Britain Euthanizes Its Steel Industry

    High energy costs needlessly accelerate a painful transition.

    Prime Minister David Cameron promised voters last year that his Conservatives would be the true working-people’s party in Britain. Try telling that to the Welsh steel workers at Port Talbot whom Mr. Cameron’s green-energy policies are about to push out of their jobs.

    The latest blow to Britain’s steel industry comes as India’s Tata Steel said this week it will try to sell its U.K. operations. Tata is clocking losses that may be as high as £1 million ($1.4 million) a day, and now says it has more or less written off the value of its British plants. Thousands of workers will lose their jobs if Tata can’t find a buyer, on top of the thousands left unemployed by other plant closures last year.

    Britain’s steel industry has been in decline for decades, with employment falling to 24,000 in 2014 from 320,000 in 1971 and steel’s contribution to both employment and total economic output in 2014 shrinking to 0.1%. So you can’t fault Mr. Cameron for resisting rescue attempts such as the renationalization some have called for.

    Rather, the outrage is that instead of allowing economic nature to take its course and letting workers and steel communities adjust gradually, London insists on hastily euthanizing steel. Witness Mr. Cameron’s green-energy policies since 2010, which have tipped the scales against heavy manufacturing by increasing electricity costs significantly.

    Those policies include a minimum price for carbon emissions in excess of the going rate in the European Union’s emissions-trading system. Britain also forces utilities to buy ever-increasing amounts of electricity from green generators such as solar and wind, even as those sources can’t make up for generating capacity lost as older plants shut down.

    High energy costs disproportionately hit extra-large industrial power consumers such as steel mills. These manufacturers paid around 9.55 pence a kilowatt hour for electricity in 2015 compared to as low as 6.7 pence a kilowatt hour when Mr. Cameron took office in 2010. Average electricity prices for all industrial users were 9.38 pence a kilowatt hour in 2014, compared to 4.26 pence in the U.S.

    No wonder imports from China—often blamed as the chief culprit in the death of British steel—are so much cheaper. High energy costs also put British steel plants at the front of the queue as global firms such as Tata determine where in the world to cut capacity amid a global supply glut. Britain is lucky that those cheap imports at least allow steel-consuming industries to buffer themselves from the full cost of Mr. Cameron’s green follies, which they’d have to bear if they had to buy more expensive, green-powered steel on top of their own electric bills.

    Britain has done this to itself, despite claims that London could have averted steel closures if only Brussels had imposed heftier duties on Chinese imports or had allowed London to subsidize steel manufacturers to partially offset the higher electricity costs caused by its environmental policies. The way to end today’s steel crisis is to stop this self-inflicted green harm and let the market work in its own way.