Many of the UK's 3,000-plus rigid plastics packaging firms could soon be eligible for a government-approved rebate against the climate change levy (CCL).
Rigid plastics has been the only packaging sector not to have qualified for a reduction in the CCL, which adds an average of 15% to annual energy bills.
But revised proposals put forward by the British Plastics Federation (BPF) could result in a rebate of up to 80%, subject to meeting agreed targets to minimise CO2 emissions.
The proposals have been approved in principle and are awaiting government ratification, according to BPF public and industrial affairs director Philip Law.
"There have been two hurdles to get over: to prove that energy use within the industry is in excess of 3% of production costs, and that there is more than 50% import penetration," he said.
"The main difficulty has been that plastics processing is treated generically within a broad standard industrial classification band, rather than sector specific. The stumbling block was cleared once we were able to persuade Defra to differentiate between processing for the packaging market and mainly extruded products for the ineligible construction industry.
"I can't say that it's signed, sealed and delivered yet, and there may still be some banana skins along the way, but the indications are very positive."
The BPF is canvassing members to see how many will want to enter into a climate change agreement scheme (CCA).
Law said it should be of interest to companies with an annual energy bill of more than £75,000-£100,000. "That could draw in at least two-thirds of our 300 plastics processing membership," he added.
In acting as the lead association in regulating the CCA, participation would also be encouraged outside of the BPF membership, subject to an administrative charge.
The BPF could also establish a separate company to handle the scheme once it has been approved, which could be "any time between the next few weeks or three months".
Government approval for a CCA would represent a major U-turn in protracted negotiations extending over the past five years.
It would be a timely boost for a sector that, according to a BPF survey carried out 12 months ago, has suffered energy cost increases of 25%-125%.
"Our members' cost-base has been rising across the board," said Law. "Rigid plastics packaging has also come under some pressure from other sectors competing across similar applications, and from mainland Europe where energy costs are lower and free of levy."
While larger organisations are expected to welcome the decision – for example, the annual cost of the climate change levy to RPC Group is approximately £800,000, according to chief executive Ron Marsh – smaller firms are likely to adopt a more cautious approach.
David Barnett, managing director of Dorset-based EPS packaging supplier Simplipac, said: "Our energy bill is about £150,000. As probably the biggest single item within our overall cost of production, this could definitely be of interest.
"However, it would depend upon how much bureaucracy was involved, and to what extent it would incur investment in energy-saving equipment. We're in an area where grants aren't readily available for factory improvements, so it might actually be cheaper to go on paying the levy.
"With margins so tight, anything that can be done to ease production cost is obviously worth looking at – but with what might be involved it's a question of assessing this in terms of the overall priorities in running a very small business. When you sit down and look at the likely payback, it just might not warrant the expenditure we'd have to incur."
Source: packagingnews
Rigid plastics has been the only packaging sector not to have qualified for a reduction in the CCL, which adds an average of 15% to annual energy bills.
But revised proposals put forward by the British Plastics Federation (BPF) could result in a rebate of up to 80%, subject to meeting agreed targets to minimise CO2 emissions.
The proposals have been approved in principle and are awaiting government ratification, according to BPF public and industrial affairs director Philip Law.
"There have been two hurdles to get over: to prove that energy use within the industry is in excess of 3% of production costs, and that there is more than 50% import penetration," he said.
"The main difficulty has been that plastics processing is treated generically within a broad standard industrial classification band, rather than sector specific. The stumbling block was cleared once we were able to persuade Defra to differentiate between processing for the packaging market and mainly extruded products for the ineligible construction industry.
"I can't say that it's signed, sealed and delivered yet, and there may still be some banana skins along the way, but the indications are very positive."
The BPF is canvassing members to see how many will want to enter into a climate change agreement scheme (CCA).
Law said it should be of interest to companies with an annual energy bill of more than £75,000-£100,000. "That could draw in at least two-thirds of our 300 plastics processing membership," he added.
In acting as the lead association in regulating the CCA, participation would also be encouraged outside of the BPF membership, subject to an administrative charge.
The BPF could also establish a separate company to handle the scheme once it has been approved, which could be "any time between the next few weeks or three months".
Government approval for a CCA would represent a major U-turn in protracted negotiations extending over the past five years.
It would be a timely boost for a sector that, according to a BPF survey carried out 12 months ago, has suffered energy cost increases of 25%-125%.
"Our members' cost-base has been rising across the board," said Law. "Rigid plastics packaging has also come under some pressure from other sectors competing across similar applications, and from mainland Europe where energy costs are lower and free of levy."
While larger organisations are expected to welcome the decision – for example, the annual cost of the climate change levy to RPC Group is approximately £800,000, according to chief executive Ron Marsh – smaller firms are likely to adopt a more cautious approach.
David Barnett, managing director of Dorset-based EPS packaging supplier Simplipac, said: "Our energy bill is about £150,000. As probably the biggest single item within our overall cost of production, this could definitely be of interest.
"However, it would depend upon how much bureaucracy was involved, and to what extent it would incur investment in energy-saving equipment. We're in an area where grants aren't readily available for factory improvements, so it might actually be cheaper to go on paying the levy.
"With margins so tight, anything that can be done to ease production cost is obviously worth looking at – but with what might be involved it's a question of assessing this in terms of the overall priorities in running a very small business. When you sit down and look at the likely payback, it just might not warrant the expenditure we'd have to incur."
Source: packagingnews
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