Chancellor George Osborne will announce 250 million pounds of support this week for energy intensive industries, part of measures to boost a flagging economy, a Treasury source told Reuters on Sunday.
Osborne is under intense pressure to find ways to revive an economy that has barely grown over the last year, and these measures will be announced in his autumn statement on November 29 among other initiatives aimed at boosting growth.
A first element of the package is to compensate high energy users for the carbon price floor, a tax on fossil fuels which the UK will introduce in 2013, and which business lobby groups have said will lead to large increases in bills for energy-intensive firms.
Osborne is expected to say the government will compensate firms to the tune of 40 million pounds in 2013/14, rising to 60 million in 2014/15.
The government will also help to offset indirect costs arising from the European Union's carbon Emissions Trading Scheme, with payments of 12 million pounds in 2012/13, rising to 50 million pounds in each of two successive fiscal years.
In addition, Osborne will raise the discount relief on the Climate Change Levy fuel tax for firms that promise to improve their energy efficiency, to 90 percent from April 1, 2013 -- an improvement on the increase to 80 percent from 65 percent announced in this year's budget.
The relief will be available only to firms that sign up to a Climate Change Agreement setting energy efficiency targets, and will cost the taxpayer a combined 40 million pounds for the 2013/14 and 2014/15 fiscal years, the source said.
The government will also pledge to limit the impact on energy-intensive industries from an electricity market reform, plans for which were set out in draft legislation in July this year.
(The measures) will help make sure energy intensive industries are internationally competitive, but the government remains committed to the green agenda and to cutting carbon emissions by 80 percent by 2050, the source said.
The new government support will cut the electricity costs of high energy users - such as steel and aluminium makers plus the cement, chemicals, glass and paper industries -- by 5-10 percent, the source added.
(Reporting by Fiona Shaikh; editing by David Stamp)