Cameron's green levy threat 'devastating' energy efficiency industry

David Cameron told prime minister's questions that he would 'roll back' green energy levies. Photograph: Olivia Harris/Reuters

David Cameron's pledge to drop green charges on energy bills is having a "wholly devastating impact" on the energy efficiency industry, according to the UK's biggest insulation manufacturer.

Following controversy over rising energy prices, the government is reviewing the levies, which support energy efficiency and renewable power, after the prime minister said last month that such charges needed to be "rolled back".

John Sinfield, managing director of Knauf Insulation, said in a letter to the prime minister: "Do you really want to condemn more families to the choice of eating or heating this winter? Addressing the energy efficiency of our homes is the only route which offers permanent savings year on year."

While the biggest cause of soaring energy bills in recent years has been rising gas prices, green levies make up 9% of energy bills. About half of the levies fund a scheme called the Energy Companies Obligation (Eco), which insulates the draughty homes of people receiving benefits and a bill-discount scheme for pensioners. Ministers have repeatedly signalled that the scheme, which the big six energy companies have lobbied against, will be changed.

"I write to you to inform you of the wholly devastating impact already being caused to the energy efficiency industry, further to your announcement on green levies at PMQs," said Sinfield.

He added: "Eco has been designed poorly, implemented badly and has not delivered on its potential. But it is not broken. My plea to you is to put the policy right … rather than consider sacrificing it at the altar of short-term political point scoring." At least five other companies and organisations have also written to Cameron expressing the same fears. Geoff Mackey, a director at another major insulation manufacturer, BASF, said Eco was important and targeted at those who most needed it, but that it could be improved.

The UK has the worst levels of fuel poverty in the EU after Estonia, and the government's official advisor on fuel poverty told the Guardian in October that any cut to the Eco scheme would be "unforgivable". Andrew Warren, from the Association for the Conservation of Energy, said attempting to cut energy bills by cutting Eco was "utterly peverse". He said: "Clearly the best way of responding to the big six's greed is to minimise the need for their product."

Warren, who himself wrote to Cameron last Thursday, said theuncertainty created by Cameron's pledge to review green levies had already caused Eco projects to be abandoned. He said 7,000 jobs had been lost in the insulation business due to a crash in demand since January when Eco replaced previous policies, and the new uncertainty would lead to new job losses.

The UK has the oldest housing stock in Europe and over 5m homes still lack cavity wall insulation, while 7m lofts are inadequately insulated. Sinfield described the government's flagship energy efficiency policy, the green deal, as "failing". The scheme allows homeowners to pay for insulation measures using loans that are paid back using the savings they made on energy bills.

Ministers claimed the green deal would treat 14m homes by 2020, but since January just 57 green deals have been completed. "We in the industry have put to you what a successful Eco and green deal would look like time and time again," said Sinfield in the letter.