The government will consult next year on the proposals to protect energy intensive industries from anticipated increases in energy costs as a result of new subsidies for nuclear power stations, windfarms and other forms of low carbon energy.
Once a decision has been made, the government will seek state aid approval from the European Commission.
Energy Secretary Ed Davey said: “Decarbonisation should not mean de-industrialisation. Energy intensive industries are an important part of the UK economy, in terms of economic output and employment throughout the supply chain. There would be no advantage, both for the UK economy and for global emissions reductions, in simply forcing UK businesses to relocate to other countries.
“The transition to the low carbon economy will depend on products made by energy intensive industries – a wind turbine, for example, needing steel, cement and high-tech textiles. This exemption will ensure the UK retains the industrial capacity to support a low carbon economy.”