An alternative climate change levy scheme for manufacturing industries

Ramsell, Philip G. (2003). An alternative climate change levy scheme for manufacturing industries. PhD thesis The Open University.

DOI: https://doi.org/10.21954/ou.ro.0000f6ed

Abstract

The threat of global wanning from an enhanced greenhouse effect caused by increased levels of greenhouse gases in the earth's upper atmosphere, could be one of the biggest concerns for international governments for the foreseeable future. The threat has led to the commitment of most developed countries, with the notable exception of the USA, to reduce their emissions of these gases in an attempt to stabilise atmospheric concentrations. Under an agreement reached at a United Nations Conference on Climate Change held in 1997 in Kyoto, Japan, (the Kyoto Protocol), the United Kingdom government has pledged to reduce greenhouse gas emissions by 8% below 1990 levels for 2008-2012, and additionally committed to reduce emissions of carbon dioxide by 20 per cent below 1990 levels by 2010.

As the combustion of fossil fuels is the greatest source of CO2 emissions, reducing their use is an important step for meeting the targets. To encourage lower energy use by business, a climate change levy is being applied to business energy. The levy will increase industry's energy costs but to mitigate its adverse competitive effects in energy intensive sectors, a levy discount scheme is available. However, since in its existing form, many firms do not qualify, the scheme will be costly to administer, many firms have not taken up the discount, and it will be burdensome for those that have.

Like many of the energy intensive industries, the aluminium casting sector is under severe global competitive pressure and needs to reduce specific energy consumption to meet its sector target. This must be achieved without increasing production costs.

The aims of the research was to find the specific energy consumption of aluminium casting processes and identify the scope for energy saving. In order to achieve these aims, the research investigated the aluminium casting sector of the foundry industry through the use of structured interviews with foundry managers, a questionnaire, and case studies. The data from these sources was then used as the basis for the construction of an alternative incremental levy scheme. Building and running a model using the research data with various levy rates and modes of application then tested this alternative strategy.

As a result, it was possible to draw three major conclusions. First, that the sector could meet its energy reduction targets set by the government. Second, an incrementally applied levy, (without reduced National Insurance contributions as now), could drive energy efficiency without raising costs. Third, an incremental levy would encourage energy efficiency in all business sectors.

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