Budget 2016: The green business reaction

Was it a Climate Budget that delivered on the UK Government's green promises? Or has Chancellor George Osborne failed to deliver the Easter egg of green pledges we were all hoping for? Here's the full industry reaction, as it comes in...

Taking place at 12:30pm this afternoon (16 March), the 2016 Budget saw Osborne provide some positive news on carbon reporting regulations and the next Contracts for Difference (CfD) auction, and also confirm new funding for energy storage and demand-side response technologies, and Britain’s flood defences. 

But the Chancellor failed to answer a number of other key green policy questions. What about air quality? The Levy Control Framework? Mandatory carbon reporting? Support for SMEs on energy efficiency? The recent CCS cancellation? And that historic Paris climate deal – surely that got a mention?

Unfortunately not. Ultimately, this was another Budget that failed to rise to the challenge set by the ambitious Paris agreement, and edie readers – while welcoming some of the announcements – are again left with more questions than answers.

Budget 2016: The reaction

Nick Molho, executive director, Aldersgate Group

“The government’s commitment to auction Contracts for Difference of up to £730 million during this Parliament for up to 4GW of offshore wind or other less established renewables is a positive step forward. This gives the offshore wind industry some confidence to continue to invest in new projects and drive down costs, although a more ambitious level of deployment would accelerate cost reductions and deliver greater supply chain benefits.

“But much more still needs to be done in order to address the concerns of investors recently highlighted by the Energy and Climate Change Committee.[1] We now look towards the government’s decision on the fifth carbon budget, the Autumn Statement and its emissions reduction plan to provide confidence that the UK is on the right track to decarbonise cost effectively. We will need a clear strategy to increase investment in energy efficiency and low carbon heat, support the deployment of mature low carbon generation technologies such as onshore wind and solar and the demonstration of carbon capture and storage technology.”

Nina Skorupska chief executive, Renewable Energy Association

“The direction for this government is becoming increasing clear, with a huge tax cut for Oil and Gas with the most polluting industries continuing to be protected, but a tax raise for renewable generators through the now thoroughly misnamed Climate Change Levy.

“The removal of the supplementary charge for oil and gas industry amounts to a £1bn giveaway, added on top of the subsidies planned for nuclear, gas and diesel this year, all whilst renewables are getting continually squeezed and blocked.

“Less than three months after the Government heralded the signing of the Paris agreement, we see more support for fossils fuels and protection for polluters. If the government are serious about their national and international commitments they need to back up the empty rhetoric with real actions.”

Jacob Hayler, executive director, ESA 

“ESA is pleased that HM Treasury has listened to the industry and chosen to retain the option of using contributing third parties under the Landfill Communities Fund scheme.

“Removal of this option would have stung landfill operators with a sudden and unforeseen £4 million burden, which would have left them with no option but to cease contributing to the fund. This would have been a crying shame for local community and biodiversity projects which rely on this source of funding in an otherwise challenging climate for fund raising, and also for the environmental bodies administering the scheme which would have been forced to wind down and lay off jobs.

“Today’s announcement that Entrust will instead publish guidance for landfill operators to increase their contributions to the fund is a preferable and more flexible alternative which means that communities will continue to benefit from this invaluable scheme going forward.”

Paul Barwell, chief executive, Solar Trade Association

“No VAT news is good news on Budget Day. This delay means we can continue to make the very strong case for Treasury to abandon plans to hike up VAT on solar. It makes no sense to penalise British families that want to take meaningful action on climate.

“The Energy Department is on the record saying they will look again at support levels for domestic solar if VAT rates are increased so households should be assured it will still pay to go solar whatever happens. However, the VAT increase should not go ahead; it would delay the point at which solar will not need public support in the UK and that would be an own goal.”

Maf Smith, deputy chief executive, RenewableUK

“We welcome the Chancellor’s announcement that funding will be available for future rounds of competitive auctions to support offshore wind farms. The budget is tight but we’re up for the challenge. We’re confident that today’s announcement will deliver 3.5 gigawatts of new offshore wind capacity between 2021 and 2025 – powering more than 3.5 million British homes.

“This budget shows that offshore wind will be cheaper than new nuclear power and competing with gas by 2025, making it even better value for money. The industry is playing its part continuing to drive down costs relentlessly – we released a report this week showing in detail how we’re ahead of what was predicted. Today’s announcement will increase confidence, attracting billions of pounds of investment in the UK’s supply chain. It’s long term commitments such as this, which will keep the UK as the number one destination in the world for investors in this technology.”

Sam Fankhauser, co-director, Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science

“This Budget will have a mixed impact on the fight against climate change. The announcement of a new round of auctions for contracts to be awarded to offshore wind and other less established renewables is very welcome, although it is not clear if this will be sufficient to ensure the UK meets its targets for reducing greenhouse gas emissions over the next ten years. But it is disappointing that the Government will proceed with its decision, announced in the last Autumn Statement, to extend the Climate Change Levy to renewable energy.

“By making renewable energy more expensive, this move will hinder efforts to reduce emissions. However, this move has been slightly mitigated by this Budget, which will increase the Climate Change Levy rate on natural gas compared with electricity.

“The extension of the freeze on the Carbon Price Support Rate is disappointing, but it is to be hoped that the Treasury’s review of this carbon tax over the next few months will mean a significant long-term rise can be announced in the next Autumn Statement.”

Dale Vince, founder, Ecotricity

“The budget is remarkable not so much for what’s in it, but for what’s not; the chancellor forgot to mention a little thing called climate change – and in the same week that NASA called February’s global temperatures ‘stunning’ and scientists from around the world declared a climate emergency. 

“Only two days ago, our own government promised to set a net zero emissions target into law, as agreed by the whole world in Paris just a couple of months ago. What is this budget, and this Chancellor, doing on this front? Very little it seems.”

Richard Warren, senior energy policy advisor, EEF 

“Manufacturers will be enormously pleased to finally see the back of the CRC energy efficiency scheme, a vastly overcomplicated tax that has had a negligible effect on energy efficiency improvements in industry. We would have liked to see the government go further, however, and relinquish the revenue stream attached to this scheme, but do at least welcome the government’s clear commitment to make changes to the Climate Change Levy in a genuinely revenue neutral manner.

“Continuation of the Climate Change Agreements for all sectors is extremely welcome. The scheme strikes the correct balance between penalty and reward, working with the grain of business to drive investments in energy efficiency. Just as importantly, the scheme is an essential element of the package of measures protecting our most energy intensive industry from uncompetitive energy prices. Government is to be congratulated on listening to the concerns of industry and refraining from unhelpful reform.”

Doug Parr, policy director, Greenpeace

“It makes no economic or environmental sense that the government is cutting support for renewable energy whilst seeking to prop up a North Sea oil and gas sector. Clean energy could power the UK in the future if they were given a sliver of the financial and political backing that is given to the nuclear or fossil industries.

“Rather than hoping to extract more North Sea oil and gas, the government should be looking at a transition plan for the communities impacted by a declining industry including expanding offshore wind.”

Richard Cockburn, energy partner, Bond Dickinson

“The tax reductions announced today by the Chancellor will help significantly to improve the economics of North Sea projects. The effective abolition of Petroleum Revenue Tax has long been called for by the industry and will be welcomed widely.

“The reduction of the supplementary charge may allow operators to take a second look at projects which, until now, were looking uneconomic. Oil and Gas UK has been predicting investment approvals of less than £1billion this year relative to a typical annual figure of £8 billion over the last five years so the Chancellor’s reform has come at an opportune time.”

Nick Blyth, policy & engagement lead, IEMA

“IEMA welcomes aspects of the Chancellors budget but at the same time has concerns about long-term effectiveness of the Government’s approach to the environment and sustainability. He mentioned that this Budget was one which aims to ‘pay now so we don’t pay later’ but I think some opportunities have been missed.”

“As IEMA has previously encouraged, we are pleased to see Government retain Mandatory Carbon Reporting. In scrapping the Carbon Reduction Committeemen, the Chancellor’s approach to replacing the revenue raised from CRC allowances in a ‘fiscally neutral way’ by simultaneously increasing the Climate Change Levy could be a concern as that such a tax may be difficult to make effective.

“Some opportunities around environmental taxation are not being maximised and freezing fuel duty could be seen in this context. Where taxation is applied there is a concern that the impact and visibility of the increased Climate Change Levy might be very low as the tax will be spread over such a wide number of businesses.”

Liz Hutchins, campaigner, Friends of the Earth

“The Chancellor’s Budget was full of ‘next generation rhetoric’, but tax breaks for the climate-wrecking oil and gas industry pose a real threat to the security of people, the economy and planet. It’s almost as if the recent UN climate agreement never occurred. What happened in Paris, appears to have stayed in Paris.

“Air pollution kills tens of thousands of people prematurely every year and costs the economy billions of pounds, as the Prime Minister admitted shortly before the Chancellor spoke – so why did this Budget do so little to clean up transport and wean the nation off dirty fossil fuels?

“This Government should do far more to develop the UK’s huge renewable energy potential – creating jobs and putting us at the forefront of building an economy fit for the challenges of the future.”

Richard Black, director, Energy and Climate Intelligence Unit (ECIU)

“This was a fairly low-key Budget on the energy side; the Chancellor didn’t conjure any rabbits from hats this time, but you could say he found a few hamsters at the bottom of teacups.

“Probably the most notable feature was that he accepted the National Infrastructure Commission’s conclusion that the future of the electricity system is diversified, decentralised and flexible. Concretely that means £50 million for R&D in energy storage and demand response, and endorsement for 9 gigawatts more of interconnection with the Continent – not much on the money side, but profound philosophically.

“The £730 million announced for renewable energy should mean we’ll continue building offshore wind farms at about the current rate, but it’s equally notable that there’s nothing new for onshore wind, biomass and solar – or, indeed, for measures to cut energy waste, which we know is the energy investment that Britons support most. And we still have no idea what support looks like 2020.”

Budget 2016: As it happened

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Luke Nicholls & George Ogleby

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