Opinion

Energy resilience “at risk” as policy gaps continue to fail the UK refining sector

Fuels Industry UK has issued a stark warning about the precarious state of UK refining suggesting that recent Budget announcements have failed to provide the clarity and immediate support needed to safeguard remaining refineries and the skilled jobs they underpin. 

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Fuels association sets out policy changes needed to deliver net zero

The UK has already lost one-third of its refineries in the past year. Without urgent action, the remaining four sites face the same pressures: higher carbon and energy costs than competitors abroad, and growing uncertainty over long-term policy.

Despite positive signals that the Government is considering refined fuels for inclusion in a UK Carbon Border Adjustment Mechanism (CBAM), no concrete decision has been made. In its statement, FIUK warns that sector cannot wait years for CBAM to take effect without change in the meantime.

Key concerns highlighted include:

  • Lack of CBAM clarity: The Budget’s recognition of refining’s role in our economy is positive, but without a firm commitment to include refined fuels, the UK risks falling further behind international competitors. Refineries need certainty now to plan investment and maintain operations.
  • Exclusion from industrial support schemes: The new British Industrial Competitiveness Scheme (BICS) appears to exclude refineries, despite being designed to lower energy costs for heavy industry. This omission leaves the sector exposed to some of the highest industrial energy prices in the world.
  • ETS policy gaps remain: Changes to the UK Emissions Trading Scheme (ETS) still do not address fundamental issues with refinery benchmarking. Free allocations are set to fall while compliance costs – over £200m in 2024 – continue to rise.

Elizabeth de Jong, Fuels Industry UK Chief Executive Officer, commented: “Refineries are closing because the UK is now one of the highest-cost places in the world to operate. Recent announcements have done nothing to change that. Without urgent and meaningful action, the UK risks losing more refineries — and with them the growth, skills, industrial base and energy resilience they provide.”

“We need a clear commitment on CBAM, immediate interim measures to address carbon costs now, and access to industrial energy cost reduction schemes. Without this, the UK’s refining base — and the security it provides — will continue to erode.”

Image provided by FIUK.