How the budget will impact on environmental sector

The Environmental Industries Commission has compiled a thorough analysis of how member companies are likely to be affected by Alistair Darling's first budget.

Here they take a sector-by-sector look at the key announcements.

General

Climate Change Bill Carbon Budgets

The Climate Change Bill is currently making its way through Parliament and is expected to be in statute by the summer. The Bill would put into statute the UK's targets to reduce carbon dioxide emissions by 60 per cent by 2050 and 26-32 per cent by 2020, on 1990 levels.

Under the Bill the Government will set five-year carbon budget to meet long-term targets - a carbon budget will place a limit on carbon dioxide emissions over a specified period of time.

The Budget announces that the Government will set out the carbon budgets and plans to meet them in Budget 2009.



Land

Phase Out of the Landfill Tax Exemption

The landfill tax exemption for waste from contaminated land will be phased out by 1 April 2012, instead of 2010 as originally proposed.


Extension of Land Remediation Relief to Japanese Knotweed

The Budget announced that the Government will recycle the additional revenue from phasing out the landfill tax exemption for waste from contaminated land to extend land remediation relief to expenditure on derelict land and to the removal of Japanese knotweed by treatment.

This will be done from 1 April 2009 and the Government will consult on draft legislation in the summer.



Renewable Transport Fuels

Withdrawal of Fuel Duty Incentive for Bioethanol and Biodiesel

The Budget announces that the 20 pence per litre fuel duty incentive for bioethanol and biodiesel will be withdrawn from spring 2010.

Therefore, the Renewable Transport Fuels Obligation (RTFO) will become the principal mechanism of support for biofuels - see below


Doubling of Buyout Price in Year 3 of RTFO

The Budget announces that the RTFO buy-out price in year 3 of the Obligation will increase from 15 pence to 30 pence per litre.

Review of Indirect Impacts of Biofuel Production

The Department for Transport has announced a review of the wider economic and environmental impacts of different forms of biofuel production. The results of the review will inform the development of post 2010 biofuels policies in both the UK and EU.

The Government has stated that it will not "go beyond current UK target levels for biofuels until we are satisfied it can be done sustainably." The review is expected to be completed by summer 2008.

The terms of reference for the review can be accessed here


Government Letter to European Commission on Sustainable Biofuels

The European Commission recently published its proposals for Member States to use at least 10 per cent biofuels by 2020. The Directive sets out the carbon saving and sustainability requirements that must be met in order for certain biofuels to contribute to the overall 10 per cent target.

Amongst these requirements the Directive states that biofuels sold in the EU will have to achieve at least a minimum level of greenhouse gas savings of 35% compared with their fossil equivalent

The Chancellor and the Secretary of State for Transport have written to the European Commission setting out the principles on which the UK believes that a sustainable EU biofuel policy must be based.

These are that:
  • Reducing greenhouse gas emissions must be at the heart of EU policy;
  • Targets must be set at the appropriate level, taking into account the indirect impacts of biofuels, and must be revised if they cannot be met in a sustainable or cost-effective manner;
  • Robust sustainability standards must be in place;
  • EU policy must ensure a level playing field between domestic and international producers - in particular unfair EU biofuel import tariffs should be abolished.


    Fuel Duty Incentive for Biogas

    The Budget announces that fuel duty incentive for biogas will remain at its current level until spring 2012.


    King Review

    Alongside the Budget the Government has published the final report of the King Review, which was launched in 2007 to assess vehicle and fuel technologies, which, over the next 25 years, could help to 'decarbonise' road transport, particularly cars.

    The Review identifies four areas where action needs to take place to move towards decarbonising transport - reducing vehicle emissions, cleaner fuels, consumer behaviours and research and development.

    A Government response to the review will be published in the summer. For a copy of the King Review click here


    Restructuring of VED Rates

    The Budget announces a restructuring of the Vehicle Excise Duty, including a £15 or £20 discount for alternatively fuelled cars in 2009-10, and £10 in 2010-11.

    Further changes to VED include:
  • Six new VED bands from 2009-10 - including a new top band (band M) for the most polluting cars that emit more than 255g carbon dioxide per km.
  • Reducing the standard rate of VED, in 2009-10, for all new and existing cars that emit 150g of carbon dioxide per km or less, and increasing the standard rate of VED on the most polluting cars to £425.
  • Extending the zero rate of VED from 2010-11, during the first year of ownership, to all new cars that emit 130g carbon dioxide per km or less.
  • A first-year rate of £950 in 2010-11 for the most polluting cars.

    R&D for Low Carbon Vehicles

    Following the publication of the King Review - see above - the Budget announces a new £40 million research, development and demonstration programme to focus on the development low-carbon vehicles.



    Transport

    VED Discount for Euro V Vans

    The Budget announces that, from 1 January 2009, the Government will introduce a VED discount for the early take-up of Euro V technology diesel vans ahead of mandatory introduction in 2011.

    The incentive will remain for the lifetime of the vans.


    2020 Target for New Car Carbon Dioxide Emissions

    The European Commission recently published proposals to require manufactures to achieve a fleet average for all new cars of 130 grams of carbon dioxide per kilometre by 2012.

    The EU has a wider target for the average new car to reduce its carbon dioxide emissions to 120 grams per kilometre by 2012. The additional 10 grams per kilometre will have to be achieved through complementary measures such as a gradual reduction in the carbon content of road fuels, notably through greater use of biofuels.

    The Budget announces that the Government will push the EU to introduce a target to reduce the average new car carbon dioxide emissions to 100g per km by 2020.



    Waste

    Landfill Tax

    In last year's Budget the Government announced that from 1 April 2008 and until at least 2010-11, the standard rate of landfill tax will increase by £8 per tonne each year.

    Furthermore, the 2007 Budget announced that the lower rate of Landfill Tax applying to inactive waste would increase from £2 to £2.50 per tonne from 1 April 2008.

    The 2008 Budget announces that lower rate will be frozen at £2.50 per tonne in 2009-10.

    Furthermore, the Budget states that the "Government expects the standard rate to continue to increase beyond 2010-11."


    ECAs for Waste

    The 2007 Budget announced that the Government would review the classes of equipment that can qualify for Enhanced Capital Allowances (ECAs) for good quality combined heat and power (CHP). This would ensure that there are ECAs to cover all the necessary equipment for CHP facilities to use solid refuse fuel.

    The 2008 Budget announces that this review is now complete and the ECA qualifying criteria will be revised and published later in 2008.


    Support for Resource Efficiency

    Las year the Government recently launched a cross-Departmental initiative called the Business Support Simplification Programme, which is looking to reduce the number of publicly funded business support products from around 3000 to less than 100 by 2010.

    Business support will be organised primarily through Business Link. Business Link will then be organised into six themes relating to business needs. There will then be a set of publicly funded business support products available under each of these themes. One of the six themes is Operations and Efficiency, under which business support programmes for resource efficiency and sustainable waste management will be available.

    The Budget announces that Resource Efficiency support will be merged into Business Link by October 2009.



    Sustainable Buildings & Energy Efficiency

    Zero carbon Non-Domestic Buildings

    The Budget announces a target for all new non-domestic buildings to be zero carbon from 2019.

    A consultation on this proposal will be launched later this year.


    Zero Carbon Public Sector Buildings

    The Budget announces a target for all new public sector buildings to be zero carbon from 2018. This follows a recent announcement that all new schools should be zero carbon from 2016.

    The Government will establish a Task Force to advise on an appropriate pathway to achieving both the target for all new non-domestic buildings to be zero carbon from 2019 and all new public sector buildings to be zero carbon from 2018.


    Existing Buildings

    The Budget announces that the Government will look at the use of fiscal measures to promote energy efficiency in existing non-domestic buildings.

    This follows the announcement that from 1 October 2008 microgeneration investments will not be subjected to ad hoc reassessments of business rates liability.


    Definition of Zero Carbon

    The Government will launch a consultation in the summer on the definition of zero carbon for the purposes of meeting the target for all new homes to be zero carbon by 2016.

    A final announcement on the definition will be made by the end of 2008.


    Stamp Duty Land Tax Exemption for Zero Carbon Homes

    In the 2006 Pre-Budget Report the Government announced a Stamp Duty Land Tax exemption for new zero-carbon homes from 1 October 2007.

    The 2008 Budget announces an extension of exemption to new flats, retrospectively from 1 October 2007.

    Furthermore, the Budget provides for Government Departments to charge a fee when assessing whether a dwelling meets the zero carbon standard.


    Zero Carbon Delivery Unit

    The Budget announces that the Government will establish a 2016 Delivery Unit to monitor and coordinate progress towards meeting the target for all new homes to be zero carbon by 2016.


    Code Level 3 for All New Homes on Government Land

    The Budget announces that, from April 2008, all new homes built on central Government land released through the surplus public sector land programme will be required to achieve a minimum of Level 3 of the Code for Sustainable Homes.


    New Technology Category for Enhanced Capital Allowances

    The Budget announces that the list of designated energy saving and water-efficient technologies qualifying for Enhanced Capital Allowances will be expanded during 2008, to include one new technology class and four sub-technologies.

    Further details are not announced in the Budget.


    Payable Enhanced Capital Allowances

    The Budget confirms that payable Enhanced Capital Allowances for energy efficient and water-efficient technology will be introduced from April 2008.

    Therefore, loss-making companies investing in energy and water efficient technology will be able to claim a payable cash credit of 19 per cent of the loss surrendered, subject to a cap of the higher of £250,000.

    Increase of Climate Change Levy

    The Budget announces that the Climate Change Levy rates will increase in line with inflation from 1 April 2009.


    Support for Microgeneration

    The Budget announces that the Government will consult in the summer on what the Government can do to increase the use of renewables. This will include proposals for support mechanism for microgeneration, including the option of a feed in tariff.

    Sustainable Development & Management

    New Procurement Guidance and a Centre for Expertise in Sustainable Procurement

    The Budget announces that the Government will shortly publish a new policy framework for procurement including guidance on how to take the environment into account.

    Furthermore, the Government will shortly launch a new Centre for Expertise in Sustainable Procurement.



    Carbon Trading

    100 per cent Auctioning for Phase III

    The Budget announces that in Phase III the UK will auction 100 per cent of allowances to the large electricity producers' sector.


    Consultation on Phase III of the EU ETS

    The Budget announces that Defra will consult shortly on the implications of the European Commission's proposals for Phase III of the EU ETS shortly.


    Linking Trading Schemes

    Last year the Government announced the establishment of a Carbon Markets Experts Group to discuss ways of enhancing and developing the global carbon market.

    The Budget announces that the Government is working with California to look at building links between emissions trading schemes.



    Business and Innovation

    Energy Technologies Institute

    As part of the 2006 Budget the Government the launch of an Energy Technologies Institute - a 50:50 public-private partnership to raised £1.1 billion over ten years for R&D into low carbon technologies.

    The 2008 Budget announces that the Institute has now been legally established and the first projects supported will be on offshore wind (a £40 million fund joint with the Carbon Trust) and marine, wave and tidal (up to £20 million).


    Environmental Transformation Fund

    The Environmental Transformation Fund is a new initiative to bring forward the development of new low carbon energy and energy efficiency technologies in the UK. There are two streams of the Fund:
  • Domestic - £400 million of funding between 2008/09 to 2010/11 to ensure that technologies that are in the later stage of development can be brought to market.
  • International - £800 million between 2008/09 to 2010/11 to help developing countries to tackle climate change.
    The Budget announces that the domestic stream of the Fund will include £45 million of funding for energy efficiency demonstration and deployment (over £45 million) - including trials and loans for energy saving in the public sector, small businesses and households.

    Furthermore, there will be £200 million of funding for low-carbon technologies including anaerobic digestion and microgeneration.

    The Budget also announces that the Government will publish a Low Carbon Technology Strategy setting out how new and existing schemes can be better coordinated to ensure that the UK is producing the best technologies for tackling climate change.

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