The Confederation of British Industry (CBI) is campaigning for changes to the climate change levy, changes that would encourage ministers to help industry improve the environment by offering discounts to firms that meet energy reduction targets but who are currently excluded.

The CBI said that companies using 40 per cent of their consumed energy in manufacturing are not entitled to a discount even if they want to cut emissions.

‘Business supports the government’s environmental objectives, but it is worrying that so many firms are ineligible for discounts,’ said Michael Roberts, director of Business Environment. ‘The aim of the tax should be to change behaviour, not to raise public funds. Any group of firms that is willing and able to take on a challenging environmental target should get a reduction. Discounts are not the environmental equivalent of a free lunch, firms can only get them if they meet tough targets.’ The CBI says the levy will create unnecessary market distortions because some firms qualify for discounts while others do not. It warns that different approaches in other European countries mean British companies will be at a significant disadvantage.

It also points out that the German government has made all manufacturing companies eligible for a discount.