Climate change cuts could push up bills

The increasing costs of energy as a result of green policies could hit the UK's manufacturing sector - just as the country needs industry to help boost the economy, a think-tank warned today.

A report from Civitas said efforts to tackle climate change through cutting greenhouse gas emissions and increasing renewable energy generation would significantly push up energy bills for business.

Extra costs are put on energy from policies including the EU's emission trading scheme, the renewables obligation to boost investment in technology such as wind power, and the climate change levy which taxes energy use in businesses and the public sector.

The Labour Government's climate change strategy added an extra 14% on homeowners' electricity bills and 21% on business bills, the report said.

And last year's renewable energy strategy could have created "surcharges" of up to 70% for businesses, and 33% for domestic customers by 2020, the report from Civitas claimed.

The study warns the new coalition Government's energy policy could be as damaging to manufacturing industry as the previous administration.

The review by economist Ruth Lea and Jeremy Nicholson, director of lobbyists the Energy Intensive Users Group, said the UK was badly placed to meet its commitments to boost renewables as it was starting from such a low base.

And even without the extra costs imposed to pay for climate change policies, Britain has high industrial electricity prices, which threaten its competitiveness.

Ms Lea said: "The economy desperately needs a competitive and thriving manufacturing sector if it is to prosper.

"Competitive energy prices are vital to the success of manufacturers, especially energy intensive users.

"Government energy policies are, however, remorselessly driving up energy costs thus risking the 'migration' of manufacturing plants to economies where the costs are lower."