By Susanna Twidale
LONDON (Reuters) - Britain has begun paying firms millions of pounds in compensation to industrial companies help shield them from higher energy bills due to European carbon permits, a government spokeswoman said on Thursday.
"The government has begun compensating companies for the indirect costs of the European Union Emissions Trading System (ETS) ... To date a total of 16 million pounds ($25.7 million) has been paid to 17 companies in the UK," a spokeswoman from the Department of Energy and Climate Change said via email.
Companies that have received cash so far include Tata Steel, Celsa Steel and chemical firm Ineos Chlor Vinyls, she said, without revealing how much each firm was awarded.
The government wants to limit the impact of new rules under the EU ETS, which from this year force most power generators to pay for carbon permits rather than receive them for free, and has set aside 113 million pounds to cover compensation.
Germany and the Netherlands have similar schemes, which have got approval from the European Commission and are designed to help compensate industrial companies from higher energy prices resulting from carbon costs.
The cash is part of a total government allocation of 250 million pounds for the next two years to help companies pay for indirect costs relating to carbon policies, including 100 million pounds to help offset Britain's domestic carbon tax.
British utilities must submit carbon permits under the EU's Emissions Trading Scheme for each tonne of carbon dioxide they emit. Britain, furthermore, has set a carbon price floor, which is an additional burden for them.
The government hopes the extra cost will help to drive investment in low-carbon power generation.
The domestic tax is set at 4.94 pounds per ton this year and is due to rise to 18.08 pounds in 2015 and then up to a level that ensures power companies by 2020 pay a total of 30 pounds for each tonne of carbon dioxide they emit.
The Commission has yet to sign off on the 100 million pounds relating to the domestic tax, the DECC spokeswoman said.
($1 = 0.6232 British pounds)
(editing by Jane Baird)