Tata Steel fears effects of carbon tax in Budget

Steel giant Tata has warned that a new carbon tax announced in the Budget dealt the industry "a potentially severe blow".

The plan sets a new minimum price on carbon emissions which Tata said would make UK steelmakers less competitive.

Tata Steel is the biggest private business in Wales, employing about 7,500 people.

The chancellor said the move would encourage billions of pounds of investment.

Karl-Ulrich Köhler, head of Tata Steel's European operations, said the tax was "exceptionally unhelpful and potentially damaging".

The UK is the first country in the world to introduce a minimum price, or price floor, for carbon emissions from power stations. It will fund investment in green energy.

Chancellor George Osborne said in his Budget: "This will provide the incentive for billions of pounds of new investment in our dilapidated energy infrastructure."

Mr Osborne plans to introduce the carbon floor price (CFP) of £16 per tonne from 2013, rising to £30 a tonne by 2020.

Mr Köhler said the positive measures in the Budget for steelmaking were overshadowed by the introduction of the floor price.

He said: "These benefits are likely to be dwarfed by the introduction of the carbon floor price which represents a potentially severe blow to the sustainability of UK steelmaking."

He said steelmakers already faced the prospect of "deteriorating international competitiveness" because of European Union emissions costs.

He added: "The CFP proposal will impose additional unilateral emission costs specifically on the UK steel industry by seeking to artificially ensure that these costs cannot fall below government-set targets which no other European country will enforce.

"This is an exceptionally unhelpful and potentially damaging measure."

'Super tax'

The Budget predicts the levy will raise more than £740m for the Treasury in 2013-14, rising to just over £1bn in its second year and £1.4bn in its third year.

But Tata fears the floor price will lead to higher costs for generating electricity, hitting energy-intensive industries such as steel.

Steel produced elsewhere in the world would not be subject to the extra costs, the company said, making UK steelmaking less competitive.

Tata's biggest site in Wales is the plant at Port Talbot. Its other sites include rolling plants in Newport and steel coating plants in Shotton, Flintshire, and Trostre, Llanelli.

They were acquired in 2007 when Tata bought Corus.

Ian Rogers, from industry body UK Steel, said: "The problem is that it will impose a tax on us that is not borne by any other steel producer in the world.

"George Osborne yesterday made great play with the fact that the UK is going to be the first to do this but he has taken no account of the fact that, for energy-intensive users, this is a significant extra cost."

First Minister Carwyn Jones met the head of Tata Steel Europe on Wednesday to discuss the company's future in Wales.

A Welsh Assembly Government spokesman said: "We have a close working relationship with Tata Steel who are a major employer in Wales and we want this to continue.

"They are investing heavily in reducing their carbon emissions here in Wales."