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The British government has announced a loan of £ 120 million to British Steel so that the company can meet payments to a European environmental program – as part of an unusual government intervention by the Conservative government.
Secretary of State for General Affairs Greg Clark confirmed Wednesday emergency funding in the Commons, saying British Steel had been fined £ 500 million in Brussels.
The steel producer sought the help of ministers after the six-month deadline before Brexit faces a deficit of carbon credits needed to cover emissions under a policy Brussels to combat climate change.
Without urgent intervention, the company would have faced a liability of more than 600 million pounds, the fine over 120 million pounds sterling, which would put it under "significant financial difficulties," stated Mr. Clark in the House of Commons.
"The agreement with British Steel is unique in exceptional circumstances," he said, acknowledging that the government had found itself in an "unenviable" situation.
Mr. Clark insisted that the agreement represented a good value for taxpayers: if the price of carbon credits increased, the government would benefit from a positive potential, he said. declared. If the price went down, British Steel would be required to make up any shortfall.
The intervention eliminates the threat of a colossal fine for the UK's second-largest steelmaker, who runs the large Scunthorpe plant in the north of England and employs 5,000 people.
The money will be used to purchase carbon credits that polluting industries must submit under the EU's "Emissions Trading Scheme" to cover each tonne of CO2 or greenhouse gases they give off.
Under the ETS, companies are allocated a number free of charge, but many are allocated a higher allocation than that required by lower emissions. It is a potential source of cash as permits can be sold on the carbon market and it is not uncommon for companies to use their free allocation to pay the liabilities of the previous year.
However, Brussels' decision to temporarily suspend British companies receiving new allowances until a Brexit withdrawal agreement was signed left British Steel forced to buy credits at a time when carbon prices rose.
Although the problem concerns all British polluters, the largest steelmaker in the country, Tata, who manages the plant in Port Talbot, did not ask for financial badistance to the government, according to one person.
Clark accused MPs of not supporting the government's withdrawal agreement on British Steel's situation, urging them to "think about the real impact" of their repeated rejection of Agreement on Brexit.
When British Steel sold some of its quotas, prices were well below current levels. This appears to have occurred largely when the company still belonged to India's Tata, to which private equity firm Greybull Capital acquired it for £ 1 in 2016.
Clark's action shows political sensitivities around the UK steel industry, which was on the brink of collapse three years ago when Indian Tata, owner of the Port Talbot steel mill, threatened to close all of its activity. Ministers are acutely aware of the historical significance of steelmaking in Britain over the last century – and the potential political fallout from new closures in the troubled industry.
However, the intervention will raise questions as to whether other industries will receive similar help to manage their EU ETS allocations. The specific terms of the "commercial" taxpayer loan to the industry will also be the subject of close scrutiny.
The Unite union is pleased with this decision, but warned about the future of the steel industry and called for increased government support.
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