British Steel’s taxpayer subsidies to skyrocket because of Net Zero

Taxpayers could be forced to cough up £500 million a year if a new green levy is slapped on Britain’s last blast furnaces, steel industry bosses fear.

The extra green taxes – caused by a change in Treasury policy – could make Scunthorpe’s steelworks so uncompetitive they are forced to shut, insiders say.

The potential impact of the levy, which stems from a looming change to an emissions trading scheme known as the Carbon Border Adjustment Mechanism (CBAM), was revealed after trade body UK Steel made an urgent plea to Chancellor Rachel Reeves for a rethink.

The scheme forces firms to buy permits covering their carbon dioxide emissions to incentivise them to use more environmental methods.

Domestic heavy industry is exempt but a revised version of the scheme to be launched next year could see it brought within the scope of the CBAM.

Frank Aaskov, a director at UK Steel, said: ‘Steelmakers have so far been shielded from most UK carbon costs through free allocations. But the Government will be sharply reducing these allocations. That means a traditional blast furnace in the UK like the one in Scunthorpe must increasingly buy almost all of its carbon allowances on the open market.’

Looking into the abyss: Taxpayers could be forced to cough up £500 million a year if a new green levy is slapped on Britain’s last blast furnaces

UK Steel’s research – based on historical emissions for a British blast furnace – shows that, once the phase out of these free allocations begins, carbon costs could rise ‘extremely quickly’.

Aaskov said: ‘When the UK CBAM comes into effect, such a plant could face carbon costs of over £100 million annually, rising to almost £250 million in 2031, and nearly £500 million by 2035.’ That would send Government subsidies for the Scunthorpe blast furnaces, run by nationalised British Steel, skyrocketing.

Taxpayer funding for the steelworks has totalled £274 million, or more than £1 million a day, in the first seven months since the Government used emergency powers to take it over from China’s Jingye in April last year, far more than the £700,000 in daily losses racked up under Jingye.

Aaskov also said the industry was ‘extremely concerned’ that the revised CBAM would disadvantage British-made steel against foreign competition.

This is because imports from countries including China would be subject to ‘global average default values’ for carbon emissions rather than exact data.

The ‘global average default’ figures are understood to be less stringent than those used to calculate emission levies for British firms, which bosses fear will divert even more cheap foreign steel towards UK shores.

Aaskov said: ‘High emission foreign steel will still enter the UK at a large discount, undercutting domestic producers who are paying full UK emissions trading scheme costs. UK producers will pay the full carbon bill. Many importers will likely not. That’s the gap we urgently need Government to fix.’ Steel industry boss Sir Andrew Cook added: ‘The only benefit of these green taxes is to give a warm feeling to a small section of the British public that ‘something is being done’ to avert the threat of climate change.

‘This ignores the reality that even zero UK carbon emissions would make no significant difference globally. China is the biggest carbon emitter on the planet. Chinese steel is exclusively made by high carbon means. Far better to exclude Chinese steel from British markets and kill two birds with one stone. Help save the planet, and save British steel in the process.’

Anger is also mounting that steel for building projects that could be made in Britain is still being imported from abroad.

Last month, the Mail revealed that 7,000 tons of Chinese steel, costing £5 million, would be used in the taxpayer-funded Net Zero Teesside gas power station on the site of the Redcar steelworks. British Steel is understood to have bid for the contract but was rejected.

Separately, Government procurement data showed a third of the 293,000 tons of steel bought for Government contracts last year for £374 million came from abroad, £53.9 million of which could have been made in Britain.

The Government has yet to say where the estimated 50,000 tons of structural steel and 230,000 tons of reinforcement steel to build Suffolk’s Sizewell C nuclear power station will come from.

UK energy costs remain high, making it more expensive to produce metal domestically, with fears a glut of cheap Chinese steel could skew prices further.