Business for Britain exists to give a voice to the large, but often silent, majority among Britain’sbusiness community who want to see fundamental changes made to the terms of our EUmembership. We are independent and non-partisan, involving people from all parties andnone.As a campaign, we aim to reflect the views of our business signatories, and the campaign isrepresented in the media and at events by people with real business experience. By pushingthese voices into the mainstream - through quality research, eye-catching campaigns, rapidrebuttals and set-piece events such as lectures and debates - Business for Britain ensures thatthe British people understand that many UK business people want a better deal from Brusselsand are not scared to fight to achieve that change.■ Alan Halsall (Co-Chairman) – Chairman, Silver Cross■ John Mills (Co-Chairman) – Chairman and Founder, JML■ Daniel Hodson (Honorary Treasurer) – Former CEO, LIFFE■ Matthew Elliott (Chief Executive) – Founder, TaxPayers’ Alliance & Big Brother Watch■ Neville Baxter – Director, RH Development■ Harriet Bridgeman CBE – Founder, The Bridgeman Art Library■ Dr Peter Cruddas – Chief Executive, CMC Markets■ Robert Hiscox – Honorary President, Hiscox Ltd■ John Hoerner – Former CEO, Tesco Central European Clothing■ Brian Kingham – Chairman, Reliance Security Group■ Adrian McAlpine – Partner, Sir Robert McAlpine■ Jon Moynihan OBE – Former Executive Chairman, PA ConsultingAbout the AuthorsMatthew Elliott led the hugely successful ‘No’ campaign against the Alternative Vote in the2011 referendum, founded the TaxPayers’ Alliance, civil liberties campaign Big Brother Watchand, most recently, Business for Britain. Oliver Lewis is the Research Director of Business forBritain. He has previously worked for Michael Gove and the New Schools Network and haswritten for The Spectator.Energy Policyand the EUBusiness For Britain is a Company Limited by Guarantee in England No. 84112612

AcknowledgementsWe would like to thank the trade bodies that took the time to share their thoughts withus, as well as Ruth Lea, David Lewis, Jonathan Lindsell, John Redwood, Matt Sinclair andothers who have offered their advice. Finally, we would like to thank Tim Philpott for hishelp with the original research. The opinions and conclusions expressed in this paper areours alone.Energy Policyand the EU4

In a recent letter to the President of the European Commission, José Manuel Barroso, theBritish Prime Minister, David Cameron, also made it clear that the EU needed to avoid placinga regulatory burden on British businesses:“It is essential that we avoid regulations or targets that will forcemember states away from their least cost decarbonisation pathwayor undermines a level technology playing field.”– David Cameron, Letter to the European Commission 3This paper seeks to highlight and calculate the impact of EU legislation on energy producersand users. This paper does not attempt to argue that the EU has been the main driverof energy prices, it cannot be disputed that UK Governments have, in some areas, goneconsiderably further than the EU in introducing expensive policies. Both unilateral UK actionand a tendency to ‘goldplate’ EU directives means that UK policy has, historically, accountedfor the bulk of, though not all, regulatory energy costs. However this should not cloudthe fact that the EU does play a role in driving up the cost of energy and has introducedexpensive policies.Some excellent research has been done to highlight how successive British Governmentshave driven up energy prices, both via their own initiatives and by ‘goldplating’ EU directives.Unfortunately relatively little research has been done on how the EU specifically is exertingan ever increasingly role in driving up the cost of energy.What is even more concerning for many British businesses is that this rise in energy bills isnot being felt everywhere. In other major economic areas, in particular the United States,the last few years have seen a marked decrease in energy prices as restrictions on accessingnew types of energy, especially shale gas, have been reduced.The research below shows that many energy intensive firms are now considering movingto areas where there are lower energy costs, a decision which would have a devastatingeffect on jobs in the UK. Those firms who can’t relocate face the prospect of closure, withthe same disastrous effect on employment. While expensive energy has had a particularlycorrosive impact on the manufacturing sector (especially the Energy Intensive Industriessuch as petrochemicals, metal founding, ceramics and glass manufacturing) it is worthremembering that high energy costs don’t just affect businesses; in 2012-13 alone theNational Health Service spent about £630 million on energy. 4Something needs to be done to help Britain’s manufacturers; however this report veryfirmly believes that the answer does not lie in subsidy or protectionism, but in devolvingdecision making powers back to the member states. Policy makers should aim to reduce theregulatory burden faced by energy producers and users. European leaders, in particular thePrime Minister David Cameron, have emphasised the need to simplify EU rules and targetsin order to reduce energy bills. There may be a case for the EU to set an emissions target- a target derived from the United Nations Framework Convention on Climate Change(UNFCCC) - but there is no need for the EU to micromanage member state’s energy policies.3 Letter from D. Cameron to J.M. Barroso, 4 December 20134 TaxPayers’ Alliance, Research Note 133: Energy and Water Bills in the NHS, 21 November 2013, found at9

The rising costs of energy2The EU has a long history of involvement in energy issues. Despite the fact it was onlygiven the formal power to legislate on energy in 2009, the EU has been involved in energydecisions for many years, developing a de facto energy policy over several decades. Thisarguably started when the then European Economic Community sought to come to acommon position against the Organisation of Petroleum Exporting Countries (OPEC) duringthe 1973 energy crisis.During the Maastricht Treaty discussions in the early 1990s, proposals for an energychapter were vetoed and the final wording of the Treaty meant that the EU lacked the legalfoundations for energy laws for several years. However, despite this lack of a legal basis,directives were still passed that affected energy markets, notably via initiatives that soughtto create an internal market in electricity (Directive 96/92/EC) and gas (Directive 98/30/EC)which were based on internal market or environmental clauses in the Treaties. Other clauseslike the Renewables Energy Directive (Directive 2009/28/EC) and introduction of the EU’sEmissions Trading Scheme (EU ETS) were based on environmental clauses. It was noted bythe House of Lords EU Committee that before 2009 certain European energy laws lacked aspecific legal basis. 5The EU has engaged in a process of market opening in network industries, including in theenergy markets. In recent years there has been a succession of new policies introduced bythe EU, including measures to complete the Single Market in energy (in July 2007 every EUconsumer was given the right to purchase electricity and gas from any other supplier in theEU) and to tackle climate change. More recently, these interventions have become moredirect as the EU has sought to realise the aims set out by the United Nations FrameworkConvention on Climate Change (UNFCCC). Perhaps the most notable example of thisrecent intervention is the EU’s demand that member states meet set targets for shares ofrenewable energy consumption via the renewable energy targets, with the UK’s RenewablesObligation (RO) adapted to become one of the main vehicles to deliver this target.In 2009, the Lisbon Treaty created a new title on energy (Article 194 TFEU) which expandedthe EU’s legal basis and gave the organisation “new” powers to pass laws affecting energypolicy. 6 For the first time the Treaty made it clear that energy policy is a shared competencebetween the EU and the member states, stating that the EU was tasked with ensuring thefunctioning and security of energy supply and promoting energy efficiency, interconnectionand renewable energy. The year 2009 also saw the EU introduce the Third Energy Package,which aimed to finally create single markets in electricity and gas.As of July 2014 there were 224 legislative instruments falling under the remit of DirectorateGeneral for Energy. 7 These are the inevitable product of decades of both legislative creepand the EU’s ambition of integrating Europe’s energy markets. There are, at first glance,strong arguments in favour of integrating energy markets, not least to allow energy firmsaccess to larger markets and to improve the UK’s energy security. But there are serious5 House of Lords European Union Committee, The Treaty of Lisbon: an impact assessment: Volume I, p. 221, February 2008,found at 6 The Foreign and Commonwealth Office (FCO) determined that the powers were new in its own assessment of the LisbonTreaty, found in FCO, A comparative table of the current EC and EU Treaties as amended by the Treaty of Lisbon, January 2008,found at 7 DG ENER, Overview of the secondary EU legislation (directives and regulations) that falls under the legislative competence of DGENER and that is currently in force, found at 11

in the US. While this would be concerning in its own right, what is even more concerningis that long term trends suggest that the UK has faced, and will continue to face, risingelectricity prices. This can be seen in the rise of British electricity prices (Figure 3) which havemore than doubled for non-domestic consumers in the last ten years and the price of gashas nearly doubled as well.Figure 3: Evolution of average electricity and gas prices for non-domesticconsumers in the UK in nominal terms (excluding climate change levy) 14The same trend is also seen when taxes such as the climate change levy are added(Figure 4) which shows that, again, both gas and electricity prices have nearly doubled.Figure 4: Evolution of average electricity and gas prices for non-domesticconsumers in the UK in nominal terms (including climate change levy) 14Energy Policyand the EU14 The Climate Change levy is a tax imposed on certain energy generating products, including coal and HM Government,Price of fuels purchased by non-domestic customers in the United Kingdom, data found at 14

The UK’s struggles are faced across the whole of the EU: according to the Commissionbetween 2005 and 2011 EU manufacturing saw the highest increase in energy costs relativeto the US, China and Japan. 15 According to Commission President Barroso, between 2005and 2012 the gas price for European industry increased by 35 per cent and the electricityprice increased by 38 per cent. In the US by contrast gas prices fell by 66 per cent andelectricity prices fell by 4 per cent. 16The marked difference can be seen in Figure 5 which shows the annual industrial gas pricesfor the UK and US between 2005 and 2011 and the rising gap that has emerged as US priceshave fallen while the UK’s prices have continued to rise.Figure 5: End user gas prices for industry 17And the same trend can be seen in electricity prices (Figure 6) where the UK’s prices haveincreased significantly while US prices have remained static.Figure 6: End-user electricity prices for industry 1815 European Commission Staff Working Document, Energy Prices and costs report, p.197, 17 March 2014, found at16 European Commission, Energy Priorities for Europe: Presentation of J.M. Barroso to the European Council, 22 May 2013, foundat 17 HM Government, International industrial energy prices – including taxes, data found at 18 HM Government, International industrial energy prices – including taxes, data found at 15

This divergence is not confined to just the UK. Last year the European Commission cameto the disturbing conclusion that “almost all member states have seen a consistent rise inconsumer prices of electricity and gas” and found that certain Energy Intensive Industries(EIIs) had reported gas price rises of between 27 and 40 per cent in the period 2010-12. 19 Thesame study also concluded that since 2008 electricity network costs have increased by 30per cent for industrial consumers and that taxes and levies rose by 127 per cent for industry,before exemptions. 20This was not an isolated study; other reports by the EU have found that between 2008 and2012 industrial electricity prices (excluding VAT and recoverable taxes) have gone up byabout 3.5 per cent per year, although in some countries retail industrial prices have actuallyincreased more dramatically than this. Estonia, Lithuania and Latvia have all experienced anannual increase in prices of more than 8 per cent. 21Other econometric surveys have also come to similar conclusions. A recent study of the RealUnit of Energy Costs (RUEC) for EU member states concluded that these costs had increasedby 47 per cent between 2000 and 2009. Between 2000 and 2009 the UK had an averageannual RUEC increase of 4.6 per cent while the EU as a whole saw an average increase of 4.2per cent (an increase in Real Unit Energy Costs means that the amount of money spent onenergy sources to obtain one unit of value has increased). 222.2The future of energy costsWhat is even more concerning is that it seems these high costs are only going to increaseover the coming years. The European Commission has recently warned that “Europeanindustry’s efforts to compensate for higher energy costs... may need to go even further.” 23 Ina recent report, the International Energy Agency (IEA) warned that electricity and gas costswill remain high for another 20 years. The report has also warned that the EU is likely to loseup to a third of its global market share of energy intensive exports. The IEA has stressed thatthe gap between the US and the EU is “structural. It’s not a one-off”. 24There are several factors that the EU is going to have to face over the coming ten yearswhich are going to increase energy costs regardless of policy. Investment is needed andthere are concerns that international fossil fuel prices may increase. 25 However, it is also clearthat poorly designed EU law will also have a role in driving up the price of energy and thecosts for Energy Intensive Industries (EIIs).Energy Policyand the EU19 European Commission, Energy Prices and costs in Europe, COM(2014) 21/2, p.6, 29 January 2014, found at20 European Commission, Energy Prices and costs in Europe, COM(2014) 21/2, p.6, 29 January 2014, found at21 European Commission Staff Working Document, Energy Prices and costs report, p.9, 17 March 2014, found at22 European Commission, Energy Economic Developments in Europe, pp. 11-25, 2014, found at23 European Commission, Energy Prices and costs in Europe, COM(2014) 21/2, p.13, 29 January 2014, found at24 International Energy Agency, World Energy Outlook, data found at 25 European Commission, EU Energy, Transport and GHG Emissions: Trends to 2050, pp. 47-8, 16 December 2013, found at16

The British Government has already begun to warn British businesses to expect an increasein their energy costs and has warned medium-sized users of energy to expect cost increasesof between 15-21 per cent higher as a result of both EU and UK policies. The Departmentfor Energy and Climate Change (DECC) has provided a breakdown of how bills are going toincrease over the coming few years which is summarised in Table 1. 26Table 1: Estimated gas and electricity costs for medium-sized business users 272013 2020 2030Average gas bill £520,000 £540,000 £560,000Average electricity bill £1,070,000 £1,360,000 £1,570,000Average energy bill £1,590,000 £1,900,000 £2,130,000What makes this even more concerning is that, as shown above, this increasing burden isnot being felt in other major economic areas, putting British industry at a disadvantage. TheInternational Energy Agency has warned that the price gap between Europe and the US ishere to stay, warning that:“Lower energy prices in the United States mean that it is well-placed to reapan economic advantage, while higher costs for energy intensive industries inEurope and Japan are set to be a heavy burden.”– International Energy Agency 28Why are energy prices increasing?2.3There are numerous factors which drive up the price of energy and drive up the costs forEnergy Intensive Industries (EIIs): wholesale fossil fuel prices, market structure, the state ofexisting infrastructure are just some of the factors which intertwine and shift the price ofenergy to varying degrees on a day to day basis. 29 While working out the exact effect of eachof these drivers on energy prices is not within the remit of this paper, it is worth noting thatthere is also a growing consensus that EU policy has played a small but significant role indriving up EIIs energy bills, a role which is growing.Despite the EU’s claims that the rise in costs is mostly driven by external factors, includingrising fossil fuel prices and the taxes and levies set in the member states, the European26 Non-CRC participant, counting impact of climate change policies, data found at 27 Non-CRC participant, found in Estimated impacts of energy and climate change policies on energy prices and bills, found at28 International Energy Agency, World Energy Outlook 2013 Press Release, found at 29 Factors that have been highlighted by other studies range from the economic climate to the accessibility of fuels to theimpact of legislation (both European and British). In the gas market for example there is a concerning lack of suppliers andgas prices are still often indexed to oil prices. The sheer number of factors that can influence energy prices and the complexway these factors interact means there remains a serious lack of credible and comparable information on what actuallyfinally determines prices and costs of energy for different consumers. There are also factors which influence the globalenergy markets, such as the impact of subsidised coal in China.17

Commission has itself acknowledged that its policy has had an impact on energy costs,stating that its policies will “ensure a sustainable energy sector in the long run, withacknowledged higher costs in the short term” 30 Various studies by the European Union,British Government and various think tanks have also begun to highlight specific EU lawsthat are causing problems either by increasing the regulatory burden or by driving up costs.In a recent report, an analyst at Oxford University’s Institute for Energy Studies warned:“The cost of Europe’s clean energy policies has also risen, and will rise further,as a result of the Commission’s proposals, made in January 2014, for EUenergy and climate change targets.”– Institute for Energy Studies, Oxford University 31In a recent major study, the Department for Energy and Climate Change (DECC) identifiedtwo EU policies that are having a particularly harmful effect and have pushed up energy bills:the EU Emissions Trading Scheme (EU ETS) (combined with the UK Government’s CarbonPrice Floor) 32 and the Renewables Obligation (RO). The RO (which is due to be replaced)was created independently by the British Government but has since been adopted tocomply with the EU’s renewable target, despite the UK’s developing hostility to the ideaof a renewables target. 33 In addition, the Government’s Red Tape Task Force was told byseveral companies that there were significant problems with the Emissions Trading SchemeRegulation, Energy Efficiency Directive and Energy Performance of Buildings Directive. 34It is possible to calculate the cost of the two most expensive EU energy policies: the EUETS and RO. DECC has provided detailed breakdowns of the impact (and predicted futureimpact) of individual climate change policies on energy bills. This allows us to, at least forthese two policies, calculate the impact on UK Energy Intensive Industries (EIIs). While theCPF is not counted as an EU cost in this report, experts who spoke to the authors did pointout that the CPF was introduced because of the perceived failure of the EU ETS to deterenergy producers away from fossil fuels. While DECC figures show that many costs stemfrom the UK, it is also clear that the cost of the EU ETS and RO is increasing with time. Viathis new analysis it soon becomes clear that, on their own, these two measures are goingto have a growing impact on EIIs over the coming fifteen years. For EIIs, these two policiesaccount for 9 per cent of the cost of energy today and will account for just under 16 percent of energy bills by 2030.Energy Policyand the EU30 European Commission, Energy Prices and costs in Europe, COM(2014) 21/4, p.2, 29 January 2014, found at31 D. Buchan, Costs, competitiveness and climate policy: distortions across Europe, p.5, April 2014, found at32 Department of Energy & Climate Change, Estimated impacts of energy and climate change policies on energy prices and bills,p.29, found at 33 For more information please see House of Commons Library, The Renewables Obligation, found at 34 Cut EU red tape: Report from the Business Taskforce, 15 October 2013, found at 18

Figure 7: Estimated average energy bills paid by an energy intensive userconsuming 100,000MWh each of gas and electricity (2012 prices) 35It is important to note that, while this information provides a good quantification of thecosts of the two main planks of EU energy legislation, it should not be seen as a definitivefigure for the additional burden placed on Energy Intensive Industries by the EU. The figuredoes not include other, less significant, EU policies and in addition there is a good chancethat the UK would have introduced similar policies had it been outside of the EU, althoughthe costs would likely have been much smaller (see Section 2.4 for more details). Whatthe above graph does show however is that the two main planks of EU energy policy areexerting an increasing burden on EIIs, though it would be wrong to claim that they are thesole problem.While this paper does not take a stance on the need for environmental legislation or thequestion of the need to reduce carbon emissions, it is also worth noting however thatorganisations like Friends of the Earth have condemned the EU ETS as being ineffective incombating climate change. 36The upward pressure that the EU is exerting on energy costs is now acknowledged bymost commentators. As recently noted by The Economist: “European industries pay threeto four times more for gas and over twice as much for electricity as American ones (whobenefit from cheap shale gas)”. 37 American newspapers have also warned that US policymakers should not aim to copy the EU; in a recent editorial the Washington Post arguedthat “We ought to take note of what’s happening on the other side of the Atlantic… acrossEurope, the price of retail electricity has soared by 20 per cent over four years, thanks to theEuropean Union”. 3835 Please note that the CPF is counted as a non regulatory cost. For consistency highest cost estimates were used for allpolicies in 2020 and 2030.Estimated impact of regulations on wholesale prices are counted as non-regulatory cost.For more information, see DECC, Estimated impacts of energy and climate change policies, p.86, March 2013, found at36 Friends of the Earth Europe, The EU Emissions Trading System: failing to deliver, found at 37 “Europe’s energy woes”, The Economist, 25 January 2014, p.3238 Editorial: “European Union cooling to global-warming costs”, Washington Times, found at 19

2.4The rising costs of EU energy regulation“This massive tide of red tape also means higher administration andmanufacturing costs which in turn… acts as a gigantic brake upon theentrepreneurial spirit.”– Owner of a medium-sized manufacturing business based in East EnglandIn addition to applying upward pressure on energy prices, EU energy laws also place asignificant regulatory burden on British firms. There is mounting evidence that the UK hasbeen particularly badly hit by the compliance costs that have stemmed from EU energylaws, in part down to the UK’s failure to secure exemptions or tendency to go beyondminimum EU requirements.The consequences of complying with a mounting complex regulatory burden has beennoted by firms with high energy demands:“The EU’s stringent hazard based / precautionary approach to regulation cancause serious implementation problems for companies.”– British Ceramic Confederation 39It is possible to calculate the cost of EU energy laws by looking at detailed HM GovernmentImpact Assessments (IAs). These are official documents produced by departments toaccompany new regulations, stating how far the specific recommended policy meets theGovernment’s objectives and to calculate the potential costs and benefits. While there hasbeen a noted failure by the Government to place all the IAs in one repository (previousattempts to compile such a collection have had notable omissions) it is possible to selecta large sample which includes as many relevant IAs as possible. Our methodology for bothselecting relevant IAs and analysing them can be found in the Appendix.The EU and British Government both claim that these directives bring benefits which oftenoutweigh the costs, but this claim has been widely disputed, not least by Open Europe. 40There is a lot of evidence to show that the benefits have been exaggerated: for example theETS Impact Assessment said the benefits were dependent on a scenario “where EU actionis pivotal in achieving a global deal”. 41 Clearly this was a flawed assumption. In other IAs theprojected benefits are based on an attempt to quantify predicted improvements in theenvironment.By looking at the total cost to British business via these IAs we can start to get an idea of thetotal cost of EU regulations, with a detailed breakdown of the costs and benefits providedin Table 2.Energy Policyand the EU39 British Ceramic Confederation, Response to the call for evidence on the Government’s review of the balance of competences, 17January 2014, p.1.40 Open Europe, Top 100 EU regulations cost the UK economy £27.4 billion a year – and costs outweigh benefits in a quarter of cases,21 October 2013, found at 41 Government Impact Assessment of the EU Climate and Energy package, found at 20

Table 2: Net costs of EU energy directives 42IA TitleTotalCost(lower)TotalCost(upper)TotalBenefits(Lower)TotalBenefits(Upper)NetCosts(Lower)NetCosts(Higher)EU Renewable EnergyDirective £98.9bn £119.1bn £6.2bn £12.4bn £92.7bn £106.6bnEU Climate and Energypackage, the revisedEU Emissions TradingSystem Directive andmeeting the UK nontradedtarget throughUK carbon budgets.Directives concerningthe Internal Market inGas & ElectricityProposal to recast theBasic Safety Standards(96/29)(and otherEuratom) Directives£20.6bn £20.6bn £9.2bn £9.2bn 43 £11.4bn £11.4bn£2.0m £4.5m £0 £0 £2m £4.5m£124.2m £127.8m £0 £0 £124.2m £127.8mIndustrial EmissionsDirective (IED) £3.4m £20.6m £0 £0 £3.4m £20.6mRegulations on thesupervision andcontrol of shipments ofradioactive waste andspent fuelEU requirements forHeating, Cooling andHot Water networks£690,000 £690,000 £0 £0 £690,000 £690,000£0 £0 £0 £0 £0 £0Energy End-Use andServices Directive £377.3m £378.2m £547.8m £551.5m -£170.5m -£173.3mOil Stocking Order£126m £126m £554m £554m -£428m -£428mEnergy ProductsDirective £1.2bn £1.7bn £4.9bn £6.0bn -£3.8bn -£4.4bnPlanning fornationally significantinfrastructure£200m £200m £4bn £5bn -£3.8bn -£4.8bnEnergy Performance ofBuildings Directive £7.1bn £8.6bn £9.9bn £30.3bn -£2.8 bn -£21.7bnTotals £128.7bn £150.7bn £35.4bn £64.1bn £93.2bn £86.6bn42 The following values were determined by adding the relevant Impact Assessments. It is important to note that the UK cango ‘beyond’ minimum EU standards and that the costs and benefits stem not just from the EU but from the decision of UKpolicymakers as well. However it is equally important to remember that the origin of many of these rules and directivesstemmed originally from the EU and that the measures cited were primary introduced to meet EU requirements. IAs alsoprovide a “lower” and “upper” estimate of the costs, both are provided in Table 2.43 Benefits in this IA were based on the assumption 2009 Copenhagen Agreement would result in a global climate changedeal. As the IA points out: “Benefits depend on other’s actions and the emissions concentration trajectory the world ison. High end of range reflects world where EU action is pivotal in achieving a global deal.” Considering the failure of theCopenhagen Summit only lower benefit estimates were counted, not the £242.1 billion higher estimate.21

It is important to note that many of these IAs state that there is both a cost and a benefit thatstems from the policy. There are benefits that stem from these laws, not least the potentialto make the air cleaner and it is worth emphasising that the above analysis suggests thatsome EU directives actually have a net benefit for the UK. This table simply shows the netcosts that stem from these rules.It should be emphasised that this paper does not take a stance on the climate changedebate and does not consider the environmental pros and cons of these laws. It has beensuggested that, even were it outside the EU, the UK Government would go beyond minimumEU requirements in implementing EU regulations. However, this claim is deceptive: studiesby Open Europe have shown that British regulation is more effective at delivering benefitsthan European regulation, so were the UK to replicate EU laws, these rules would likelybe much less onerous and, crucially, could have been altered in response to changingcircumstances. 44Finally, it is worth pointing out that while these directives have, usually, been based on theargument that they are building a Single Market in energy, there has been a noted failureto actually improve cross border trade. While the European Commission has argued thatcompleting the Single Market could add significantly to Europe’s GDP and claims that theEU’s efforts to unbundle networks and to open the energy markets have had a downwardimpact on prices, there is a concerning lack of evidence for this in many areas. 45 The UKGovernment has noted the “missing links in the EU’s energy infrastructure” 46 while reportsfor the European Commission have noted that the EU has managed to secure some marketcoupling over the last ten years “market coupling is delivering only the benefits of shortterm arbitrage in energy trading. The Target Electricity Model only makes partial progress indelivering a fully integrated electricity market.” 47Other reports have pointed out that price convergence between markets has notmaterialised. In the Central West Europe region market coupling initially resulted in priceconvergence of 66 per cent in the first year (2011) but by 2012, this figure had fallen to 46per cent and, in 2013, to just 15 per cent. According to the study “market coupling has failedto overcome national supply/demand factors.” 48 The lack of growth in cross border energytrade can also be seen in Figure 8 which, while showing significant variation over severalmonths, also shows a concerning lack of growth over time.Energy Policyand the EU44 Open Europe, Still out of control? Measuring eleven years of EU regulation, June 2010, found at 45 European Commission, Energy Economic Developments in Europe 2014, p.61, 46 BIS, European Commission Consultation on the Single Market Act, p. 23, February 2011, found at 47 Booz&co, Benefits of an integrated European Energy Market,20 July 2013, found at 48 Energy Economist, Trying to get a single European electricity market, 27 February 2014, information and summary can befound at 22

Figure 8: EU Cross border monthly physical flows by region 49In summary, it is hard to disagree with The Economist that Europe suffers from “Balkanisedenergy markets”. 50 The sad fact is that £86 billion of regulation has done little to improveEurope’s cross border trade.The impact on British businesses3The effect that increased energy costs and the increased regulatory burden are having onBritish manufacturing is deeply concerning. Commentators have noted that the combinationof European energy regulation and the upward pressure this regulation places on energyprices risks endangering hundreds of thousands of British jobs and is holding Britain backfrom restoring its manufacturing industries. 51High energy costs have played a significant role in the decline of key sectors of Britishmanufacturing and have forced British businesses to reconsider their investment decisions.Expensive energy has, in particular, had a devastating impact on Energy Intensive Industries(EIIs). This chapter aims to detail the impact that high energy costs will have on BritishEIIs. This narrow focus isn’t down to a belief that these firms are special or in need of stateprotection, but instead reflects the fact that these firms are particularly at risk from highenergy prices. 52 While this chapter only focuses on a few industries. It is worth noting thatthe costs that stem from expensive energy will be felt across the wider economy.49 European Commission, Quarterly Report on European Electricity Markets, Vol.6 Issue 2, p. 22, found at 50 “Europe’s energy woes”, The Economist, 25 January 2014, p.3251 J. Redwood, “The UK’s current membership costs us at least 500,000 jobs”, 28 March 2014, found at 52 The House of Lords recently warned that “Rising energy costs pose a particular challenge for energy intensive sectors”, moreinformation found at House of Lords Economic Affairs Committee, The Economic Impact on UK Energy Policy of Shale Gas andOil, p. 19, May 2014, found at 23

3.1The impact of high energy costs on Britishbusiness“Our business is increasingly concerned about rising energy costs, as I’m suremost manufacturing businesses must be.”- Owner of a large manufacturing business based in the West MidlandsIn addition to placing a hefty administrative cost on British business, it is also clear that theincrease in energy prices is having a detrimental effect on manufacturing businesses, inparticular EIIs who depend on cheap energy. While there is no definitive definition of suchan industry, we are able to reach one by combining the UK’s definition with the EU’s. 53 Thisprovides us with the following industries which this paper will investigate:■ Metals (Section 3.1.1)■ Chemicals and chemical products (Section 3.1.2)■ Paper and paper products (Section 3.1.3)■ Mineral extraction (Section 3.1.4)■ Glass products (Section 3.1.5)■ Ceramics and cement (Section 3.1.6)This is not meant to be a definitive list of all EIIs within the UK; however it does include all ofthe industries which are considered to be energy intensive by the European Commission. Itis also not an argument that these firms are ‘special cases’, instead it is simply an analysis oftheir concerns.EIIs have long invested in energy efficiency, motivated both by the need to reduce costs and tocombat climate change. This dependency on energy means that the recent increase in priceshas had a devastating effect on EIIs. Production levels in these firms have been in decline inboth the UK and the EU. The impact is not limited to just EIIs: the share of manufacturingin the UK’s GDP fell from 19 per cent in 1997 to 10 per cent today. 54 Manufacturers have nodoubt that high energy costs are one of the main reasons for this decline:“The high cost of energy in Europe… has become one of the biggest threats tothe competitiveness of European industry. When compared with other regionsof the world, industrial energy costs in Europe are substantially higher.”- Accenture 55The impact of high energy costs on Europe’s EIIs looks set to only grow over the comingyears: the International Energy Agency recently warned that the EU is set to lose 10 per centof the global market in energy intensive exports. A short analysis of the energy intensivesectors shows the devastating impact that high energy bills are having on the EIIs. Thischapter looks at each industry individually and calculates the number of jobs that could belost as a result of expensive energy.Energy Policyand the EU53 The EU’s definition is provided at 54 World Bank, data found at 55 Accenture, Unlocking industrial opportunities, p.22, found at 24


MetalsTOTAL UK EMPLOYMENT471,000 in 2012 56 (foundry sector employs around 62,000employees). 57THE STATE OF THE SECTORMetal, along with plastics and materials accounted for 2.0per cent of UK GVA (gross value added) in 2011 (an outputof £28 billion). 58 In 2013 alone metals accounted for £18.4billion of UK exports with around 30,000 companies inthe UK metals sector (80 per cent of foundries are SME’s.) 59Output of metal products has recently fallen (see Figure 10)however there has been a slight recovery in recent years.PROBLEMS FACING THE SECTORThe metal sector has been described by commentators as“a sector where closures and redundancies had becomethe norm in northern England” (the greatest concentrationof jobs in the metal industry are located in Yorkshire,Humberside and the West Midlands). 60 High energy bills,coupled with the economic downturn have hurt theEuropean steel industry. In a wide-ranging report by EEF in2012 it was reported that ArcelorMittal had permanentlyhalted iron and steelmaking at its Liège (Belgium) andFlorange (France) plants, mothballed steelmaking plantin Schifflange (Luxembourg) and a plate mill in Galati(Romania) and had halted its rolling mills at Schifflange andRodange. Riva’s Taranto plant (Italy), the largest steel plant inthe EU, was only operating at 70 per cent capacity. Beltramehas also announced the permanent closure of rollingmills in Belgium, Luxembourg and Italy, together with themothballing of its steel plant in Turin. Mechel is mothballingits Romanian operations.In the UK, Tata Steel’s Scunthorpe works is only operatingtwo of its four blast furnaces, while output from its PortTalbot blast furnaces has been temporarily cut back. Theclosure of the Thamesteel Sheerness plant also removedcapacity from the market. 61There have been numerous factors which have been citedas the reasons behind this recent decline. Trade bodies haveraised concerns about the recent lack of demand from theEU27 with Eurofer warning about the impact (see Figure11). This lack of demand is almost certainly down in partto the recent recession and on-going crisis with the SingleCurrency. 62However, despite this concerning trend in the EU, thereremains very strong demand from third countries, especiallyChina, with Figure 12 showing that output is slowlyincreasing since the dip in 2008. 63THE IMPACT OF HIGH ENERGY BILLSWhile the economic downturn has certainly had an impacton the steel and aluminium industry, leading industrialfigures have warned that high energy costs are alsothreatening their firms. ArcelorMittal, the world’s largest steelmaking company has been vocal in raising their concerns,According to the CEO, Lakshmi Mittal, “the huge cost gap[between Europe and the US] is threatening Europe’s energyintensive industries” and has described the EU’s policiesas being “punishing”. 64 These fears are not just confined tothe UK; Wolfgang Eder, chief executive of Voestalpine, theAustrian steel company, has warned that “the exodus hasstarted in the chemical, automotive and steel industries.If Europe doesn’t change course, that process will accelerateand at some point not be reversible”. 65 Following a EuropeanCourt Decision in April 2010 that the power plant is subjectto the Large Combustion Plant Directive (despite theprotests of the UK Government) Rio Tinto Alcan’s aluminiumsmelter in Lynemouth closed in March 2012.56 Government figures put together employment figures for manydifferent industries, making it very hard to separate the exact numberof employees for any given industry (example found at ). As a result Trade Body figuresor Trade Union sources, supported by academic research were used tocalculate employee numbers of each individual sector.57 Unite: the Union, Steel, metals and foundry sector overview, found at58 BIS, Industrial Strategy: UK sector analysis, September 2012, p.10, foundat 59 Department for Business Innovation and Skills, BIS Economics PaperNo.18: Industrial strategy: Sector analysis, September 2012, found at and Unite: theUnion, found at 60 C. Tighe and A. Bounds, “UK Steel furnaces roar back into life”, FinancialTimes, 13 May 2012, found at 61, 62, 63 EEF and UK Steel, Steel Market Report: November 2012, foundat 64 L. Mittal, “Rewrite energy policy and re-industrialise Europe”, FinancialTimes, 20 January 2014, found at 65 C. Bryant, “High European energy prices drive BMW to US”, FinancialTimes, 27 May 2013, found at 26

INDUSTRY CASE STUDY 3.1.1Figure 10: Output - Basic metals and metal products index (2010=100) 66Figure 11: Percentage change in real EU steel demand 2012-3 (estimates) 67Figure 12: UK’s Balance of Payments in Iron and Steel (1998-2013) 6866 ONS, “Detailed Index of Production”, found at 67 EEF and UK Steel, Steel Market Report: November 2012, found at 68 ONS, Monthly Review of External Trade Statistics, August 2011, found at 27

Chemicals and chemical productsTOTAL UK EMPLOYMENTThe chemicals industry supports 600,000 jobs in the UKand provides direct employment for 214,000 people. 69The pharmaceutical industry accounts for 72,000 totalemployment (27,000 in research and development) with200,000 more employed indirectly. 70THE STATE OF THE SECTORThe UK chemicals industry is a vital part of the UK economy,accounting for 16 per cent of the UK manufacturingoutput (1.2 per cent of UK GVA), with a turnover of £60billion and is estimated to generate £222 billion of revenuedownstream. 71 Basic chemicals, fertilisers and nitrogencompounds accounted for 1.6 per cent of total UKmanufacturing in 2008. Pharmaceutical products accountedfor 0.7 per cent of UK GVA in 2011 (an output of £10billion). 72 However there has been a recent decline inchemical output, as can be seen in Figure 13.This recent decline can also be seen in the pharmaceuticalindustry, which has suffered a much more dramatic dropsince 2009.Like other industries, the chemical sector have recentlysuffered from a dip in output, in part brought about by theworld recession but also from problems stemming fromhigh energy bills. According to INEOS, the UK has seen 22chemical plant closures since 2009 with no new builds. 77 Inaddition there have been historic concerns about the factthat the UK chemical industry has reduced its investment inresearch and development and instead appears to dependon maintaining existing business rather than generatingnew products. As a result there are fewer new chemicalsbusinesses in the UK. 78THE IMPACT OF HIGH ENERGY BILLSIt has been estimated that the chemical industry consumesabout 22 per cent of total UK industrial energy. As a resultit is unsurprising that high energy costs have already hada very detrimental effect on the chemicals industry. Therehas already been concern about UK companies movingabroad to escape high energy costs (“carbon leakage”), aspointed out by Tyndall Manchester:The pharmaceutical sector makes a greater contributionthan other high-tech industries to the UK and, over thepast decade, has generated an ever-widening trade surplusreaching a little over £6 billion in 2009. 73 In 2008 UK-basedpharmaceutical companies invested nearly £4 billion in theR&D of new medicinal products. 74PROBLEMS FACING THE SECTORDespite some decline in the decades following the SecondWorld War, much of the UK chemicals infrastructure isstill in place and productive. Unfortunately, despite theseapparent strengths, many chemical plants in the UK arereaching the end of their economic life and in recent yearsmany plants have decided to close rather than undergo thecost of refitting. 75 At the same time there is also a decliningnumber of raw resources:“In recent years the dynamics of the industry havechanged… The supply of raw materials is eitherbeing exhausted, or becoming uneconomic. Many UKoperators are already seeing the impact of decliningNorth Sea oil reserves.”The EU andEnergy Policy69, 70 Chemical Industries Association, Science Education: Britain’s nextdeficit?, found at and UK Trade andInvestment figures, found at 71 UKTI, “Chemicals”, see also Dr P. Gilbert, Dr M. Roeder and Dr P. Thornley, TyndallManchester, Can the UK afford (not) to produce chemicals in 2050?, June2013, found at 72 BIS, Industrial Strategy: UK sector analysis, September 2012, p.10, foundat 73 ABPI data, found at 74 The Stockholm Network Expert’s Series, The UK Pharmaceutical Industry:Current challenges and future solutions, January 2009, found at 75, 76 PwC, The future of UK manufacturing, p. 24, found at 77 J. Ratcliffe, Open Letter to Mr Jose Manuel Barroso, found at 78 J. Brophy, The impact of chemicals industry mergers, acquisitions andrestructuring on the UK chemical infrastructure, found at 79 Gilbert, Roeder and Thornley, Tyndall Manchester, Can the UK afford notto produce chemicals in 2050, found at 28

Paper and paper productsTOTAL UK EMPLOYMENT25,000 direct and more than 100,000 indirect employees. 84There are over 65 companies represented by specialist tradebodies in the UK. 85THE STATE OF THE SECTORThe industry currently has an annual turnover of £5 billion. 86While production fell from a high of 6.5 million tonnes in2000, the period since 2009 has seen uninterrupted growthin the sector, although it remains significantly below itshigh point in 2000. 87 The last few years have, again, seen aconcerning decline in output (as shown in Figure 14).The last few years have also seen employment and thenumber of UK paper mills fall as well.PROBLEMS FACING THE SECTORThere are a number of factors that are challenging thepaper industry. In addition to high energy prices, thereare other pressures on the industry, including changinginternational standards on quality and concerns aboutwater abstraction regulation. 88 The EU’s REACH directive hasalso had an effect on the paper industry, regulating the useand supply of certain chemicals. Faced with higher pricesand ever-more regulation the number of jobs in paper millshas, unsurprisingly, declined from 25,000 in 1993 to under10,000 in 2013. See Figure 15.THE IMPACT OF HIGH ENERGY BILLSFor a paper mill producing on average 500 ADt/day usingtypical energy costs the annual energy spend would be£15.5 million per year. 89 This is despite the fact that between1990 and 2010 the UK papermaking industry reduced totalenergy use by 34 per cent per tonne of paper made. 90There have been warnings that energy and climate changepolicies risk job losses in the paper industry. 91 This has notbeen confined to the UK but in paper mills across Europe inrecent years, with various facilities marked for closure acrossthe EU. 92 These concerns have been exacerbated by fearsthat paper mills will not be allowed to retain a ‘carbonThe EU andEnergy Policyleakage’ status, which means that they may not receiveenough carbon allowances to cover their emissions underthe EU ETS. It has been estimated that, were the paperindustry to lose their status then it would cost the UK paperindustry £94 million between 2015 and 2020. However, evenwith this protection, the Confederation of European PaperIndustries has already warned that problems are mounting:“The European Industry needs affordable energy.CEPI calls upon on the European Commission andmember states to urgently address the increasingcost differences in energy costs compared to NorthAmerica resulting from the shale gas boom. Thissituation is unsustainable. The competitivenessof industry is seriously at risk. Even for singlecompanies, the costs differences are tens of millionsof euros a year, compared to competitors buying gasin the USA. If nothing is done, the growing price gapwill soon make most of the investments in Europe– including low-carbon technologies – simplyeconomically unattractive.”- Confederation of European Paper Industries 9384 Confederation of Paper Industries, found at 85 Confederation of Paper Industries, Industry Facts, found at 86 A. Reece, “Government policies bad news for UK paper industry”, 16November 2012, found at 87 CPI, Industry Facts, found at 88 CPI, UK Paper, found at 89 Carbon Trust, Industrial Efficiency Accelerator – Guide to the paper sector,found at 90 Confederation of Paper Industries, “Myth: Paper production uses toomuch energy”, found at 91 G. Pitcher, “Paper industry chief warns of ‘many closures”, MaterialsRecycling World, found at 92 European industrial relations observatory online, “Workers react tothreat of closure of paper mills”, found at 93 Confederation of European Paper Industries, The difference we cannotafford: CEPI position to the costs of Natural Gas in Europe, foundat 30

INDUSTRY CASE STUDY 3.1.3Figure 14: Output - Paper & pulp index (2010=100) 94Figure 15: Paper and board mills/employees 9594 ONS, “Detailed Index of Production”, 95 CPI, Industry Facts, found at 31

Mineral extractionTOTAL UK EMPLOYMENT35,000 people are directly employed by the mineralextraction industry with a further 35,000 jobs supportedby it. 96 Over 88,000 jobs are supported by the oil refiningindustry. 97THE STATE OF THE SECTORMining and quarrying currently accounts for around 2.9 percent GVA (£39.6 billion in 2011). Cement, lime and petroleumaccounted for 0.45 per cent of total UK manufacturingin 2008. 98PROBLEMS FACING THE SECTORLike other industrial sectors, the recession of 2007-8 hada large negative impact on the minerals industry. Todaycommentators have started to describe “attrition in theextractive industries”. 99 The high costs of extraction havehad a negative effect on the industry at large, with asignificant drop in output and production. In petroleuma clear divergence has appeared with European andAsian operators struggling (2013 saw European refineryruns plummet to 25 year lows) while US refineries faredbetter. 100 In addition there are also concerns surroundingdepletion. While Q4 2013 saw a rise in European demandfor petroleum, this was the first time this had happenedsince Q4 2010. Productive capacity for both minerals andpetroleum has fallen dramatically over the last few years,seen clearly in Figure 16.The problems facing the industry can also be seen in thedeclining amount of minerals being sold by the UK as well.As Figure 17 shows, there has been a substantial drop in theamount that the UK sells.In 2013, UK production of crude oil fell by 9 per cent, inline with the long term trend and became a net importerof petroleum products for the first time since 1984 (whichitself was an aberration created by the Miners’ Strike) 101 asshown by Figure 18.In addition the UK’s petrochemical and petroleum industrieshave been seriously compromised by over-regulation. It hasbeen estimated that, as a result of UK, EU and internationalregulation, between 2015 and 2020 the cost of a barrelis going to increase by $2.5 per barrel of which only $1.3can be passed onto the consumer (assuming if EU basedpetroleum companies are going to remain competitivewith non-EU countries). According to UKPIA:The EU andEnergy Policy“It should be noted that cost items that are EU specificreduce the ability of EU refineries to compete with refineriesoutside the EU not subject to such stringent regulation”. 102THE IMPACT OF HIGH ENERGY BILLSThe mineral products industry comprises activities whichare energy intensive such as cement and lime manufactureand activities which are less energy intensive such as asphaltand aggregates production. This means that, while theindustry as a whole will not be severely damaged by the riseof energy costs, certain areas will suffer.High energy prices have had a significant impact onworldwide competitiveness. At the Wood Mackenzie ShortTerm Oil Markets Seminar held on 19 February 2014, itwas suggested that US Gulf Coast refiners were obtaininggross refining margins some $8/bbl higher than North WestEuropean refiners.It was also estimated that EU regulatory cost on UK refinerieswould be £5,205,280 (the UK regulatory cost by contrastwas £677,203). 103“High energy costs and a complex regulatoryclimate make the UK a less competitive place forthe minerals sector to do business. Despite effortsby the Government to streamline the planning andregulatory system, it remains cumbersome, timeconsuming and expensive.”96 According to BIS around 61,000 are employed in mining and quarrying.See also 97 UKPIA, Statistical Review 2013, found at 98 TUC and EIUG, Building our low-carbon industries, found at 99 C. Tighe, “Mining decline has brought coals to Newcastle”, Financial Times,found at 100 International Energy Agency, T. Bosoni, “International Refining Markets in2013 and Medium Term Outlook”, (Antwerp, Belgium 30-1 January 2014)101 UKPIA, The role and future of the UK’s Refining Sector in the Supply ofPetroleum products and its value to the UK economy, 10 May 2013, foundat 102, 103 IHS and Purvin & Gertz, The role and future of the UK refiningsector, p.16, 104 Written evidence on behalf of the CBI Minerals Group, found at 32- CBI Minerals Group 104

INDUSTRY CASE STUDY 3.1.4Figure 16: Output - Crude petroleum, coke and refined petroleum indexes (2010=100) 105Figure 17: Tonnes of minerals sold 2000-10 (2010=100) 106Figure 18: Petroleum products net trade (exports - imports)105 Note: data limited to 1997, found at ONS “Detailed Index of Production”, 106 MPA, “Market summary 1980-2010”, found at 33

Glass productsTOTAL UK EMPLOYMENTEmploys around 7,000 people directly and at least a further150,000 in related industries across the supply chain, inretail, research and development, marketing and officeadministration. 107THE STATE OF THE SECTORThe glass industry is a high tech industry, with a combinedvalue in the UK of approximately £2.5 billion. 108 Along withstones and ceramics, glass accounts for 3 per cent of UKexports (about £19.6 billion). 109PROBLEMS FACING THE SECTORThe glass industry is affected by numerous issues, includingproduct innovation, quality standards and legislation.Analysts have described how “it is an industry whichnever stops changing and developing across the wholeglass supply chain.” 110 Constant innovation is needed tohelp ensure that UK glass produces remain competitiveworldwide. Glass industries are investing significantresources in intensive R&D programmes to develop newways to use glass and to make available new products.Unfortunately however the industry has identified skillsgaps in technical and ‘soft’ skills. This is down to both anageing work force and the industry having difficulty inattracting young people. EU demand for UK glass productshas also either been weak or has only seen modest growthin the last four years, as shown in Figure 19.“If increases continue there will be some partialclosures and redundancies at least. At worst, firmswill transfer production from the UK to elsewhere”The EU andEnergy PolicyGlass manufacture is an energy intensive industry. For yearsthe glass industry has sought to mitigate the amount ofdamage caused by high energy bills, investing heavily inenergy efficiency. Between 1979 and 2003 the amount ofenergy required to melt a tonne of glass has fallen from3.2MWh per tonne to 1.5MWh. 112However, despite these improvements, the UK glassindustry remains susceptible to the problems generatedby expensive energy. In 2006 EIUG warned that the gasprice spike had contributed to 6,000 job losses in the glasssector. 113 In a recent report British glass also pointed outthat “energy prices and the price of raw materials remaina cause for concern throughout all glass manufacturingsectors.” 114THE IMPACT OF HIGH ENERGY BILLS“The Government has said they will extend thecompensation for energy intensive industries forthe cost of the Carbon Price Floor and EU emissionstrading system to 2019-2020, however, the glassindustry is not entitled to benefit from this unlessthey widen the terms to include us.”- British Glass 115- British Glass 111107 Talent Retention, “The Glass Academy @ British Glass”, found at108 Talent Retention, “The Glass Academy @ British Glass”, found at109 BIS, Industrial Strategy: UK sector analysis, September 2012, p.10, foundat 110 British Glass, found at 111 British Glass press statement, found at 112 British Glass, found at 113 CIVITAS, R. Lea & J. Nicholson, British Energy Policy and the threat tomanufacturing industry, p.11, found at 114 British Glass, found at 115 British Glass press statement, found at 34

INDUSTRY CASE STUDY 3.1.5Figure 19: British glass exports to EU 2009-12 116Figure 20: UK glass production by output (2008) 117116 British Glass, found at 117 British Glass, found at 35

Ceramics and cementTOTAL UK EMPLOYMENT20,000 in direct employment, at least 40,000 when includingindirect employment. 15,000 jobs are indirectly supportedby the cement industry, 3,400 directly employed. 118(At an EU level the European ceramic industry employs over200,000 people). 119THE IMPACT OF HIGH ENERGY BILLSAccording to international studies, energy costs canamount to 30-35 per cent of production costs. As a resultit is unsurprising that the UK ceramics industry is warningthat the UK economy is becoming less competitive:THE STATE OF THE SECTORAlong with glass, ceramics accounts for 3 per cent ofUK exports (about £19.6 billion). 120 Recent reports havesuggested that exports to non-EU countries may beincreasing after several years of decline. The cementindustry has recently faced a substantial decline in sales;a recent report by CIVITAS noted that the UK’s balance ofpayments in cement has declined, while at the same timecement production has decreased substantially, as can beseen in Figure 21. 121PROBLEMS FACING THE SECTORCommentators have been noting the decline of certainceramics industries, such as pottery for many years. 122 Ithas been noted also that the cement industry has declinedover the last few years, even before the financial crisis, withboth production and consumption falling dramaticallybetween 1992 and 2006. 123 The cement industry also facesthe criticism of lacking competition (with customers facingincreased prices) and the Competition Commission hasrecently ruled that there needs to be a fifth cement producerin the UK to try and increase the amount of competition inthe market. 124118 Communities and local Government, information found at additional information providedby British Ceramic Confederation119 Cerame-Unie, Paving the way to 2050, found at“There are issues with the approach of the EUperformance and outcomes.”120 BIS, Industrial Strategy: UK sector analysis, September 2012, p.10, foundat 121 CIVITAS, Rock solid, an investigation into the British cement industry,found at 122 The Economist, The China Syndrome, 23 August 2001, found at 123 Communities and local Government, information found at 124 Competition Commission, information found at 125 British Ceramic Confederation, Submission to the Balance ofCompetences126 British Ceramic Confederation, Key Priorities for the New Government,found at 127 British Cement Association, Submission to the European Commission,found at 36- British Ceramic Confederation 126The British Ceramic Confederation has gone on to stressthe need for secure energy prices; natural gas representsapproximately 85 per cent of all energy consumed inthe ceramics sector. Similar concerns are also found inthe cement industry. The British Cement Association haswarned that “energy represents an increasing proportion ofthe variable costs of cement manufacture”. 127

INDUSTRY CASE STUDY 3.1.6Figure 21: Output - Cement, lime, plaster products index (2010=100) 128Figure 22: Output - Glass, clay porcelain and ceramic products index (2010 = 100) 128128 ONS, “Detailed Index of Production”, 37

3.2The threat to jobs from high energy pricesBy taking the employee numbers in each industry and by highlighting those who are in directemployment, we can calculate the number of people whose jobs are likely to be directlyaffected by rising energy costs and those whose careers risk being severely disrupted:Table 3: EII Employee numbersIndustryTotal employee numbersTotal number of people indirect employment (High risk)Metals 471,000 62,000Chemicals and chemical products 600,000 214,000Paper and paper products 100,000 25,000Mineral extraction 158,000 35,000Glass products 157,000 7,000Ceramics and cement 40,000 20,000Total 1,526,000 363,000It is important to stress that the EU policy is not the sole factor behind rising energy costsand that it is far from clear what the final impact of high energy costs will be on employmentin Energy Intensive Industries. However what is clear is that job losses in EIIs are alreadymounting and that there is evidence that the EU is playing a growing role in driving up theenergy costs these firms face.3.3Manufacturing companies are leaving the EU“In the longer run I can only see the situation getting worse. We are competingagainst countries with far lower energy costs. How are we to compete in aglobal market if organisations such as the EU seek to impose more and morecosts onto companies?”- Owner of a medium-sized manufacturing business based in the East MidlandsDespite the large amount of evidence cited above which suggests that European firms areeither considering leaving the EU for areas with cheaper energy, or are having to close down,there is little acknowledgement of this problem by the EU. A recent study by the EuropeanCommission even argued that there was no evidence for carbon leakage (i.e. industry leavingthe EU for countries with lower carbon emissions targets). This was based however on a verynarrow criteria (it examined whether the ETS was the sole driver of carbon leakage) and infact the report acknowledged that:Energy Policyand the EU38

“Energy discussions play a major role in the overall situation for industry andare always on the background of carbon leakage discussions. Be it cheapshale gas in the US and Middle East or subsidised coal in China, the impact ofenergy prices is real.”- Carbon Leakage Evidence Project 129In addition, numerous commentators from both business and beyond have warned that EUpolicies are contributing to the closure of businesses. The International Energy Association’schief economist recently warned that Europe’s high gas prices risked driving away a bigshare of its Energy Intensive Industries such as cement and steel: “These industries arecritical for the European economy as they employ over 30 million people and it could havea major knock on effect on the European Union economy”. 130Any estimate of the exact number of firms who have left the EU because of expensiveenergy are unlikely to be satisfactory. There are several reasons why a firm may chooseto leave the EU, including a desire to tap into the national resources of other countries. 131Attempts to calculate the relative importance of energy prices in any firm’s investmentdecisions is incredibly difficult. At the same time the Commission’s attempts to mitigateagainst carbon leakage via a host of different rules and allowances produces a very complexset of circumstances, with each different sector affected differently by new and existing EUlaws. It is very hard to find a situation in which firms identify high energy costs as the solereason for closing down their facilities (and even harder to find situations in which onespecific policy is blamed for the decision to move facilities).However it is possible to see incidents where individual EU laws are named as overwhelmingreasons for the decision to close a facility. 132 It is also possible to identify cases of firms havingto close or to move onto other areas as a result of high energy costs. CIVITAS looked intoincidents of carbon leakage in the UK and pointed out that in 2003 Britannia Zinc near Bristolwas closed (with a loss of 400 jobs) and in 2006 EIUG warned that the gas price spike hadcontributed to 6,000 job losses in the glass sector. 133 Beyond the UK a similar pattern can beseen elsewhere in Europe, in 2013 BMW announced that it was moving its manufacturingfacilities to the US to benefit from the cheaper energy. 134129 Ecorys, Carbon Leakage Evidence Project, p.11, 23 September 2013, found at 130 International Energy Agency, World Energy Outlook, found at 131 More information provided by Oxford University, see D. Buchan, Costs, competitiveness and climate policy: distortionsacross Europe, p.5, April 2014, found at 132 RWE, Report on the first half of 2013, p. 10, found at 133 CIVITAS, Lea and Nicholson, British Energy Policy, p.11, June 2010, found at 134 C. Bryant, “High European energy prices drive BMW to US”, Financial Times, 27 May 2013, found at 39

3.4 The impact on energy producers“The Large Combustion Directive is forcing us to close our coal powerstations… increasing energy prices.”- Owner of a medium-sized manufacturing business based in the East MidlandsIn addition to raising energy bills, EU policies have already had a direct impact on firmswhich generate energy. A quarter of the UK’s current electricity generating capacity is dueto close by 2020. Of these power stations, half (including all of the coal and oil stationsscheduled for closure) are closing to comply with the Large Combustion Directive (2001/80/EC). The stations that have closed, or are scheduled to close are presented in Table 4:Table 4: Power plants that have closed or are due to close to comply with Directive2001/80/EC and lost capacity 135Station Capacity (MW) Closure DateGrain A 1300 Dec-12Kingsnorth 1940 Dec-12Cockenzie 1152 Mar-13Didcot A 1958 Mar-13Fawley 968 Mar-13Tilbury 750 Aug-13Ferrybridge C units 1 & 2 980 To close by end 2015Ironbridge 600 To close by end 2015Littlebrook 1370 To close by end 2015In total this represents a loss in capacity of over 11GW (UK daily demand is just under 40GW)and it is estimated that over 1000 jobs will be lost as a direct result of these closures. This raisesserious concerns about the UK’s energy security. The House of Lords has recently warnedthat they are concerned about “the imminent closure of large numbers of coal plants acrossthe EU due to environmental rules.” 136 We must also take into account the impact of theIndustrial Emissions Directive (2010/75/EU) which will place additional restrictions on theoperation of some existing coal and older CCGT stations post 2016/17.These policies have been criticised by many different groups. In a recent report, Ofgemwarned that the “risks to electricity security of supply over the next six winters haveincreased.” 137 It put the reduction of capacity down to plants using up their allotted hoursmuch quicker than expected and having to close to comply with the terms of the LargeCombustion Plant Directive (LCP Directive). Likewise LCP Directive opted-out oil plantsEnergy Policyand the EU135 Freedom of Information request from Business for Britain to the Department of Energy and Climate Change. Furtherinformation can be found at and 136 House of Lords European Union Sub Committee, No country is an energy island: securing investment for the EU’sfuture, 2 May 2013, p.5, found at 137 Ofgem, Electricity Capacity Assessment Report, pp. 9-12, 27 June 2013, found at 40

were also closing faster than expected. 138 The report also warned that LCP Directiveopted-in plants which were converting to biomass had reduced capacity. 139 The LCPDirective is a good example of how the UK is unable to adapt its energy policy in response tochanging circumstances because it is, in effect, locked into poorly planned EU regulations.Changing investment patterns3.5It is difficult to calculate the exact impact that EU energy laws have had on investmentpatterns. There are numerous factors that influence investment, not least the decline ofnatural resources, however the EU’s own studies have noted:“It can be concluded from a general observation of public information andinterviews with industry that there are indications for investment relocationfrom the EU to the rest of the world in certain sectors… Based on the limitedinformation available so far, carbon cost may be one factor thatcannot be excluded.”- Carbon Leakage Evidence Project 140There are various reasons why investors are investing in countries beyond the EU;attractive growing economies, promising demographic trends and different approachesto education have all informed investment decisions. However it is felt by trade bodies,including the Intensive Energy User’s Group, that EU regulation has made a substantialimpact on investment decisions. 141 While the Commission has calculated that €13.8trillion of assets is theoretically available, the CBI has warned the House of Lords that itis hard to attract high levels of investment into the UK and EU energy’s infrastructure. 142There is little doubt that the EU and UK have found it harder to secure investment; since 2008the share price of European utilities has declined dramatically (as can be seen in Figure 23).138, 139 Ofgem, Electricity Capacity Assessment Report, pp. 9-12, 27 June 2013, found at 140 Ecorys, Carbon Leakage Evidence Project, p.13, 23 September 2013, found at 141 Interview between author and Intensive Energy User’s Group.142 House of Lords European Union Sub Committee, No coutry is an energy island: securing investment for the EU’s future, p.9, 2May 2013, found at 41

Figure 23: Performance of EU utilities share prices (Euro Stoxx) against other shareprices (Stoxx 600) 143There has also been a notable lack of investment in the EU’s energy sphere over the last fewyears. An FDI Intelligence report recently warned that, across the EU, “capital investment inthe coal, oil and natural gas sector fell by 36 per cent.” 144 This is in spite of the urgent needfor investment. The UK Government stated that the UK electricity sector will require around£110 billion of investment over the next decade to improve its infrastructure. 145 It seemsclear that, at the very least, Britain would be lucky to get the investment that it needs just tomaintain and repair its existing energy infrastructure.In addition to the evidence provided above, there has also been an increasing number offirms who are not classed as “energy intensive” who have stated that they will have to movesomewhere where there are low energy prices. As noted above BMW recently decided tobuild their energy intensive plant in the United States. Joerg Pohlman, managing directorof the venture, has gone on record stating: “The main reason for wanting to be based therewas to secure an adequate supply of energy from renewable sources. But another decisivefactor was the low energy price.” 146Energy Policyand the EU143 House of Lords European Union Sub Committee, No country is an energy island: securing investment for the EU’sfuture, p.37, 2 May 2013,found at 144 FDI Intelligence, “UK tops European inward and outward FDI tables”, found at 145 House of Lords European Union Sub Committee, No country is an energy island: securing investment for the EU’s future, p.9, 2May 2013, found at 146 C. Bryant, “High European energy prices drive BMW to US”, Financial Times, 27 May 2013, found at 42

Increased energy dependence3.6Another consequence of the high energy costs and the closure of power plants is that therehas been a noted increase in dependency on energy suppliers from outside of the EU (seeFigure 24). The last decade has seen the EU increase its import dependency whereas theUS has satisfied the increased demand mainly from domestic sources and has significantlydecreased its energy imports (gas imports in monetary terms decreased by 56 per cent,compared to their peak in 2005).Thanks in part, to its willingness to utilise shale gas reserves, the United States is set tobecome a net gas exporter by 2035 and is making strides towards ending its dependencyon imported oil. The EU, by contrast, will become far more dependent on energy imports by2035 and, as Figure 24 shows, will be one of the most dependent blocs in the world by 2035.Figure 24: Net oil and gas import dependence by region (2010-35) 147This has significant ramifications for both the EU and the wider world. It undermines effortsto combat climate change as Europe effectively exports its energy production to countrieswhich do not comply with the same high standards. As noted in a recent report:“It is likely that these refineries outside of the region would be emitting similarlevels of CO2 and other industrial emissions as if the refining capacity hadremained within the UK and EU and potentially significantly higher levels ofemissions depending on how stringent local regulations would be and howwell operated the refineries were. Europe would simply have “exported” theenvironmental and climate change issues associated with supplying Europe’srefined product demand to other countries.”- The role of the UK refining sector 148147 Replication of original graph found in European Commission, Energy Priorities for Europe: Presentation of J.M. Barroso to theEuropean Council, 22 May 2013, found at 148 IHS and Purvin & Gertz, The role and future of the UK refining sector, p.19, 10 May 2013, found at 43

There are also security concerns. Europe’s dependency on foreign suppliers of energy reducesits diplomatic clout (something that was highlighted in the recent Ukraine crisis). Followingthe recent uprising in Kiev and subsequent regional turmoil, British trade bodies warnedthat the supply of gas could be compromised, with the British Ceramic Confederationwarning that:“The problems in Ukraine reinforce the need for the Government to ensure theUK has extra gas storage capacity and a requirement to hold adequate safetystocks. Uncertainty over supply has led to terrible price volatility in the pastand will do so in future, leading to harmful effects on manufacturing andinvestment and a possible loss of jobs.”- British Ceramic Confederation 149Concerns have also been raised by the House of Lords who have warned that “The UK isnot directly dependent on Russian supplies but in an integrated market we would not beimmune from shortages or price increases across the European Union”. 150Reducing the burdens faced by European energy suppliers shouldn’t just be consideredan economic necessity; it should be seen as an essential component of Europe’s security.Dependency on other countries also means that the EU’s commitment to combatingclimate change is thrown into question, as many states don’t comply with the same highgreen standards as those found in Europe. 1514Changing the situation“Europe’s carbon and energy markets are dysfunctional.”- The Economist 152As shown above there is very little confidence in EU energy policy among commentators:it is incredibly expensive and despite decades of work the EU has not yet managed tocomplete the Single Market in gas or electricity (see section 2.4). On top of this, certain energymeasures, in particular the Large Combustion Plant Directive, have imposed significant costson the UK, adding to many firms’ compliance costs. Europe’s Energy Intensive Industrieshave already started to leave for cheaper locations and jobs losses are starting to mount.Energy Policyand the EU149 British Ceramic Confederation, Press Release on turmoil in Ukraine could spark energy crisis for UK Industry, found at 150 House of Lords Economic Affairs Committee, The Economic Impact on UK Energy Policy of Shale Gas and Oil, p. 17, May 2014,found at 151 It is easy to exaggerate the difference between EU and other countries green credentials. Certain reports have stressedthat in many ways the EU and the US have very similar systems and that industries transferring between the two may becarbon neutral. However, it is clear that other states are much more lax when it comes to EU law. See D. Buchan, Costs,competitiveness and climate policy: distortions across Europe, p.5 found at 152 “Europe’s energy woes”, The Economist, 25 January 2014, p.3244

Despite these problems, the EU’s current policy agenda seems to be ‘more of the same’.Current proposals from the European Commission focus on completing the Single Market,with specific proposals for more regulation and harmonisation with a view to improveinterconnectivity. It should also be remembered that, while important, interconnection onits own does not guarantee that prices will fall; as President Barroso admitted in a recentpresentation when looking at the impact of EU proposals, “energy costs [are] to rise in allscenarios”. 153 The recent 2030 framework for climate and energy policies unfortunatelyfailed to address the EU’s failings, instead introducing a new renewables target of 27 percent (though as of yet there hasn’t been new binding targets on member states) and onlyoffered a review of the energy efficiency directive, looking at “policy measures at the EU andnational levels”. 154The problem with EU regulation in recent years is that it has been based on a number ofassumptions, assumptions which, in the words of the House of Lords, “have been proveninaccurate”. 155 In particular the EU’s belief in the mid-2000s that there would be a global dealagreed at Copenhagen (in which the EU would play a major role) to tackle climate changenever materialised. At the same time the period 2005-14 has seen major changes in theglobal markets: economic recession has brought the price of carbon down while the shift toshale gas in the US has, at least in the short to medium term, revolutionised and revitalisedfossil fuel industries that had previously been seen as endangered. EU policy decided in themid-2000s is already well out of date, yet it is very hard for the UK to opt out of or modifythese laws.In many respects the global shift towards green technology and the decreasing costs ofclean energy will encourage investment in green technology regardless of the decisionof policy makers. Across the world there has been a noted decline in the costs of cleanenergy. To take just one example, according to research from the financial firm Lazard Freres& Co. the levelised cost of electricity for wind and solar installations across the US has fallenby over 50 per cent in the past four years. 156 The falling costs of green technology meanthat, in many ways, market dynamics will encourage a more effective investment in greentechnology regardless of EU action.This final chapter demonstrates British business’ desire for a new deal and looks at theways renegotiation could change the current, unsatisfactory situation. Big changes canbe secured via both short term changes in the way EU works and longer term changeswhich would involve changing the EU’s Treaties. Such long term changes would allow forexisting laws to be reviewed and would clarify the limits of the EU’s power, giving memberstates greater safeguards to protect their energy policies and energy mixes from future EUregulation. Such long term changes would also give member states the chance to reassesstheir membership of EU programmes like the EU Emissions Trading Scheme, something thatgroups such as Open Europe have long advocated.153 European Commission, Energy Priorities for Europe: Presentation of J.M. Barroso to the European Council, 22 May 2013, found at154 European Commission Climate Action, information found at 155 Lords European Union Sub Committee, No country is an energy island, p. 9, 2 May 2013, found at 156 Lazard, Levelized cost of Energy Analysis - Version 7.0, August 2013, found at 45

4.1 Business leaders believe that powers needto flow back to member statesBritish business is very clear: the status quo is unacceptable. In a recent survey of Europeanbusiness leaders, 58 per cent stated that they were pessimistic that European industrywould be cost competitive compared to other main countries like the US, China or Russia inthree years’ time. 157 Successive surveys and polls have shown that British businesses want tosee powers return to the member states.It is important to emphasise that there is a lot of debate among various organisations abouthow much of a change is needed. During interviews and surveys certain organisationssuggested to the authors that the UK should consider leaving the EU. Others said that Britainshould remain inside the EU but that some repatriation of powers could be beneficial. TheBritish Ceramic Confederation, for example, has argued that “in certain instances it couldappear to be desirable to restore the balance of competence from the EU to the UK” but hasnoted that “a key concern is the level of UK resources (including financial and expertise), thatwould be available to implement this effectively.” 158Business for Britain was set up to accurately reflect the views and opinions of UK businessleaders when it comes to the EU. In light of the very different views and opinions that havebeen put forward by different bodies (but noting the overwhelming demand for changesin the current relationship with the EU) it was decided that independent research had tobe done to assess businesses attitudes. One of the abiding issues with drawing too heavilyfrom previous surveys is that the majority of research purporting to represent the views ofbusiness is drawn from membership surveys of trade associations. These surveys are notuseful as the respondents are chosen from a pre-defined panel of members and thereforecannot claim to be providing an accurate and impartial reflection of overall British businessopinion.In order to get a more comprehensive idea of attitudes towards the EU across company size,sector and location, Business for Britain commissioned YouGov to conduct a representativepoll of 1,000 business leaders based in the United Kingdom on what they thought aboutBritain’s membership of the EU. This poll aimed to be as fair and accurate reflection ofBritish business as possible. As a result we oversampled the number of medium and largecompanies (our poll was weighted 70 per cent small, 15 per cent medium and 15 per centlarge, whereas the official BIS classification is 97 per cent small, 2.5 per cent medium and 0.5per cent large) and we also oversampled the number of exporting businesses, around halfthe respondents in our poll exported overseas. 159 This allows us to also specifically analysethe view of British manufacturers, the group who have been most adversely affected byhigh energy prices.Energy Policyand the EU157 Accenture, Unlocking industrial opportunities, p.22, found at 158 British Ceramic Confederation, Response to the call for evidence on the Government’s review of the balance of competences,17 January 2014159 See the full paper Britain and the EU: What Business Thinks at

41 per cent of British manufacturers said that they would vote for Britain to leave theEU, 53 per cent said that they would vote to stay. When asked, 53 per cent of our pollingrespondents said that they thought that the costs of Single Market regulation outweighedthe benefits of being part of the EU, only 37 per cent thought that benefits outweighed thecosts, as can be seen in Table 5:Table 5: Views on the costs and benefits of the EUWhich statement best reflects your view: the costs of complying with EU Single Marketregulation outweighs the benefits of being in the EU, or the benefits of being in the EUoutweighs the costs of complying with EU Single Market regulation? (%)All businessesManufacturingCosts outweigh benefits 46 53Benefits outweigh costs 37 38Neither 8 5Don't know 10 9The evidence from our polls and interviews showed that people thought that the mainproblem with the current terms of EU membership was the large volume of EU regulation.While the leaders of large companies were most likely to say that the benefits of the SingleMarket outweighed the costs, small business leaders in particular were overwhelminglyopposed to the current situation.In our poll we asked manufacturing business leaders to decide whether they thought the EUor the UK Government should be in control of key policy areas currently under the purviewof the European Union, the results are provided in Figure 25.Figure 25: Views on the balance of competences47

It is clear that there is a deep concern among British business leaders that the EU is notworking in their interests. At the very least, these results suggest that there needs to be asubstantial return of powers to the UK.Finally, when asked what they would like the future relationship between Britain and the EUto look like, a majority of manufacturers made it clear that they thought that powers shouldreturn to the UK, with the majority calling for the return of powers. Only 6 per cent opted forcloser integration (full details are provided in Table 7).Table 7: Views on the future relationship between the UK and EUPlease say which of the following best describes what you think Britain should do? (%)All businessesManufacturingIntegrate more deeply with the EU, eventuallybecoming part of the Eurozone.Remain a member of the EU but don’t join theEuroRemain a member of the EU but repatriatesome powers back to Britain only so long asEU-wide reform is achieved creating a multitierEuropeNegotiate a new relationship with the EUbased on trade with the Single Market andallow non-exporting British companies theability to opt out of European legislationLeave the EU and don’t negotiate a newrelationship10 621 2120 1828 3616 17Don’t know 5 34.2Promoting cross border tradeThe EU is clear that it sees improving cross border trade and completing the Single Marketin energy as the main tool for lowering energy prices. There are certainly many potentialbenefits which come from removing barriers to trade: the prospect of larger markets andmore competition means a Single Market in energy has always been an attractive idea.However, attempts to improve the Single Market need to be reviewed critically to make sureany future proposals actually do improve cross border trade.The British Government has already taken the lead in promoting more cross border tradebetween the EU member states. David Cameron recently wrote a letter to the Presidentof the European Council, Herman Van Rompuy, stating that the EU needed “to establish aEnergy Policyand the EU48

genuine, efficient and effective internal market in energy by 2014… Energy interconnectionshould be enhanced to help underpin security of supply.” 160This is a promising intervention but the UK cannot rest on its laurels. The UK has fullyimplemented the Third Energy Package, the first country to do so, however the fact that theUK was the only state to introduce this package early on and the patchy record of the othermember states in implementing it has led the Trade Policy Research Centre to warn that“Energy is yet another area where the UK’s efforts to achieve EU reform have been less thansuccessful”. 161 The UK has a right to demand that other member states comply with theircurrent Treaty obligations faster so that the UK isn’t put at a disadvantage.Clearly further action is needed by the EU to make sure that interconnection is madeavailable. However, “completing the Single Market” cannot be allowed to become a catch-allterm which justifies unnecessary harmonisation or further over-prescriptive regulation. Theassumption that harmonisation and more regulations will complete the Single Market andwill bolster competitiveness can also only be taken so far. Tendency towards harmonisation,while useful in certain cases, is not always beneficial. Energy UK has noted that in certainareas, in particular interconnection, “a one-size-fits-all EU approach is not appropriate”. 162“It is important in our view that the Network Codes focus particularly onovercoming barriers to trade and do not impose unnecessary costs. Thisis particularly important for a mature competitive market such as the UK,where costly system changes could be required without major benefit interms of promoting cross border competition.”- Energy UK 163Harmonisation and interconnection is important for exporters, but it cannot be seen as acure all to the problems that EU policy has created. The fact that several proposals haven’teven improved cross border trade just underlines the limits of this approach.The European Commission has a poor track record of introducing expensive and ineffectiveregulation in the name of “completing the Single Market”. While there are many potentialbenefits in dismantling barriers to trade, protections are needed to make sure that“completing the Single Market” doesn’t become an excuse for introducing unnecessarylaws.160 Joint letter to President Van Rompuy and President Barroso, 20 February 2012, found at 161 Trade Policy Research Centre, The EU, Energy and Climate Change, p. 11, 23 October 2012162,163 Energy UK, Balance of Competences Review, 15 January 2014, found at 49

4.3Short term fixes not requiring Treaty change“The EU has a massive paperwork administration problem in that it is unableto control its thousands of various departments in acting as one for the sakeof common sense. This in effect means that we are regularly subjected toa massive tide of written legislation and red tape that very often makes nosense whatsoever.”- Owner of a medium-sized manufacturing business based in East EnglandAs this paper has shown, expensive European regulation has become a serious problem forBritish businesses; the £86 billion cost of these laws (see Section 2.4) is clear evidence of theneed for powers to return to the member states. Because these costs are being felt today,it is important that action is taken as soon as possible. Fortunately, there are actions thatthe EU can and should take immediately, actions which would reassure the EIIs thinking ofmoving overseas and would, at least in the short term, reduce the number of European lawsgoing on the statute books.The changes discussed in this section are described as ‘short term’ because they can besecured within the current Treaties; these changes involve the EU changing its internalpractices, reviewing current policies and encouraging the UK to make better use of existingopt-out clauses. Without the longer term changes described below the policies detailed inthis section are not sufficient, but they would represent a good start for any renegotiation.First there needs to be much more scrutiny of proposed EU laws. The appointment of a newEuropean Commission is a golden opportunity to reassess how regulations are determinedat the European level. The EU needs to fundamentally change its approach, in the wordsof the British Ceramic Confederation: “there are issues with the approach of the EU whichshould be addressed in order to improve performance and outcomes.” 164 In particular, thenew Commission needs to introduce a more critical approach to new proposals, an approachwhich clearly and explicitly takes the concerns of businesses more into consideration.One immediate step that the Commission could take is to improve the quality of its impactassessments when proposing new laws. When the EU proposes new laws the proposalshould show how the Commission has considered the impact that each law will have onbusinesses in each member state. There is a pressing need for each new European proposalto i) show how the proposal will facilitate cross border trade and ii) show that it has takeninto account business opinion. In short EU lawmakers need to show that they are usingevidence when they are devising policy and demonstrate that, for all future energy policyproposals, the EU is considering affordability, international competitiveness and security ofsupply, not just sustainability. This should be true of both original Commission proposalsand any subsequent amendments made to that proposal by the European Parliament.Energy Policyand the EU164 British Ceramic Confederation, Submission to the Balance of Competences50

The EU should also make it clear that there will be no new renewables targets for themember states and should make clear that future targets will concentrate only on reducingemissions overall. This can be done by reassessing the 2030 framework of climate changeand replacing the EU’s myriad of renewables and energy targets with one emissions target,a policy that has the support of the British Government.“[We need] an opportunity to simplify the existing targets regime from threetargets to one. This will reduce unnecessary costs that our embattled energysector is currently bearing.”- David Cameron, Letter to the European Commission 165The EU needs to show a greater willingness to reassess existing laws by offering morefrequent reviews and responding more positively to member states parliament’s requestsfor new proposals, or a reassessment of existing laws.In addition the EU has a tendency to bundle policies together in packages, forcing memberstates to accept certain policies that they may disagree with or risk losing the whole package.This problem was well articulated by the European Commission when discussing why itis not possible to change biofuel targets: “You can’t change a political objective withoutrisking a debate on all the other objectives”. 166 This is not a sensible way to determine oradminister energy policy: member states should not be ‘locked in’ to policies which arecausing economic harm. Energy issues are subject to rapid change; it is an area where policymakers want as much discretion as possible to adapt policy to changing circumstances and,when necessarily, discard bad ideas. Detailed scrutiny of each proposal, on-going analysisand revision of energy policy should be encouraged, not avoided. Future policies shouldnot be presented or voted on as bundles, but as individual proposals, assessed on their ownmerits.At the UK level there also needs to be much greater use of ‘opt out’ clauses. It should beassumed as default that the UK will make use of any opt out clauses unless there is a verygood reason not to and should seek, whenever possible, to implement EU regulationswithout goldplating.While these changes, if enacted properly, would go a long way towards reducing theburden of the EU’s laws, it clearly offers no long term protections for the UK or the othermember states. As shown above (Section 2), the EU had a historic tendency to regulate onenergy policy even before it had been given the explicit right to do so. As a result it wouldbe a mistake to solely rely on the changes described above. The existing laws need to bereviewed, powers need to return to the member states, and safeguards are needed to ensurethat the EU cannot pass new harmful laws. These sorts of changes can only be secured viaTreaty change, something that would take a longer time to secure, but something that isessential.165 Letter from D. Cameron to J.M. Barroso, 4 December 2013166 Open Europe, The EU Climate Action and Renewable Energy Package, October 2008, found at 51

4.4Long term solutions requiring Treaty changeBusiness opinion is clear: the central problem with the EU is that it legislates too much andthat too many of its laws are unnecessary exercises in micromanagement. In many waysthis is a historic problem of the EU; the current definition of ‘subsidiarity’ has failed to be aneffective legal block on the EU’s ever-growing remit. 167 There is very little support for moreintegration among businesses and the Prime Minister has also made his opposition to thisclear as well:“The EU must be able to act with the speed and flexibility of a network, notthe cumbersome rigidity of a bloc. We must not be weighed down by aninsistence on a one size fits all approach which implies that all countries wantthe same level of integration. The fact is that they don’t and we shouldn’tassert that they do.”- David Cameron, Bloomberg Speech 168This last section looks at how powers could be formally returned to the member states. Treatychange is a rare chance to enshrine the limits of the EU’s role and to give the UK a greater sayto block harmful laws. There is a need for much greater clarity in the Treaties setting out thelimits of what the EU can and cannot do in each policy area, including energy. Treaty changeshould clearly establish that the member states are responsible for determining their ownenergy mixes and that the EU has no role in setting renewables targets or attempting toalter energy policy beyond setting a single UNFCCC-approved emissions target. This wouldwin the support of many businesses.“It should be a national matter on how we decide to keep our lights on.”- Owner of a medium-sized manufacturing business based in the East MidlandsThe changes suggested in this section are much more substantial (and in several ways moreimportant) than the changes suggested above, and will require the EU to review hundredsof existing laws and to agree to Treaty change, both of which will require large amounts ofpolitical capital. However both are essential.It is clear that the existing EU laws need to be reviewed. The UK and other member statesshould push for existing EU energy rules to be reviewed by the Commission, Council ofMinisters and Parliament, with a view towards scraping unnecessary laws or to returnpowers back to the member states. Treaty changes should grant member states the right todemand that existing laws can be reviewed. The 224 laws administered by the Energy DGshould be reviewed to determine if they are working well and to work out whether the UKwould benefit from being exempt from the law in question. The cost/benefits in particularEnergy Policyand the EU167 ‘Subsidiarity’ was formally entered into the Treaties in 1992168 D. Cameron, ‘EU speech at Bloomberg’ (London, 23 January 2013) found at 52

should be considered: were the UK to opt out of the Renewable target today it would beable to reduce energy bills for EIIs by up to 7 per cent. 169As part of this process the Government should also review the current EU ETS programand investigate the possibility of introducing a more flexible regime. It should also considerwhether both industry and the environment would benefit from the UK opting out of thescheme entirely. Friends of the Earth had argued for more action at a national level and for acarbon tax to be introduced to replace the EU ETS. 170 Open Europe has also suggested thatthe UK should seek to renegotiate the existing renewable energy target, with the objectiveof abandoning it entirely or at least downgrading its ambition. 171In addition to reassessing current EU laws, there also needs to be new safeguards for theUK and other member states against future dangerous proposals. At the moment the UKhas very little influence over the formation of EU law. While some have claimed the UK isinfluential, this is usually based on anecdotal accounts or a handful of examples. The UKcurrently has no veto over energy policy and its ability to alter legislation that is determinedby Qualified Majority Voting (QMV) has been seriously disputed by Business for Britain inresearch documents. 172 In addition the UK’s voting power remains very small; it currently hasonly 8 per cent votes in the Council of Ministers and 9.5 per cent of votes in the EuropeanParliament; the two bodies which determine EU law. 173 The UK may be one of the larger EUmembers, but this does not give it a whip hand, something which is demonstrated by thefact that the UK has not managed to block any proposal which it opposed being approvedby the Council of Ministers. 174Any renegotiation needs to address the fundamental problems that exist with the currentterms of Britain’s EU membership. The primacy of European law and the fact that the UK isobliged by Treaty to obey existing rules means that the Government is forced to comply withEU regulations and directives, regardless of the evidence that is harming Britain’s industries.In the words of the think tank Open Europe, the UK is currently “locked” into badly designedEU energy policies. 175 The UK along with the other member states need a much greater sayover the laws it is currently forced to comply with and a much greater ability to block new,dangerous proposals.169 Figures taken from DECC breakdown of impact of regulation on EII Energy bills for 2013 using highest cost estimates. TheBritish government has long made its opposition to the RO well known and were the EU’s Renewable Target abolishedit is unlikely to be replaced with a British equivalent today. For more information see DECC, Estimated impacts of energyand climate change policies, p.86, March 2013, found at 170 Friends of the Earth Europe, The EU Emissions Trading System: failing to deliver, found at 171 Open Europe, Open Europe submissions to the UK Government’s Balance of Competences Review: Environment and ClimateChange synopsis, August 2013, found at 172 Upcoming changes to the voting weights look set to give the Eurozone a permanent majority. For more information pleasesee Business for Britain, Measuring Britain’s Influence in the Council of Ministers, Briefing Note 3, found at 173 Due to the lack of information it is not possible to calculate or quantify the ‘informal’ influence that Britain has behind closeddoors (e.g. in preventing proposals from even being presented to the Council) however considering the poor record of theUK when an actual vote takes place and comments by officials on the willingness of the UK to support proposals the UKdisagrees with, it would be fair to say that this particular area of influence is far from satisfactory.174 Business for Britain, Measuring Britain’s Influence, found at 175 Open Europe, The EU Climate Action and Renewable Energy Package: Are we about to be locked into the wrong policy?, found at53

In short, renegotiation should enshrine the limits of EU competence in the Treaties, makingit clear how far the EU may legislate in the different policy areas and make it clear thatthe EU should not be granted any new powers. Energy UK in particular has stressed thatat the moment it does not see the need for policy decisions to be shifted to EU level andwants the member states to continue to decide their own energy mixes. 176 (It is pleasing tonote that, so far, the 2030 targets have only been set at an EU level and that there appearsto be no plan to renew national renewable energy targets.) The UK should also considernew safeguards against any future EU proposals which manage to circumvent these newrestrictions. 177Energy Policyand the EU176 Energy UK, Balance of Competences Review, 15 January 2014, found at 177 Please see Section 2 for historic examples54

Conclusion5The EU’s energy policy isn’t working and we are already paying the price for its failure.Over the last few years EU rules and regulations have played an increasing role in reducingBritain’s industrial output and in destroying jobs. As this paper has shown, if Energy IntensiveIndustries continue to leave Europe’s shores up to 1.5 million jobs could be lost in the UK.While protection or subsidy aren’t effective solutions, making sure that firms don’t have toalso face unnecessary and expensive regulation would go a long way toward reducing thepressure on them.A mounting number of investigations, including European Commission reports andGovernment studies, have highlighted the role of the EU in driving up the cost of energy.Changing this unfair status quo should be considered a matter of economic urgency;Britain’s Energy Intensive Industries are already starting to leave for cheaper shores.Action is needed as soon as possible. Requiring the Commission to consider the impact ofits proposals on British business, replacing the complex set of targets with one emissionstarget and making greater use of opt outs would help to reduce the burden on Britishbusinesses. These actions, along with new initiatives to promote cross border trade, shouldbe pursued as a matter of urgency.However, simply petitioning for minor changes in policy alone isn’t good enough; powersneed to return to the member states. Treaty change is needed to clarify the limits of the EU’srole, to make it clear that beyond setting emission targets (based on UNFCCC agreements)it is down to the member states to decide their own energy policy and their own energymix. A reformed EU needs to give the member states the ability to question current EUenergy policies and should also give them the right to look for cheaper and/or greeneralternatives.For too long opposition to EU energy policy has been dismissed by claims that the UKwould have introduced similar laws unilaterally. It is true that Britain may have introducedthe Renewables Obligation before it was required to by the EU but it also true that it hassince voiced opposition to retaining a renewable target. Under the current terms of EUmembership the UK has lost its freedom to change its policies. The UK is now stuck witha renewables target it opposes and laws that demand power stations close early, raisingserious concerns about energy security. Clearly, something needs to change.This paper does not attempt to claim that the EU is the only reason that energy priceshave increased over the last decade, however it is clear that the EU has played a significantand growing role in driving up the cost of energy. Restoring the power to block, amendor leave poorly designed EU laws to the member states will help address these problems.Such changes will help ensure that future EU energy policies take the needs of Britishindustry into greater consideration. In short, renegotiation offers an opportunity for theBritish Government to create savings, reduce the cost of energy and halt the exodus ofmanufacturing. It is an opportunity that should be grasped.55

Appendix: The costs of EU energy lawsCalculations were made using Government Impact Assessments (IAs), official documentsproduced by Government departments to accompany new regulations, stating how far thespecific recommended policy meets stated objectives and quantifying the potential costsand administrative burdens.However, despite this impressive resource, it is important to note that there are limitationsto using IAs. There has been a noted failure by the Government to place all the IAs in onerepository and previous attempts to compile such a collection have had notable omissions.In addition there are also inconsistencies in compiling IAs, both over time and betweendepartments. It is important to also note that these costs are estimates, though they arederived from Government assessments and analysis.IAs provide a range of different figures in their reports, including minimum cost, maximumcost and estimated cost. We have calculated the net costs for both the minimumand maximum estimates. This study is based on the collection of IAs available on website and a detailed search for IAs on environmental and energy policy on variousdepartmental websites and the National Archives. This detailed search for IAs of all Directivesthat have been highlighted by EIIs and the Energy sector and all IAs cited on the DG Energylist was carried out between 1 February and 1 April 2014. While we recognise that this mightmean that not all relevant IAs have been selected, it should account for the vast majorityof relevant laws and include the most expensive and intrusive regulations, however werecognise that due to these limitations our final figures may under-estimate the cost ofenergy-related regulation.It is important to also note that all of the EU laws cited do not affect all businesses in thesame way. Some laws clearly only have an impact on certain industries. It should also benoted that different IAs can look at the same EU directive from various different perspectives(multiple IAs since 2008 have looked at the impact of the Energy Products Directive forexample). This, however, is not a disadvantage. In fact adding together multiple IAs on thesame regulation gives a better idea of the total cost of that regulation. This approach allowsus to get a better estimate of the costs/benefits that stem from each rule and regulation. Thecosts and benefits are extracted from the option on the IA chosen by the British Governmentas the right course of action (as stated in the IA or on the Government’s own websites).It is also worth pointing out that there are sometimes some variations in where theinformation is placed on a sheet, despite the standard layout that IAs have. When noinformation is provided on the number of years annual costs will be paid for, this is recordedas ‘on-going’. It is possible that, had the EU not introduced these laws then the UK wouldhave chosen to legislate in these areas anyway, but it is worth pointing out that British lawsare more likely to offer a better cost/benefit ratio.Energy Policyand the EU56

Table 8: All energy Impact Assessments analysedIA TitleImpact Assessment: Proposed changes to Part L of the BuildingRegulations 2012/13Net costsNet costs (Lower) Net costs (Higher)-£ 2,388,000,000 -£ 21,075,000,000Impact Assessment: Stamp duty land tax relief for new zero carbon homes - -Impact Assessment: Recast of the Energy Performance of BuildingsRegulationsImpact Assessment: Increasing the fees for entering Energy PerformanceCertificates and Related Documents onto the Energy PerformanceCertificate RegistersImpact Assessment of a suite of measures to widen access to energyperformance certificate registers.Impact Assessment: Recast of the Energy Performance of BuildingsRegulationsImpact Assessment: Requiring Energy Performance Certificates (EPCs) forhouses in multiple occupation (HMOs)Impact Assessment: Proposals for requiring Energy Performance Certificateratings to be displayed on all property advertisements-£ 237,800,000 -£ 297,700,000– –£ 200,000 £ 200,000£ 143,800,000 £ 143,800,000-£ 25,400,000 -£ 25,400,000£ 34,700 £ 34,700Impact Assessment: Making better use of energy performance data £ 600,000 £ 600,000Impact Assessment: Proposals for extending Display Energy Certificates(DEC) to commercial buildings-£ 316,000,000 -£ 316,000,000Impact Assessment: Making better use of Energy Performance data £ 1,400,000 £ 1,400,000Impact Assessment: Requiring Energy Performance Certificates (EPCs) forshort term holiday letsImpact Assessment: Energy Performance of Buildings Directive - Complianceand Enforcement-£ 5,300,000 -£ 5,300,000£ 6,780,000 £ 6,780,000Impact Assessment: Making Energy Performance Certificate data available -£ 3,700,000 -£ 170,500,000Impact Assessment: Regulatory impact assessment for changes to the VATrules on the place of supply of gas and electricityImpact Assessment of the implementation of the Energy ProductsDirective (EPD) on private pleasure boatsImpact Assessment of the implementation of the Energy ProductsDirective on private pleasure flyingImpact Assessment of the implementation of the Energy ProductsDirective (EPD) on the use of waste oils reused as fuelImpact Assessment of EuP Implementing Measure for External PowerSupplies-£ 1,500,000 -£ 3,000,000£ 5,100,000 £ 6,600,000£ 240,000 £ 390,000– –-£ 37,040,000 -£ 21,040,000Impact Assessment of EuP Implementing Measures for Tertiary Lighting -£ 1,184,000,000 -£ 1,138,000,000Impact Assessment of EuP Implementing Measures for non-directionalhousehold lamps-£ 960,000,000 -£ 1,514,000,00057

IA TitleNet costs (Lower)Net costsNet costs (Higher)Impact Assessment: EuP Implementing Measures for Simple Set Top Boxes -£ 496,301,000 -£ 496,301,000Impact Assessment of the Proposed Penalty Regime for the Energy UsingProducts and Energy Labelling Regulations -£ 64,000,000 -£ 183,000,000Impact Assessment of the compliance & enforcement regime of the Energy-Using Products (EuP) & Energy Labelling Dir. -£ 164,000,000 -£ 164,000,000Impact Assessment of Cost Sharing Options available to the MarketSurveillance Authority under the Energy Using Products and EnergyLabelling Regulations-£ 4,000,000 -£ 12,100,000Impact Assessment of Implementing Measures for ecodesign requirementsand energy labelling of Televisions (TVs) -£ 871,000,000 -£ 871,000,000Impact Assessment: Hydrocarbon Oils Duty: Relief for rebated heavy oilsused to generate electricity – –Impact Assessment: Implementation of Article 5 of the Energy End Use andEnergy Services Directive £ 179,510,000 £ 179,510,000Impact Assessment: Provision of historic consumption on Energy Bills -£ 350,000,000 -£ 350,000,000Impact Assessment of Directive 2006 / 32 /EC on energy end use efficiencyand energy services B: Non Net bound supplies- -£ 2,814,000Impact Assessment of UK Renewable Energy Strategy £ 55,000,000,000 £ 54,000,000,000Impact Assessment of proposals for a UK Renewable Energy Strategy -Renewable Electricity £ 33,200,000,000 £ 33,200,000,000Impact Assessment for the Government Response to the Consultation onthe Grandfathering Policy of Support for Dedicated Biomass, AnaerobicDigestion and Energy from Waste Under the Renewables ObligationImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive (1)Minimum Sustainability CriteriaImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive (2)VerificationImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive ) (3) Non)Road Mobile Machinery (NRMM)Impact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive ) (4)Minimum Obligation ThresholdImpact Assessment: Amendments to the Renewable Transport Fuel Obligationfor compliance with the Renewable Energy Directive ) (5) DoubleCertification of Waste)Derived Biofuels-£ 850,000,000 £ 550,000,000£ 28,200,000 £ 99,300,000£ 6,500,000 £ 6,500,000£ 14,000,000 £ 26,000,000– –-£ 15,600,000 -£ 31,500,000Energy Policyand the EU58

IA TitleImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive ) (6) BuyoutRecyclingImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive ) (7) PartiallyRenewable FuelsImpact Assessment: Amendments to the Renewable Transport FuelObligation for compliance with the Renewable Energy Directive - (1)Minimum Sustainability CriteriaImpact Assessment of Increasing renewables deployment in the UK andBanding of the Renewables Obligation (RO)Impact Assessment: Government response to the consultation on proposalsfor the levels of banded support under the Renewables Obligation for theperiod 2013-17 and the Renewables Obligation Order 2012.Impact Assessment: Future Management of the Compulsory StockingObligation in the UK (p.27)Impact Assessment of proposals for amending the Renewable TransportFuels Obligation OrderImpact Assessment: Third Package: Articles concerning provision ofconsumer information (p.11)Impact Assessment: Obliging Ofgem to assess future electricity capacityrequirementsImpact Assessment of regulations on the supervision and control ofshipments of radioactive waste and spent fuelImpact Assessment: Expected European Commission (EC) proposal to recastthe Basic Safety Standards (96/29)(and other Euratom) DirectivesNet costsNet costs (Lower) Net costs (Higher)– –– –-£ 82,000,000 -£ 771,000,000£ 2,900,000,000 £ 3,100,000,000£ 2,900,000,000 £ 4,000,000,000£ 5,575,500,000 £ 6,975,500,000£ 197,000,000 £ 5,464,000,000£ 1,250,000 £ 2,500,000£ 800,000 £ 2,000,000£ 690,000 £ 690,000£ 124,200,000 £ 127,800,000Impact Assessment: Oil Stocking Order -£ 428,000,000 -£ 428,000,000Impact Assessment of EU Climate and Energy package, the revised EUEmissions Trading System Directive and meeting the UK non-traded targetthrough UK carbon budgets.Impact Assessment: Metering requirements for Heating, Cooling and HotWater networks£ 20,600,000,000 £ 20,600,000,000– –Updated Impact Assessment of the Industrial Emissions Directive (IED) £ 3,400,000 £ 20,600,000Impact Assessment of Planning Bill proposals for nationally significantinfrastructure-£ 3,800,000,000 -£ 4,800,000,00059

Advisory CouncilPlease note that Advisory Council members, like Board members andSignatories, have signed up to Business for Britain in a personal capacity■ Edward Atkin CBE - Avent & ARCC Innovations (Founder)■ Patrick Barbour - Barbour Index & Microgen (Former Chairman)■ Lord Bell - BPP Communications (Chairman)■ Gordon Black CBE - Black Family Investments (Chairman)■ Roger Bootle - Capital Economics (Founder and Managing Director)■ Rosemary Brown OBE - Tomorrow’s Achievers (Founder and Chairman)■ David Buik - Panmure Gordon & Co (Market Commentator)■ Lars Seier Christensen - Saxo Bank (Co-Founder & CEO)■ Damon de Laszlo - Harwin Plc (Chairman)■ Olivia Dickson - Investec (Non Exec Director)■ Ben Elliot - Quintessentially (Founding Director)■ Matthew Ferrey - Ranworth Capital (CEO)■ Lord Flight - Flight & Partners Ltd (Chairman)■ Mark Florman - Time Partners Ltd (Chairman)■ Amy Folkes - Folkes Holdings Ltd (Director)■ Sir Rocco Forte - The Rocco Forte Collection (Exec Chairman)■ Ian Fraser - Brammer plc (Group Chief Executive)■ Dr David Hammond - Chartered Accountant■ Graham Hampson Silk - Hampson Holdings (Chairman)■ Oliver Hemsley - Numis Securities (CEO)■ Sir Michael Hintze - CQS Management Ltd (Chairman)■ Alexander Hoare - Hoare & Co (Board member)■ Tony Howard - HATS Group (Director of Logistics)■ Luke Johnson - Patisserie Valerie (Chairman)■ Lord Kalms - Dixons Retail Plc (President)■ John Kersey - Kersey Hairdressing (Managing Director)■ Paul Killik - Killik & Co LLP (Founder)■ Stuart Lamb - William Lamb Footwear (Chairman)■ Ruth Lea - Arbuthnot Banking Group (Economic Adviser)■ Michael Liebreich - Bloomberg New Energy Finance (Founder)■ Rupert Lowe - Southampton Leisure Holdings (Former Chairman)■ Neil MacKinnon - The ECU Group plc (Global Macro Strategy Adviser)■ Alastair MacMillan - White House Products Ltd (Founding Director)■ Sir Christopher Meyer KCMG - Former Ambassador to the USA & Germany■ Julie Meyer - Ariadne Capital (Chairman & CEO)■ Helena Morrissey - Newton Investment Management (CEO)■ Charlie Mullins - Pimlico Plumbers (Founder and Managing Director)■ John Nike - Nike Land Securities (Founder)■ Richard Patient - Indigo Public Affairs (Managing Director)■ Michael Petley - The ECU Group Plc (CIO)■ Simon Stilwell - Liberum Capital (CEO)■ Rhoddy Swire - Pantheon Ventures (Founder)■ Lord Vinson - British Airport Authorities (Former Director)■ David Wall - I.M. Group (Director of Business Development)■ Michael Webster - Gorkana (Co-Founder)■ Lord Wei - House of Lords■ James Woolf - Flow East (CEO)55 Tufton Street, London SW1P 3QL0207 340 6070 (office hours)© 2014 Published by Business for Britain, all rights reserved. Information correct at time of print, E&Os accepted.Designed by Niche Creative Services Ltd. Printed by Impress Print

“Energy Policy and the EU is a timely and well-researched reminder of theway in which the EU’s misguided policies significantly ramp up energycosts... It cannot be said too often that the EU’s policies, especially in relationto renewables, are deeply flawed. They are in urgent need of reform as thispaper, a very useful contribution to the debate, persuasively argues.”– Ruth Lea, Director and Economic Adviser, Arbuthnot Banking Group“Not since the early 1970s has the very real threat of big energy pricespikes and power supply interruptions been so real. Slavish adherence todraconian and damaging EU energy directives has undermined a coherentand sustainable energy policy for the UK. This report highlights the problemand provides credible solutions”– Tony Lodge, Research Fellow, Centre for Policy Studies“This timely report shows how EU policy is driving up the cost of energyand undermining the competitiveness of our Energy Intensive Industries.If we want UK manufacturing to thrive, we need less prescriptive EUlegislation and more freedom for markets to deliver cleaner, internationallycompetitive energy supplies.”– Jeremy Nicholson, Director, Energy Intensive Users Group“This important paper is a valuable contribution to the debate and shouldbe required reading for MEPs and EU officials as they set out their agenda”– James Sproule, Chief Economist, Institute of

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