THOUSANDS of firms in the region face higher energy bills because of an energy tax that comes into effect today.

The Confederation of British Industry (CBI) is already campaigning for changes to the Climate Change Levy, which aims to tax business according to how much energy they use.

According to the Engineering Employers' Federation, the impact on individual companies will range from £4,000 to £400,000, and comes on top of substantial increases in gas prices.

The CBI suggests industry should be encouraged to help the environment, with tax discounts to firms that meet energy reduction targets.

Many manufacturing companies are not eligible for tax discounts, even if they cut emissions. Other industry sectors claim up to 80 per cent discount for having a green policy.

Michael Roberts, director of business environment, said: "Business supports the Government's environmental objectives, but it is worrying that so many firms are ineligible for discounts.

"The aim of the new tax should be to change behaviour, not to raise public funds. Any group of firms that is willing and able to take on a challenging environmental target should get a reduction."

The CBI believes the tax will create unnecessary market distortions, because some firms will qualify for discount, while others will not.

It is feared those companies who do not get a discount will pass on higher costs to the consumer.

The CBI also claims the new tax will put the region's companies at a disadvantage when they compete with other European firms, such as Germany, where all green manufacturing companies enjoy a tax discount.

It is believed small and medium-sized companies in the North-East and North Yorkshire could see electricity bills rise by eight per cent and gas bills by 15 per cent, because of the tax.

Mr Roberts said: "Firms of all sizes will be affected, including major manufacturers competing in tough international markets, and small firms operating in tight margins."