Summer Budget 2015: Osborne provides further uncertainty for green business
Chancellor George Osborne has brought further uncertainty to green leaders, with an emergency Budget that confirmed more taxes for renewables along with tax-breaks for oil and gas.
Delivering his second Budget in four months on Wednesday – the first all-Conservative budget in nearly 20 years – Osborne failed to offer much good news for the low-carbon economy; instead bringing further uncertainty to the sector.
Osborne announced that the Government would be changing the Climate Change Levy, which businesses pay on their energy use. The Levy is “outdated”, according to the Chancellor, who said an exemption for renewables in the CCL will be removed.
“This change will correct an imbalance in the tax system by preventing taxpayers’ money benefitting renewable electricity generated overseas, and by helping ensure support for low carbon generation provides better value for money for UK taxpayers,” reads the official Budget document.
There will be a transitional period for suppliers – from 1 August 2015 – to claim the CCL exemption on any renewable electricity that was generated before that date. According the Budget document, the Government will discuss the details of this transitional period with stakeholders over the summer and autumn, to determine an appropriate length for it.
On green taxes, the Budget document also states: “The Government will review the business energy efficiency tax landscape and consider approaches to simplify and improve the effectiveness of the regime. The review will consider the Climate Change Levy (CCL), Carbon Reduction Commitment (CRC) energy efficiency scheme and their interaction with other business energy efficiency policies and regulations. A consultation will be launched in the autumn.”
Meanwhile, Osborned said that planned tax breaks for North Sea oil and gas will still be going ahead as planned.
Osborne did not mention a review of the £7.6bn Levy Control Framework (LCF) – which is meant to provide clean energy subsidies through to 2020/21 – despite numerous reports suggesting he would beforehand. The Government’s own analysis suggested that the money pot had already been used up and is at risk of exceeding its budget.
Just last month, Labour MP Alan Whitehead said the LCF was “effectively completely bust” and that the mechanism hasn’t worked in the way it should have, thanks to “the dead hand of the Treasury”. Similar concerns were voiced by former Climate Minister Greg Barker, who told edie that managing an ever-tightening LCF budget would be “the big challenge” for DECC this year.
In just two months since the election, the Tories have overseen a subsidy cut for onshore wind, a budget cut for DECC and the sale of the Green Investment Bank. Today’s Summer Budget will likely bring further uncertainty to the sector.
Summer Budget 2015: Green industry reaction
Before Osborne’s Budget announcement – his seventh in total – edie heard from an array of sustainability professionals and green groups on their hopes and expectations from the Summer Budget.
But it appears those hopes and expectations were, once again, not met. What Osborne actually delivered was deemed underwhelming by the majority of industry commentators as he brushed past green issues and thew his weight behind oil and gas.
- Nick Molho, executive director, Aldersgate Group
“The Government’s understandable focus on tackling the annual budget deficit and the national debt shouldn’t come at the expense of failing to support those sectors of the economy that are key to the UK’s long-term growth and competitiveness prospects.
“With the global low carbon goods and services sector already worth US$5.5trn and international momentum building to accelerate cuts in carbon emissions, the UK economy can’t afford to drop out of the low carbon race.”
- John Alker, director of policy and communications, UK Green Building Council
“George Osborne promised a Budget that would be bold in delivering infrastructure. Yet energy efficiency, which should be seen as one of the UK’s biggest infrastructure priorities, failed to even get a look in.
“Energy efficiency is an economic no brainer – cutting bills for households, creating jobs and growth, and improving our energy security. Government’s failure to support this industry at a time when uncertainty about the future of ECO and Green Deal is rife, represents a major missed opportunity for the economy.”
Paul Raynes, director of policy at EEF, the manufacturers’ organisation
“Industry will welcome a review of energy taxation and levies. Fifteen years of layering and tinkering with policy has left us with a vast patchwork of expensive, inefficient and incoherent policy drivers for decarbonisation.
“We urgently need to revisit the policy landscape to reduce costs, improve the business environment and better deliver on our policy objective of reducing emissions.”
Nick Blyth, IEMA
“This is far from a green budget and we have concern over the Government’s commitment to the green economy. The Chancellor’s clear statement that the government will not extend the Coalition government’s commitment to increasing the proportion of revenue from environmental taxes to this Parliament is a backwards step.”
David Powell, senior economics campaigner, Friends of the Earth
“The next five years are crucial for breaking our dependency on climate-wrecking gas, coal and oil and dirty transport – so it’s appalling that the Chancellor has only added fossil fuel to the fire.
“Mr Osborne’s confirmation of huge tax breaks to North Sea gas and oil, and continuing support for deeply unpopular fracking, is particularly reckless as the world prepares for critical climate talks this December.
“Money raised from taxing cars shouldn’t be spent on yet more roads, which will simply encourage more traffic. The Chancellor should boost public transport instead, and make our cities better for walking and cycling to help stop air pollution claiming lives.”
Dr Doug Parr, policy director, Greenpeace
“By removing the climate change levy exemption on renewable energy, Osborne is taxing clean power as if it were a fossil fuel. This will make it more expensive for businesses to buy electricity from renewable power.
“He is a man out of step with the times. If Osborne wants to do the right thing for busineses and the climate, this additional tax revenue should be diverted into supporting renewable generation, in the same way that he diverted vehicle excise duty into more road building schemes.”
- Jonathan Grant, director of sustainability and climate change, PwC
“There’s not much in this budget that is new in supporting low carbon investment and transition. But the Chancellor did highlight the government’s support for a ‘two degrees’ deal in Paris later this year. We can’t underestimate how ambitious this target is and the scale of shifts in energy and transport infrastructure required to achieve it.
The changes needed are so rapid, they make the ‘dash for gas’ look pedestrian. We didn’t hear much that was bold or brave to support the scale of change in infrastructure that two degrees implies. The Budget contains a mix of short-term measures, such as changes to the climate change levy and the sale of the Green Investment Bank, but not the long-term vision which many people wish to see.”
- Dr Nina Skorupska, chief executive, Renewable Energy Association
“The removal of the Climate Change Levy exemption for renewables will have a significant effect for our members immediately, and will undermine investor confidence by changing the stable market conditions needed for financing and business planning.
“If the intention was to remove the anomaly of international firms benefiting from the CCL exemption, this is a disproportionate action that now turns a measure designed to encourage low-carbon electricity, into just an electricity tax for business.”