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UK energy cuts good for pharma, API and chem firms says industry group

By Gareth MacDonald+

20-Mar-2014
Last updated on 11-Jul-2014 at 12:33 GMT

Chancellor George Osborne displaying his red, leathery box. Source Flickr/Chingster23
Chancellor George Osborne displaying his red, leathery box. Source Flickr/Chingster23

Efforts to cut industrial energy bills in the UK's 2014 Budget have been welcomed by the Chemical Industries Association (CIA), a group whose members include drug and ingredient makers.

The budget announced by UK Chancellor George Osborne this week featured a £7bn package designed to reduce costs for ‘energy intensive’ industrial user, including a commitment to cap the tax paid per ton of CO2 generated at £18 until 2020. 

Osborne said: “Budget 2014 contains a radical package to support the manufacturing sector by sharply reducing the cost of energy, and takes further action to boost the supply of housing. This will secure long-term economic prosperity and ensure that growth is balanced across all sectors and throughout the UK.”

Pharma energy intensive

Energy intensive” industries include both active pharmaceutical ingredient (API) producers and drug drugmakers according to Alan Eastwood, Senior Economist at the Chemical Industries Association (CIA) who told in-Pharmatechnologist.com that companies producing and using chlorine stand to benefit particularly.

There were various energy measures, all of which were generally helpful to the chemical industry, but particularly the energy intensive parts, such as chlorine manufacture” said Eastwood.

In particular, chlorine makers will benefit from expanded compensation schemes according to Eastman, who explained that this would reduce some of the negative impact of “costs imposed through CPF, EUETS, Renewables Obligation and small scale FITs for energy intensive companies.”

For other parts of the drug supply chain the benefits will be less immediate according to Eastwood, who explained that: “Further down the line for speciality chems producers - including API makers - the effect is more diluted.

However” he added “since chlorine for example is an important input in the manufacture of many pharmaceuticals, keeping a lid on costs here ought to benefit them as purchasers.” 

European competition

The CIA also believes the measures – particularly the carbon cap - will make UK producers more able to compete with their European rivals.

Freezing the carbon price floor support at £18/te CO2 will help all users of energy, and caps the disadvantage relative to competitors elsewhere in Europe – but it still exists.

New exemptions from CPF [carbon price floor] will also help anyone running CHP to provide their plant with power, but again only to the extent that it limits the disadvantage of a UK-only levy.”

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