By Peter Marsh

The head of the European division of Tata Steel of India has warned that a planned ?1.2bn investment programme by his company in Britain could be put at risk by the UK government?s ?over the top? climate change policies directed at heavy industry.

Karl-Ulrich K?hler told the FT that efforts by the government to load extra costs on to industry in the cause of satisfying the political goal of making the UK the greenest country in Europe was a ?race for leadership? that he had difficulty understanding.

Although coalition ministers have signalled in recent weeks that they may rein back on plans to make the administration ?the greenest government ever?, Mr K?hler regards this as a battle industrial groups have still not won.

The European division of Tata Steel, formerly Corus, is one of the UK?s largest manufacturers, employing 20,000 people mainly in steelmaking centres in south Wales and Scunthorpe, Lincolnshire.

The steel industry is one of the biggest producers of carbon dioxide implicated in climate change.

Mr K?hler is a German steel executive who took the helm of Tata Steel?s Europe division last year. The company?s European operations also include a large steel plant in the Dutch port of IJmuiden.

In an interview at a steelmaking conference in Paris, Mr K?hler said the UK government?s plans to increase the financial penalties for companies whose operations created large quantities of CO2 could rebound. This was because such policies could provide incentives for companies such as Tata to shift capital projects to countries where environmental standards were less onerous.

Mr K?hler is planning a ?1.2bn programme in the company?s UK steel works in the next five years to improve efficiencies and increase quality. ?We [Tata] are keen to invest in the UK . . . and we think we should be getting more support [from ministers],? he said.

The investment programme – running at about ?250m annually – is about 30 per cent higher than Tata Steel has invested in the UK in recent years.

Mr K?hler said the European Union regime to force companies to curb CO2 emissions was probably the toughest in the world. ?Why the UK government wants to go further and be the leader in Europe in this field is difficult for me to understand. It?s a race for leadership that is simply over the top,? he said.

David Cameron, the prime minister, said last year that he wanted to force through unprecedented new rules aimed at protecting the environment to make the UK a leader in the field.

In an indication of a potential about-turn, George Osborne, the chancellor, told the Conservative party conference this month that the government was ?not going to save the planet by putting our country out of business?.

But Chris Huhne, energy secretary, who is a strong supporter of tough environmental policies, is said to be unwilling to change his position easily.

Mr K?hler said he was not sure ministers understood the concept of ?carbon leakage? – that if steel was not made in the UK it was likely to be made in countries such as India and China: ?It?s surely better for the planet as a whole if the steel is made in the UK where emission standards are fairly strict rather than in other countries where making the same amount of this metal causes more carbon dioxide to enter the atmosphere.?

He said the government should be trying to encourage industries to expand in the UK. ?The share of manufacturing in UK gross domestic product is, at about 11 per cent, far too low. Britain should be trying to make it higher as a way of giving the country a better platform for long-term economic growth.?

? The Financial Times Limited 2011