UK risks becoming 'high risk, low resilience' on fuel as refineries close, industry warns

Five refineries have shut since 2005 as the UK's carbon costs push production overseas, with the industry now calling for protection under the upcoming border tax

UK energy security is at risk if its remaining refineries aren't given a level playing field with global competitors, the head of the fuels trade association warns.

Carbon charges have contributed to the closures of a string of Britain's refineries and, without adequate border protection, more could follow suit, warned Elizabeth de Jong, chief executive of Fuels Industry UK.

As a direct consequence of the closures, Britain has gone from being classed as a "low risk / high resilient" nation to "high risk / low resilience" in relation to diesel and jet fuel, Ms de Jong said.

Refineries are the "backbone of UK energy", she said. They contribute £11billion a year in exports and employ around 100,000 people in the wider economy.

But Ms de Jong said the high cost of doing business in the UK was forcing production abroad. Five oil refineries have closed since 2005, with two – Grangemouth and Lindsey – shutting their doors in 2025 alone.

Many of the imports replacing domestic production had a higher carbon footprint, undermining the very principles of the carbon tax regime.

"A law of unintended consequences is that we're trying to lower carbon emissions but what we're doing is probably actually raising them," she said.

Oil refineries process crude oil into petroleum products including petrol, diesel, jet fuel and feedstocks for industry.

But these processes need huge amounts of heat and power, meaning high emissions.

Britain, like Europe, charges manufacturers for carbon pollution. Under the Emissions Trading Scheme, introduced in 2005, this sees producers pay per tonne of carbon they emit.

But this favours nations with no such costs, such as the US, India or the Gulf states, and leads to domestic production moving abroad.

Known as carbon leakage, this undermines Britain's industrial base because domestic manufacturers can't compete on a level playing field, said Ms de Jong. The UK, meanwhile, is importing more fuel than ever.

The International Energy Agency has benchmarks for a nation's energy security, meaning that imports of above 45 per cent bring a "high risk / low resilience" classification.

"The UK imports 55 per cent, and that was in 2024," said Ms de Jong. "In 2000, it was 20 per cent.

"So, officially, we are high-risk, low-resilience. The loss of our refineries since the Emissions Trading Scheme has put us into that category.

"That increase in imports is down to a closure of refineries because of carbon leakage, because of carbon taxes.

"When ETS came in, there were nine refineries. That went down to six, and now we're down to four."

The UK ETS currently trades at a cheaper price than the EU equivalent. But efforts are underway to bring them into sync.

Ms de Jong said: "Unfortunately, it's just going to get worse, because if you do align with the EU, then, by our projection, carbon costs will be doubling in January 2028, then tripling by January 2030.

"We're down to four refineries already. If we then see this doubling and tripling, that would only lead to one conclusion.

"As a trade association, we cannot know anything about the commercial side of our members. But I think it would be illogical to say there wouldn't be more closures, because we've seen what's happened since the early 2000s."

Oil refineries have asked to be included in the UK's upcoming Carbon Border Adjustment Mechanism (CBAM).

This sees a carbon tariff paid on goods imported from countries that don't have the same environmental laws as Britain. It is specifically designed to deal with carbon leakage.

But refineries were overlooked for inclusion in 2027, the first year the UK CBAM will be in operation. Aluminium, cement and fertilisers have all been included.

Talks are ongoing to ensure refining is included at a later date. A sticking point is that refineries produce a range of products, making it difficult to assess the carbon usage of each one.

But Ms de Jong warned that, the longer the industry continued without such protection, the greater the harm.

She said: "What we are is a perfect economic example of carbon leakage. We are the case study. We have carbon costs that India, the USA and the Middle East don't have.

"So people decide to not produce here because it's no longer competitive. They decide to produce in countries which don't have those additional prices.

"We lose the jobs here. We lose the export income here. We lose those supply chain jobs. We have lesser energy resilience, and we just import instead.

"In addition, global emissions go up. We have lower carbon emissions than 80% of our top ten import countries."

Calling for refineries to be included in the CBAM as early as possible, she said: "Our members don't want subsidies, we just want a level playing field for competing.

"How a CBAM works, is that when you are importing from other countries which do not have carbon costs, they would be paying the equivalence.

"It would cover about 80 per cent of the difference. As well as that, it would be a massive market signal and confidence signal that we are wanted in the UK."

The mass offshoring of British industry has been called "decarbonisation by deindustrialisation".

Asked if she feared the UK was being de-industrialised, she replied: "Yes, I can't make any other conclusion.

"I did this job because I come from Sheffield and I remember my grandparents taking me through the Attercliffe area, after the steelworks had closed.

"I remember being so saddened and emotional about the great areas of the city just in ruins.

"It's that industrial heartland, Britain making things for itself, which I feel is important for economic security as well as energy security. It's also important for how we feel about ourselves."

Ms de Jong stressed the key role refining plays in the UK economy. The Valero refinery alone accounts for 15 per cent of Welsh exports.

She said: "They're the backbone of UK energy. The refinery sector supports about 100,000 jobs, so for every one job in a refinery, there are five in the supply chain. There are £11 billion in exports.

"I can make a case where an economy runs on fuel. It's needed for turning up to work, for taking your product to market, for getting your raw materials in.

She said that the Government was "receptive" to the difficulties faced by refineries but warned that a failure to act could only be seen as a deliberate choice.

"I think this is so highlighted now to Government that we can no longer say it's an unintended consequence," she said.

"If nothing happens here, we can only interpret it as a conscious decision."

She said it was vital to protect the remaining refineries because they were so expensive and complex to build. She cited New Zealand, which closed its only refinery in 2022.

The Treasury is understood to be examining the feasibility of bringing refined products into a CBAM, although this won't be possible by January 2027, when it first comes into force.

A Treasury spokesperson said: "CBAM will ensure that highly traded, carbon intensive imported goods face a comparable carbon price to that paid by British companies producing the same goods.

"We will continue to engage with sectors and assess the operation of CBAM once it is implemented to ensure the decarbonisation of our industrial sectors is carried out in a fair and managed way."