The impact of the climate change levy on the UK PCB industry
The impact of the climate change levy on the UK PCB industry
Keywords: Green issues, Electronic industry, United Kingdom
As Chairman of the PCIF's Environmental Working Group, I want to highlight an important environment related issue that may have a significant impact on the UK PCB industry and its future competitiveness. The subject is global warming and,although there is increasing awareness of its potential impact, it is the UK Government's current methodology for addressing it that is causing concern. Indeed, it is fair to say that with the implementation of the new "climate change levy" (CCL) the impact of global warming is already being experienced by the UK PCB industry.
The possibility of global warming has been known for some years and recent predictions suggest that the Earth's temperature at the end of this century could be 68C above the 1990 level. The potential effects of global warming were significant enough to lead to the generation of the Kyoto Protocol, which was signed by many of the world's major industrialized countries. This protocol was seen as the beginning of a concerted global effort to reduce emissions of the greenhouse gases causing global warming. By signing this protocol the major industrialised nations agreed to reduce their greenhouse gas emissions to an average of 5.2 percent below their 1990 levels by 2008-2012. However, the British Government went one step further and made a commitment to reduce the UKs emission of greenhouse gases to 12.5 percent (including a 20 percent reduction on carbon dioxide levels) below their 1990 levels by the year 2008-2012. The UK has already made significant progress towards meeting its emissions reduction targets, largely by moving away from the use of coal fired power stations to gas for the production of electricity. However, to encourage industry to reduce further its carbon dioxide emissions, the UK Government has, in April this year,introduced the CCL.
The CCL will result in energy bills to industry increasing by approximately 15 percent from 1 April and, although the levy is meant to be "fiscally neutral", it appears that there may be a significant impact on the UKs PCB manufacturers. The complexity of the administration of the CCL and its varying impact on different industrial sectors has led to a degree of confusion and uncertainty. For the PCB industry, the PCIF has already highlighted the potential impact of this levy to its members and has also made its concerns known to the UK Government. Overall "fiscal neutrality" will be achieved by recycling the levy through reductions in National Insurance contributions but the impact of the CCL will not necessarily be fiscally neutral for individual industry sectors. In fact, the biggest beneficiaries of the CCL will be companies with large numbers of employees and relatively low energy costs. This type of scenario may be common in the service sectors but is less likely to be encountered in more energy intensive manufacturing sectors of industry.
Additional complications have been caused by the introduction of an 80 percent discount in the levy which was offered as a concession to the larger energy users. The confusion stems from the fact this discount is not automatic and has to be agreed by negotiation based on commitments to make major reductions in carbon dioxide emissions compared to 1990 levels. It is likely that only installations covered by the Integrated Pollution Prevention Control(IPPC) regulations will be eligible for this reduction and thus it may not apply to a large proportion of manufacturing industry including the PCB industry. PCB manufacturers could end up having to pay the levy in full. In a survey conducted last year of approximately 3,000 companies with annual energy bills of £100,000 or more, it was found that only around 700 of them would be net beneficiaries via their national insurance rebates. Almost 2,300 of the companies surveyed were predicted to incur total additional costs of over £95 million. Even after the financial gains of the beneficiaries were taken into account, the overall total impact was predicted to be a net cost of over £80 million. For companies competing with overseas competitors the implications of these additional costs on their competitiveness are clear. For the PCB industry, the overall cost burden will vary with the type and size of company but for some of our larger manufacturers it could be many hundreds of thousands of pounds.
The CCL is a good example of the complex interactions that come into play when we seek to address "macro" environmental problems such as global warming on a relatively local basis. The UK government has implemented legislation to encourage industry to reduce its environmental impact, yet the result could be an additional burden that reduces the UK Circuit Board sector's competitiveness.
Martin GooseyShipley Europe Ltd
