Firm hit by EU's decision to suspend UK companies from accessing CO2 credits under emissions trading system until Brexit deal is ratified
British Steel is in talks to secure a £100m loan from the UK government to pay its upcoming EU carbon emissions bill, having been barred from securing CO2 allowances under the EU-wide emissions trading system (ETS) due to Brexit uncertainty.
The Scunthorpe-based firm, which employs around 5,000 staff and is one of the UK's biggest steel producers, has until the end of April to foot the bill in order to comply with the ETS rules, Sky News first reported on Saturday.
Previously part of Tata Steel Europe, the firm faced financial woes three years ago due to reduced demand for the metal in Europe. It was then acquired by Greybull Capital in April 2016, renamed British Steel, and has since come back into profit.
However, it is now reportedly struggling to raise the cash to pay its ETS bill, having been affected by an EU decision to suspend UK companies from accessing carbon credits to cover their emissions under the ETS, until a Brexit deal is ratified by the UK's Parliament.
Talks between British Steel and the UK government over securing a loan to cover the bill have been taking place over the past few weeks, and ministers have brought in professional services firm KPMG to provide advice, according to reports.
A British Steel spokesperson said Brexit was "presenting a range of challenges to every British company and we are not immune".
"We are discussing the impact of Brexit on our business with ministers and officials from the Department for Business, Energy and Industrial Strategy [BIES] and they have been extremely responsive and supportive to date," the firm said in a statement. "Our successful turnaround is continuing. We're pleased with the significant progress we have made over the past three years and the support we have enjoyed from our workforce, customers, suppliers and investors."
Under the ETS, industrial polluters in the EU are usually awarded a set of carbon allowances to pay for their previous year's emissions, and these carbon credits can then be traded between companies under the scheme to help them comply. The aim is to cut the overall volume of carbon emissions across the EU by gradually ratcheting down the overall limit on CO2 allowed under the ETS.
However, UK firms have been suspended from accessing the ETS allowances, and British Steel is understood to have already used up its allowances for the previous year, leaving it unable to foot the latest carbon bill.
A spokesperson for the Department for Business, Energy and Industrial strategy (BEIS) said: "As the business department, we are in regular conversation with a wide range of sectors and companies."
The steel sector is a major CO2 emitter, requiring large amounts of energy - often from fossil fuels - to provide heat to smelt metal in blast furnaces. Studies have estimated steel is responsible for around five per cent of global greenhouse gas emissions.
As such, efforts are underway to try and clean up the sector. Earlier this year a coalition of UK universities, businesses and trade bodies came together to launch SUSTAIN, a £35m research network aimed at turning the UK into a global hub for 'carbon neutral' steel production.