He told the Alfed annual lunch at the House of Lords, London, UK that in a recent budget, the government introduced a Climate Change Levy rebate for electricity and gas which would be reduced from 80% to 65%, as from 1 April 2011.

“That decision is now costing our industry millions of pounds in additional costs,” Mr Davies said. He welcomed an announcement that as from 1 April 2013, the maximum rebate for electricity will return to 80%, but gas will remain at 65%.

Energy intensive industries face huge costs from the introduction of Carbon Price Support and Phase 3 of the European Union's Emissions Trading scheme, especially if there is no compensation for indirect CO2 costs.

Ministers need to be aware that these are costs that the primary aluminium sector cannot pass-through, Mr Davies said.

“That is why our primary aluminium sector strongly advocates a switch to low carbon energy, which could best be achieved by the Government providing adequate support under the Renewables Obligations, especially for dedicated biomass plants.”

*See Alfed update this issue