Autumn Budget preview: Five green policy predictions ahead of Philip Hammond’s statement

A new levy on plastic packaging? A watered-down carbon price? An increase to the Climate Change Levy (CCL)? edie previews the green-related announcements likely to be included in the Autumn Budget on Monday (29 November).

Chancellor Philip Hammond will open his red budget box again on Monday afternoon. But with the purse strings firmly tightened as the UK prepares for an agonising ‘no deal’ Brexit, few experts predict that “spreadsheet Phil” will deliver a package of giveaways for wider society, let alone the sustainability sector.  

But amid a bleak economic and political climate, there are a number of key sustainability policy issues (five, to be precise) where the Chancellor is expected to deliver good news. Below, we have provided a neat round-up of the areas where it is thought Autumn Budget 2018 will support the green economy.

Autumn Budget 2017: Five green policy predictions…

1) Plastic packaging tax to be introduced

The Treasury is looking at how to encourage greater use of recycled plastic, as recycling rates dwindle at just 38% nationwide. An unprecedented number of respondents to a UK Government consultation examining plastic waste have called for the implementation of increased rates of tax on virgin plastics, coupled with tax breaks for manufacturers using post-consumer recycled (PCR) content.

During the consultation, the Treasury additionally received a petition calling for the introduction of a “visible tax on throwaway plastic”, which more than 247,000 signatories said “should happen at the point of sale”, similarly to the current 5p plastic carrier bag charge.

These measures will now be considered ahead of the Autumn Budget, paving the way for potential policy alterations such as the introduction of a “latte levy” on disposable coffee cups and tax incentives for recycling.

“Recycling rates have plateaued in recent years, and without intervention, they will go into reverse. There are strong signs that HM Treasury is taking notice of the need to act,” said ESA’s executive director Jacob Hayler.

“ESA would like to see new measures in the Budget to encourage the use of recycled content, and to stop packaging being placed on the market which is simply impossible to recycle. Higher recycling rates will only be achieved if we have end markets for materials and products which can be recycled in the first place.”

2) Carbon price to be watered down?

The UK’s carbon price support (CPS) has been cited as a major driver for the dramatic reduction in emissions in the power sector. But at a current level of £18/tonne, experts have warned that the price is too low to put off investors from funding carbon-intensive infrastructure. A total carbon price of £45/tonne (EU ETS + UK Carbon Price) should be sought in 2019 to stop coal burning increasing, analysts warn.

The latest reforms to the ETS have pushed the price of allowances to levels not seen in almost a decade, and this, in turn, means that fossil fuelled generators are pushing for a reduction in prices, a move that ECIU’s Jonathan Marshal’s head of analysis is warning against.  

“Relenting in the same way that Mr Hammond appears to have done in the transport sector would be a far from welcome development – in fact, with coal-burning already way below historical levels, the CPS ought logically now to evolve into a tool that can progressively take gas out of the system as well,” Marshall wrote in a ECIU blog recently.

Claire Perry revealed late last week that the Government is considering a “mirror” scheme linked to the EU Emissions Trading System (ETS) if the UK is forced to leave the mechanism due to a no-deal Brexit. Details about an increased carbon tax, which would be used as a stop-gap measure if the UK left the ETS, are set to bet laid out in the Budget.

3) Climate Change Levy on gas usage to be raised

Hammond is reportedly set to raise the Climate Change Levy (CCL) that businesses pay on gas usage to match the same rate as the tax rate on electricity. The Government has previously stated its intentions to rebalance the CCL so gas and electricity rates are equal by 2025, but rather than reducing the electricity rates, a gas levy is set to be raised to the maximum level, the Sun has reported.

Under the changes, more energy-intensive companies could be forced to sign a Climate Change Agreement (CCA), a voluntary deal which entitles firms to a lower CCL rate in return for implementing energy efficiency and reduction measures. It is hoped that raising the gas levy will simplify the green taxation landscape as well as raising around £500m to pay for the NHS.

Onshore wind to be given a lifeline?

The UK achieved record levels of installations for onshore wind capacity in 2017, as more than 2,600MW came online. But renewables experts have repeatedly warned that the UK Government is risking billions of pounds of new investment opportunities by failing to open up new avenues to deployment for the onshore wind sector.

Claire Perry has hinted that onshore wind and solar projects could be allowed to compete for subsidies in future CfD auctions. However, little detail is available as to when the technologies will be included. In the run up to the Budget Speech, RenewableUK has asked the Chancellor to support the development of much-need wind.

”We’re urging the Chancellor to allow onshore wind to compete for Government-backed contracts to generate power,” RenewableUK’s executive director Emma Pinchbeck said. “Onshore wind is now the cheapest source of power available in the UK. It saves consumers money over the lifetime of each new project.”

5) Fuel duty to be frozen…again

Every Budget for the past eight years has seen the Chancellor make a promise to freeze fuel duty. There was an early optimism that Hammond might buck the trend this time around by raising the duty, although this speculation was quashed when Theresa May confirmed during her conference speech that it would remain on ice for a ninth year. Experts point to a 4% rise in traffic since 2011 as a direct result of the failure to increase fuel duty, with emissions growing by an extra 4.5 million tonnes during this period.

Autumn Budget 2018: Other key issues on the green policy agenda…

  • UK’s adoption of a net-zero carbon target
  • Actions to boost energy efficiency
  • Reinvigorating the renewable heat market

George Ogleby

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