Group  and India’s Gupta co. and possibly India’s JSW Steel.

H.R.
Reply to  Vuk
February 28, 2022 4:11 am

Tru dat, vuk.

But the jobs and paychecks are going to Brits who are a) not on the dole, and ii) paying taxes. It doesn’t matter who owns the companies, the government gets its cut.

The GEBs (Greedy, and Government Evil Bastards in this case) will soon lose the carbon tax revenue when the mills close and the workers will go on the dole instead of paying some income tax.

Well now, someone thought it was a good idea to tax their steel businesses out of existence. Were they just stupid or were they being paid to do it?


BTW, people on the dole spending their government money and paying the VAT are just giving some of that tax money back to the government. “Here’s your money, and we’ll get our 10% for the Big Guy when you spend it.”

In that case, the Big Guy is the government. They get to touch the money twice and any time government touches money, some of it sticks to their fingers.

J Patrick Demorest
Reply to  H.R.
February 28, 2022 7:34 am

It’s Rearden Steel. Straight out of Atlas Shrugged.

Ron Long
Reply to  LdB
February 28, 2022 4:15 am

CNN Breaking News, Monday, Feb. 28, 7:00 AM East time US: “World running out of ways to adjust 6to climate crisis”. Bill Weir, Climate Correspondent: “UN Research – billions reach point where they no longer adapt unless slowed” problem of “haves and have-nots”. Then CNN followed with another Breaking News story, something about Russia and the Ukraine, with Russia putting Nuclear Forces on “heightened alert”, obviously only of secondary importance! Higher Taxes and carbon credits, intended to close the gap between haves and have – nots?

Spetzer86
Reply to  Ron Long
February 28, 2022 5:21 am

Think of all the carbon savings if we just got rid of CNN and MSNBC…

william Johnston
Reply to  Spetzer86
February 28, 2022 7:42 am

Just a good start.

MR166
Reply to  LdB
February 28, 2022 5:52 am

Well that is the point of the whole Chinese inspired green movement isn’t it! They want to move all industrial production to the East. Look what happened to chips. We are their hostages at this point.

Iain Reid
February 27, 2022 11:55 pm

Time and time again you will get ‘A government spokesman says we are doing all we can etc’ when their actions demonstrate the complete opposite. I don’t know how they can say these things with a straight face?

Chaswarnertoo
Reply to  Iain Reid
February 28, 2022 12:45 am

Griff lies a lot, too.

AndyHce
Reply to  Iain Reid
February 28, 2022 1:05 am

they are politicians. lying is ingrained.

Spetzer86
Reply to  Iain Reid
February 28, 2022 5:22 am

I’m sure any and all relevant Climate Ministers will be more than happy to fly to several distant climate conferences to assess the impact of your observations…

Dean
Reply to  Iain Reid
February 28, 2022 4:06 pm

We are doing all we can to ignore the bleeding obvious and maintain logically inconsistent ideas.

griff
February 28, 2022 12:22 am

There are multiple impacts on UK steel making and production apart from carbon taxes… for example the financial difficulties of Liberty Steel which fell into financial difficulty in 2021 when its main backer Greensill Capital went bust. Its plants have been closed, affecting production.

decnine
Reply to  griff
February 28, 2022 12:31 am

Greensill collapsed because they failed to perform due diligence before lending huge sums to Liberty. Greensill collapsed when Liberty defaulted on interest payments due. Increasing carbon taxes contributed to the collapse. A year later(!) Liberty is in trouble because it hasn’t been able to find another patsy to ‘lend’ it even more.

Last edited 2 months ago by decnine
LdB
Reply to  griff
February 28, 2022 1:34 am

There are 3 main factors all but one are the UK’s own fault

Here it is from the industry

1.) The persistent weakness in sterling is a key factor.

A rise in iron ore prices globally, due to a shortage following the
collapse in January of a dam operated by Vale, the Brazilian miner. Iron
ore prices are currently trading at close to $100 a tonne, the highest
they have been for four years

2.) Higher energy costs – British steel producers, due mainly to environmental
charges, pay substantially more for their electricity than their
counterparts in Germany or France – and the higher price of carbon
permits are also adding to the burden.

3.) There remains vast overcapacity in the global steel industry.

Due to one and two the UK steel industry is dead on it’s feet due to three.

Last edited 2 months ago by LdB
Dean
Reply to  LdB
February 28, 2022 5:02 pm

The first one is not so clear.

Ok imported iron ore is more expensive, but it is a lot lower cost to import lower value iron ore than processed steel.

The weak sterling also provides a big incentive for UK manufacturers to buy locally made steel instead of imports which are more expensive.

And any steel exported also benefits from the weak sterling. Australian mineral exporters love a weak AUD, even though nearly all the capital equipment and fuel is imported.

Reply to  griff
February 28, 2022 1:40 am

So what? I believe that’s equivalent to ‘Look! Over there! A squirrel!’

JF

MarkW2
Reply to  griff
February 28, 2022 4:52 am

As someone who grew up in one of the UK’s largest steel-producing towns I can assure you, griff, that energy prices are by far the greatest problem facing the industry and claiming otherwise is just disingenuous.

Why don’t you go to the gates of the iron and steel companies still left in the UK and tell the workers that they’re jobs aren’t being threatened by the absurd rises in energy prices created by net-zero policies; and while you’re at it tell the same people not to worry about the absurd rises in their energy bills at home. I know a lot of these people and I doubt you’d be there for very long. They’re not stupid and really don’t suffer fools.

When will people like you finally realise the damage being done to society by the calamitous charge to net-zero, to say nothing of damage to the free world by the idiot politicians now subsidising the Russian war machine. When will you actually wake-up to reality? Maybe when a Russian soldier knocks on your door and tells you to get out.

MarkW
Reply to  griff
February 28, 2022 5:35 am

griff still can’t make the connection between these “financial difficulties” and all the taxes and regulations government is piling on to these companies.

fretslider
Reply to  MarkW
February 28, 2022 6:08 am

Griff is a product of the inputs he receives much like a climate model is the product of the great assumptions put into them.

If you don’t tell the individual/model about financial difficulty, taxes and levies, and regulations, then they don’t exist.

TonyG
Reply to  MarkW
February 28, 2022 1:45 pm

Given that over in the other thread griff apparently can’t make the connection that if you generate energy from wind you must REMOVE energy from the wind, it’s hardly surprising.

Chaswarnertoo
February 28, 2022 12:44 am

Net zero. Zero jobs, zero economy. You will own nothing and be happy….

Scissor
Reply to  Chaswarnertoo
February 28, 2022 4:18 am

Does that include free healthcare?

William Wilson
Reply to  Scissor
February 28, 2022 8:32 am

Free healthcare is pretty worthless when there is virtually no healthcare.

H.R.
Reply to  Chaswarnertoo
February 28, 2022 4:33 am

… or else.

fretslider
February 28, 2022 12:57 am

This is how unreliables are made to appear cheaper when they clearly are not

Griff’s level playing field

AndyHce
February 28, 2022 1:05 am

Barking mad seems a reasonable estimation but maliciousness can’t be ruled out.

Reply to  AndyHce
February 28, 2022 1:42 am

Andy, I’m afraid you underestimate the incompetence of the average UK politician.

JF

fretslider
Reply to  Julian Flood
February 28, 2022 2:49 am

And in some cases the influence of their spouses.

Vuk
February 28, 2022 1:49 am

No one can get close to him with china virus, bottle of novichok spray or any kind of a lethal implement, but the man with the broken nose (photographed yesterday) might be tempted to do it with his bare hands.
comment image

Serge Wright
February 28, 2022 2:26 am

The European solution to this dilemma is to import from Russia. After all, what could possibly go wrong ?

Derg
Reply to  Serge Wright
February 28, 2022 4:42 am

What choice do they have?

Drake
Reply to  Derg
February 28, 2022 7:54 am

Nuclear, coal, what they used before CAGW and windmills and solar.

They CHOSE to dump their home grown energy supplies for Russian gas. There was no necessity to do that, AND it has cost them the cash sent to Putin and jobs in the mining sector for their citizens doing so.

fretslider
February 28, 2022 2:46 am

Energy – to have it or not to have it….

“Until now, the government has successfully ridden two horses on the subject of energy. It has merrily appeased the green lobby with promises to ditch fossil fuels and end their production domestically. And yet it knows perfectly well that when push comes to shove, it can’t make good on these promises. The replacement energy source just isn’t there. Nuclear might have worked, but successive governments have run it down – nearly half of the UK’s current capacity is due to be retired by 2025. And wind, solar and so on help, but they are expensive, unreliable and take up lots of valuable land.

Without a viable replacement for fossil fuels, if the government were to impose Net Zero, as promised to the green lobby, it would likely cause a cliff-edge drop to most people’s living standards.

Of course, the government could always backtrack on abandoning fossil fuels, seek a compromise and preserve people’s living standards. However, our ability to backtrack on this relies on one key factor: the continued ready availability of coal, oil and gas. You might have thought that a canny government would recognise this and keep our short-term options open by producing as much fossil-fuel energy as possible at home. Other European countries have done just that.”

https://www.spiked-online.com/2022/02/27/we-need-to-talk-about-energy/

But we won’t and so the days of all our energy intensive industries are numbered.

Ben Vorlich
February 28, 2022 3:23 am

Griff, on behalf of his employer will say that this is not a problem, in fact it is creating a wildlife habitat.

Graveyard of the green giants: It’s the hidden cost of our dash for windpower – thousands of decommissioned blades that are so difficult to recycle, they are just dumped as landfill, writes TOM LEONARD

https://www.dailymail.co.uk/news/article-10558375/TOM-LEONARD-Graveyard-green-giants.html

fretslider
Reply to  Ben Vorlich
February 28, 2022 3:30 am

Ah, the future wind turbine blade-o-cene

GeoNC
February 28, 2022 4:55 am

Could there be any worse writing than referring to “carbon prices”? It seems to be used interchangeably by various writers to describe government levies on carbon dioxide emissions or the price of natural gas or could also refer to elemental carbon prices I suppose. In this case it looks like the writer means the tax levied on emissions.I guess they want to disguise the fact that it’s all due to government action by calling it a price rather than properly calling it a tax.

Tom Abbott
Reply to  GeoNC
February 28, 2022 6:00 am

Alarmists tend not to be too precise.

MR166
February 28, 2022 5:41 am

China has figured out how to occupy the West without firing one bullet. Just a few shekels in the right pockets and our destruction is assured. It seems politicians and educators are not really that expensive to purchase.

Tom Abbott
Reply to  MR166
February 28, 2022 6:03 am

That’s what’s happening. Our greedy Elites are taking money from the Chicoms and undermining all of us in the process. They are selling us out.

MR166
Reply to  Tom Abbott
February 28, 2022 6:33 am

That is why President Trump was so detested by the Elites. His MAGA plan was trying to achieve industrial independence.

ResourceGuy
February 28, 2022 6:10 am

It’s amazing they still have any manufacturing industry there.

MR166
February 28, 2022 6:53 am

China’s dominance in manufacturing is similar to to the way that people trap feral hogs in the southern US. These hogs are very smart and not easy to trap. So to trap them people put food in an empty field. First they build one side of the enclosure. Then they build a second followed by a third. Lastly they build a forth side with a gate all the while daily feeding the pigs.
Well folks the Chinese will soon take over Taiwan and close the gate.

Brad-DXT
February 28, 2022 9:48 am

According to Joe Biden, all these steel workers will just have to learn to code.
FJB

Andyhce
Reply to  Brad-DXT
February 28, 2022 4:36 pm

About the time they try that there be a coders’ union to deselect most of them.

LdB
Reply to  Brad-DXT
February 28, 2022 4:36 pm

According to Griff they need to learn how to install bird choppers and solar panels.

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