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UK paper industry calls for changes in manufacturing

The UK’s paper industry still operates 50 mills and accounts for 25,000 jobs. It contributes significantly to the UK economy. It has reduced energy consumption and carbon emissions by over 30 percent since 1990. It has invested in state of the art equipment and combined heat and power (CHP) and on-site biomass plants. Paper is now the most recycled of materials with a recycling rate of 73 percent.

However, government policy is acting as a huge disincentive to further investment and could result in the closure of many mills over the next decade.

Potentially the most damaging of the policies is the Carbon Price Floor which takes effect in 2013. It could cost UK energy intensive industries more than twice the amount paid by EU competitors. The rate is due to increase by £2 per ton every year, until 2020. Competitors outside of the EU will not be paying anything.

New Climate Change Agreements (CCAs) come into force next year. UK’s Department of Energy and Climate Change (DECC) has arbitrarily set the paper industry a target of a further 14 percent reduction in energy use and added hugely to the costs of running the scheme by making targets site specific, rather than sector specific. Ministers need to intervene to ensure that targets are achievable. CCAs also need to remain sector specific as this is the only way that company investment cycles can be taken into account.

Incentives for investing in and operating industrial CHP plants need to be restored.

UK industry needs an energy policy based on affordability and not on meeting renewable targets. This would be a huge u-turn but is the only way of countering the competitive effects of lower energy costs around the world due to the exploitation of shale gas. U.S. industrial gas prices are now about a quarter of those paid in the UK.

Subsidies for energy from waste and large scale energy only biomass should be phased out as they put at risk supplies of the paper industry’s basic raw materials.

Raw material scarcity is potentially a huge issue over the coming years and a waste strategy based on resource efficiency and a “circular economy” where the priority is closed loop recycling. This means central command and control and a further u-turn on the “localism agenda”.

CPI would also urge the UK government to lobby the EU to prevent additional costs being imposed on industry through measures to tighten limits under the Industrial Emissions Directive and the EU’s Emissions Trading Scheme. The proposed Sulphur Directive should be implemented in a time scale that does not penalize shipping in Northern European waters.

The measures outlined above are essential if the UK’s paper industry is to thrive in these difficult economic times. CPI hopes that the new Ministerial teams have the courage to make the necessary changes to government policy that will make the UK a place where the world’s paper industry will want to invest.