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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
Page 2: Business for Britain exists to give
Page 9: In a recent letter to the President
Page 14 and 15: in the US. While this would be conc
Page 18 and 19: Commission has itself acknowledged
Page 20 and 21: 2.4The rising costs of EU energy re
Page 22 and 23: It is important to note that many o
Page 24 and 25: 3.1The impact of high energy costs
Page 26 and 27: MetalsTOTAL UK EMPLOYMENT471,000 in
Page 28: Chemicals and chemical productsTOTA
Page 31 and 32: INDUSTRY CASE STUDY 3.1.3Figure 14:
Page 39 and 40: “Energy discussions play a major
Page 41 and 42: were also closing faster than expec
Page 43 and 44: Increased energy dependence3.6Anoth
Page 45 and 46: Despite these problems, the EU’s
Page 47 and 48: 41 per cent of British manufacturer
Page 49 and 50: genuine, efficient and effective in
Page 51 and 52: The EU should also make it clear th
Page 53 and 54: should be considered: were the UK t
Page 55 and 56: Conclusion5The EU’s energy policy
Page 57 and 58: Table 8: All energy Impact Assessme
Page 59 and 60: IA TitleImpact Assessment: Amendmen
Page 61: “Energy Policy and the EU is a ti

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