Industry seeks to block government climate change levy

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Britain's big energy users are accelerating plans to launch an emissions trading system in an effort to stall the introduction of the Government's climate change levy.

Britain's big energy users are accelerating plans to launch an emissions trading system in an effort to stall the introduction of the Government's climate change levy.

The Confederation of British Industry will announce this week that it intends to have a full-blown trading system in operation by next April - a year ahead of the levy being introduced.

Originally, the CBI had planned to launch a trial system, enabling a few firms to start trading emissions permits among themselves by the end of this year. The full system would then have been launched towards the end of next year in advance of the introduction of the climate change levy in April 2001.

Now, however, the CBI believes it can have the system up and running much earlier. Successful operation of a permit trading scheme will be vital if industry is to persuade the Government that such a system will be just as effective as an energy tax in ensuring that Britain meets the emission reduction targets it signed up to at the Kyoto summit.

At a meeting between government ministers and energy intensive users last week, it was suggested that both Stephen Byers, the Secretary of State for Trade and Industry, and Michael Meacher, the Environment minister, were becoming more sympathetic to industry's case.

However, the Treasury minister, Stephen Timms, was said to have refused to budge from the announcement set out by the Chancellor in the last Budget. The climate change levy will cost industry £1.2bn, with steelmakers alone facing a bill of £238m.

The intention is to recycle the proceeds from the tax by cutting employers' National Insurance contributions. However, industry calculates that this will only reduce its bill by £140m a year.

The levy is designed to help Britain meet its target of cutting greenhouse gas emissions by 20 per cent of their 1990 levels by 2010.

However, industry argues that such a tax will only have the effect of rendering British business uncompetitive and forcing investment to go abroad. It also argues that fiscal penalties are not the effective way of cutting energy use and thereby reducing emissions.

The CBI is expected to propose a series of options for operating an emissions-trading system, including auctioning of the permits.

The Government has offered some industries, including steel, chemicals and pharmaceuticals, a 50 per cent rebate on the climate levy. But they argue that this is inadequate.

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