Chemicals boss warns of exodus

The Sunday Times
December 7, 2008
Prime minister is urged to change EU climate change rules to prevent mass exit
Danny Fortson

JIM RATCLIFFE, the reclusive billionaire behind Ineos, Britain’s largest private company, has warned Gordon Brown that hundreds of thousands of jobs will be lost if the prime minister commits Britain to tougher EU curbs on carbon emissions.
Ratcliffe issued the warning in a letter last week that was also signed by Paul Thompson, chief executive of GrowHow, the UK’s last remaining fertiliser manufacturer, and Steve Elliott, head of the Chemical Industries Association.
It is part of a feverish, last-ditch effort by the chemicals industry and other big energy users to force changes to the EU Emissions Trading Scheme (ETS) ahead of a summit of EU leaders this week in Brussels, where they are expected to sign off on a bloc-wide climate-change package.
The industry argues that the next phase of the ETS — which proposes to incorporate industries now excluded from the programme such as chemicals, cement and glassmakers from 2013 – will lead to “carbon leakage” as companies relocate to countries where they are not forced to pay to pollute.

The chemical industry employs, directly and indirectly, 600,000 people in the UK.
In its current form, the ETS will impose carbon-emissions caps on industrial polluters from 2013 and force them to pay for 100% of their permits by 2020. Ratcliffe said that doing so would be “truly horrendous” for the industry and make it uncompetitive.
Instead, he says that chemicals manufacturers should be allocated permits for free and agree on less stringent pollution caps because they compete against rivals in countries not subject to such rules.
Ratcliffe, who has been locked in crisis talks with banks after a sharp downturn in business put his company in danger of breaching covenants, said: “We believe there is a significant danger to our £60 billion industry if phase three of EU ETS becomes law in its current form.
“Chemical businesses situated throughout the UK, especially in the north of England and central Scotland, with 80% of them foreign-owned, will be ‘decimated’, putting almost 200,000 jobs at risk,” he added.
Emissions permits go for €15.49 (£13.40) per tonne, but are expected to roughly triple when phase three of the ETS begins in 2013.
The energy industry, one of the largest polluters, has already accepted that it will have to pay for 100% of its permits from 2013.
It is thought that EU leaders may have been persuaded by the industry’s arguments and will soften their stance. An increase in free allocations to polluting sectors will bring howls from environmentalists who claim that the industry is overdramatising the threat posed by the ETS.
Ed Miliband, the energy and climate change secretary who met European ministers in Poznan, Poland, for talks on climate change last week, said: “The [climate] package must retain its environmental integrity. This means a commitment to reducing our emissions by 30% following a global deal.
“It means a tough and declining cap in the ETS and an ambitious increase in the auctioning of ETS allowances. It means addressing competitiveness, but only on the basis of firm evidence of sectors at genuine risk of carbon leakage.”