New tax could cost Ineos over £60m

Ineos Grangemouth Refinery
Ineos Grangemouth Refinery

Industry insiders fear new EU and UK taxes on carbon emissions could force Grangemouth-based Ineos to move its operations to other parts of the world.

And this week Ineos would not rule out the possibility this new financial hit could lead it to leave the country in the future in an effort to lower operating costs.

The firm’s Grangemouth plant would reportedly face extra costs of up to £61 million over the next decade.

Industry sources say even if the new taxes do not force Ineos to close its Grangemouth plant and move to pastures new, they could result in more money being poured into operations outside the UK like the firm’s plant in Laverie, France.

The concerns were caused by the European Union’s proposals to make oil refiners pay for carbon emissions, which come into force in 2013, and the UK Government’s plans to set the carbon price floor - a regulatory tax firms have to pay for the right to continue to pollute - at £16 a ton from April 1, 2013, rising each year to £30 pounds a ton in 2020.

An Ineos spokesman said: “For Ineos at Grangemouth, the implementation of a carbon price floor will see an increase in costs that will affect the profitability of the site.

“We are a highly competitive company and have made significant investments to ensure we remain competitive against businesses throughout the world. Taxes like this erode the money available to invest over time, meaning the potential for closure will increase.

“For this reason we will continue to work with the appropriate organisations to lobby the UK Government to introduce mitigation measures to ensure we can operate and compete on a level playing field with other companies in Europe and the rest of the world.

“We have been working closely with local politicians, including Michael Connarty, trade organisations and the trades unions to impress upon the UK Government the implications to energy intensive industries of introducing this UK-only tax.”

East Falkirk MP Michael Connarty believes Ineos will stay put, despite the added financial pressures.

He said: “I don’t think there is any question of Ineos relocating, but they will have to bear a burden. If they did not have the deal with PetroChina they would have been in trouble, but I don’t believe there is any danger of them leaving, it will just be a burden they will have to carry.

“Refineries are definitely under pressure. Taxes like the carbon floor price are like a penalty or a punishment - they will not actually reduce carbon. It’s not sensible and it will not work.

“It will damage UK business - especially high energy users like the refining industry.”

Mr Connarty highlighted the sale of the Shell Stanlow refinery, located at Ellesmere Port near Liverpool, earlier this year to Indian firm Essar Energy and the fact some of the plant’s operations, including the production of low sulphur fuels, had been relocated from the UK to India because it was cheaper and less regulated.

He said: “It is planned to ship diesel into Britain from India where environmental standards are much lower, so there is actually an overall global loss on carbon reduction measures to tackle climate change.”

Mark Lyon, Unite vice chairman and the union’s convener at Ineos Grangemouth, shared Mr Connarty’s opinion Ineos will stay put and also his feelings on the new carbon taxes.

He said: “I don’t think we’ll see the company move from Grangemouth, but we do have concerns about the way things are going with this legislation. If we are going to continue to use carbon fuels then where do we want them to be produced?

“Isn’t it better to produce them in the UK where things like carbon emissions are tightly regulated, rather than in countries to the east where there is little or no regulation regarding pollution.’’