GREEN taxes could destroy the North-East's important chemical industry, causing economic ruin, an independent think-tank has claimed.

Civitas claims the region could suffer mass unemployment as a result of Government plans to cut CO2 emissions at almost twice the rate of any other EU nation by the end of the decade.

In a new report, Chain Reactions, Civitas claims that green taxes including the new carbon price floor to be introduced in 2013, will see the average energy-intensive company's energy bill rise to £17.5m by 2020 from the current £3m, driving firms abroad.

The North East chemical sector directly employs 35,000 people, as well as supporting thousands more in the supply chain.

Speaking to the Northern Echo last night the report's author David Merlin-Jones, believed the heavy taxation could also decimate other energy intensive industries the region relies on such as steel production.

The Government's 2020 target of cutting CO2 emission by 34per cent from 1990 levels is 14per cent higher than any other EU country.

Mr Merlin-Jones argues that instead of only assessing emissions the Government, aiming to be the "greenest ever", should realise breakthroughs by the chemical industry actually save two tonnes of CO2 for every tonne it emits. He said: "Companies, especially multinationals, will leave the UK to settle in countries with lower energy prices and fewer punitive costs.

"Those who cannot afford to relocate will likely fold.

"In the long-term, foreign investment will also dry up, leaving the UK an industrial backwater."

He added: "It isn't going to cause nationwide economic ruin, it is going to be concentrated in certain areas such as the North-East, people in the industry there are genuinely worried.

"It will cause concentrated mass unemployment, it is a horrible thing to think about."

Dr Stan Higgins Chief Executive of Nepic (North East of England Process Industry Cluster) said: "For some of our local industries some of the ideas they are proposing would mean millions of pounds a year of extra taxation."

Mr Higgins, who believed that CO2 levels would be 11 per cent higher without the work being done by the chemical industry, said that anything approaching £30 per tonne of CO2 will be prohibitive to UK chemical production.

Mr Merlin-Jones said that the carbon price floor, announced in the March 2011 Budget, looks set to push the price to exactly £30 by 2020, without even taking other green taxes into account.

He added: "The Government is wrong to think the low-carbon economy needs creating from scratch - it already exists within the chemical sector.

"The industry manufactures the products and innovations other industries and consumers need to reduce their emissions.

"On average, this means the chemical industry has a downstream emissions saving ratio of 2:1. While energy-intensive, it is clear the sector is environmentally beneficial to the UK."

Announcing 390 potential job cuts from its 1,800-strong North-East workforce last month Tata Steel Europe chief executive Dr Karl-Ulrich Kohler partly blamed imminent carbon legislation for putting additional pressure on the business.

Mr Merlin-Jones said: "Other industries such as steel are energy intensive and they face the same threat, some products are carbon intensive at the time of production, but the fact they last a lot longer means their downstream carbon savings are significant."