Economic secretary to the Treasury Patricia Hewitt said on Tuesday that fuel used as a raw material in chemical, steel and aluminium production would be exempt from the tax, which will be introduced in April 2001.
The announcement came after talks earlier that morning between representatives of energy-intensive sectors, environment minister Michael Meacher and trade minister John Battle.
Hewitt said: “We want to work with the industry to ensure we design the climate-change levy in such a way as to maximise environmental effectiveness but safeguard competitiveness.”
But a spokesman for the Building Material Producers said: “The BMP remains concerned that the climate-change levy will damage the competitiveness of British construction products manufacturers. Government proposals emerging from the meeting with energy-intensive users may offer limited help to specific industries, but will do little to reduce the £250m burden of the tax on the construction product sector.”
Graham Funnell, head of the environmental and technical policy unit at the UK Steel Association, said: “We don’t know yet what the exemption will be. Even if we get exemption for coke [deemed a chemical in steel production], the increased rate of tax would still be £120m [extra] a year.” Energy-intensive businesses that agree approved targets for energy efficiency will not be required to pay the full rate, although the exact discounts have still to be agreed.
The aim of the tax is to save 1.5 million tonnes of carbon emissions a year by 2010.