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The European Commission has cleared UK plans to compensate energy intensive industries for the cost of the carbon floor price.
The proposals to shield heavy industry from the green levy is in line with state aid guidelines, the Commission ruled on Wednesday. It will “further EU energy objectives without unduly distorting competition in the Single Market,” the Commission found.
HM Treasury introduced an extra tax on UK electricity generators in April to top up the chronically low European carbon price. It said this would encourage investment in low carbon technology.
However, the tax was passed on to customers in higher bills, prompting complaints it made UK industry uncompetitive against European rivals and risked driving businesses overseas. Accordingly, government promised to partially offset the cost for certain major electricity users, subject to the state aid clearance granted today.
It follows a decision in the most recent Budget to freeze the level of the carbon floor price instead of escalating it as previously planned, in response to industry concern.
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