Budget reaction: Govt falls short on supporting the low-carbon economy

by Search Gate staff. Published Wed 08 Jul 2015 14:28, Last updated: 2015-07-08
Industry complains of low level of support for low carbon industry
Industry complains of low level of support for low carbon industry

Industry leaders have reacted with disappointment to the details of the new Government’s first Budget and the low level of support it offers to the UK’s low carbon economy.

The Aldersgate Group said today’s Emergency Budget contained very few proposals to support the growth of the sector and called for improved commitments in the upcoming spending review.

Nick Molho, Executive Director of the Aldersgate Group said: “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$5.5 trillion and international momentum building to accelerate cuts in carbon emissions, the UK economy can’t afford to drop out of the low carbon race.”

With the UK’s low carbon economy already reaching a turnover of £122bn in 2013, the Aldersgate Group added that rapidly providing sufficient funding under the levy control framework to invest in low carbon infrastructure after 2020 and extending energy efficiency policies would help accelerate the cost reductions of new technologies such as renewables and continue the low carbon sector’s positive contribution to the UK economy.

Nick Molho added: “Yesterday, business leaders from all across the economy showed that they were willing to make significant investments in the UK’s efficiency and low carbon infrastructure, reduce the cost of new technologies and deliver economic growth.

"If it wants to unlock this much needed investment, the Government must use the upcoming spending review to show its commitment to rapidly growing the UK’s energy efficiency and low carbon infrastructure.”

Catherine Mitchell, Professor of Energy Policy at the University of Exeter, said: "The Government says that it wants a sustainable, secure and affordable energy system, but recent rhetoric and policy changes are taking us further away from that goal.

“The ending of subsidies for onshore wind farms, our cheapest low-carbon electricity resource, the failure to exploit the potential of energy efficiency, the removal of the Climate Change Levy exemption for renewable energy, and support for unpopular fracking and extortionately expensive nuclear power does not add up to a credible energy policy.

"It reduces the chances of us meeting our various legal requirements, and presents serious political risk to investors, which in itself makes energy more expensive."

Professor Mitchell said that increased renewable energy use and energy efficiency improvements in other countries has been good for citizens, with falling wholesale electricity prices, increased jobs and improvement to the wider economies.

She said: “The UK is increasingly out of step with the global energy transformation that is taking place partly in response to climate change and air pollution, but also to smart technology that allows people to generate energy more cheaply than utilities can. It puts in jeopardy Britain’s ability to derive social, economic, security and environmental benefits from the transformation.

"Based on recent policy announcements, we in Britain are going to be left entirely behind unless we start to embrace change and move with the prevailing tide.”

The Federation of Master Builders (FMB) accused the Government of refusing to address a major source of carbon emissions and called on policy-makers to make existing homes a national infrastructure investment priority.

Brian Berry, Chief Executive of the Federation of Master Builders, said: “The construction industry is at a loss as to why the Government is ignoring the need to improve our current housing stock. By refusing to acknowledge the importance of these improvements, the Government is exacerbating problems such as high household fuel bills, carbon emissions and the national housing shortage.”

Berry continued: “First and foremost, the Government has a legally binding target to reduce the UK’s carbon emissions by 80% by 2050 and our existing homes account for 27% of our current emissions. Simple logic suggests that if they do not address 27% of the issue, that target will not be met.

“Climate change is an issue that concerns the majority of the population, but without tackling the energy inefficiency of our housing stock, the Government is not taking cutting carbon emissions seriously. This is rather surprising when you consider that not long ago; the Prime Minister wanted his Conservative-led Coalition to be the ‘greenest Government ever’.”

Berry concluded: “What’s more, the issue goes to the heart of household finances. By improving energy efficiency in our homes, the Government will reduce fuel bills and put more money back in the pocket of the consumer.

“The benefits of taking action in this area are clear and the Government is aware of this but seems determined to sit on its hands. Making our existing homes a national infrastructure priority, re-directing carbon taxes, putting an energy efficiency financing framework in place and reducing VAT on housing renovation and repair work from 20% to 5% are all effective and implementable measures.

“We urge the Government to wise up on energy efficiency – we want to work with Ministers to find a sustainable solution.”

John Alker, Director of Policy and Communications at the UK Green Building Council, commented: “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.

“We welcome the review of the landscape for business energy efficiency – however, this must be about smarter regulation, rather than an ideological slashing of perceived red tape.”

Chancellor George Osborne announced in the first Tory budget since 1996 that revenue from the Vehicle Excise Duty would be channelled into a fund for new roads. He also announced that fuel duty would remain frozen, as it has done for more than four years.

Jason Torrance, Sustrans Policy Director, said: "Vehicle Excise Duty is a tax on pollution: those cars which create the most greenhouse gases are taxed most heavily. Siphoning that revenue into a new Roads Fund will inevitably lead to further pollution and undermines its original purpose.

"Over this parliament alone £15bn will be spent on new roads. Research proves that creating more road capacity will lead to increased demand, and therefore more miles driven.

“The Chancellor has kept the tax on fuel frozen at 57.95p a litre for more than four years, which is a populist policy but one which fails the public in that it serves only to lock them into having to use their cars.

“With physical inactivity, pollution and congestion increasing across the UK, investing in cycling and walking is an economic silver bullet and Government must act across all departments to secure significant investment.

“Government must create a Cycling and Walking Investment Strategy that guarantees long-term funding for active travel.”

Martin Harper, RSPB Conservation Director, said: “Today’s Budget will make the Government’s 25-year plan to restore UK’s wildlife and protect the environment, which underpins our health, wealth and wellbeing, more challenging. The budget simultaneously obstructs private incentives to help protect the environment whilst further cutting public support at a time when nature is in severe crisis.

“The environmental bodies, regulation and renewed political support are essential to implement the Government’s long-term plan to restore the UK’s wildlife: nature needs these efforts now more than ever.”

Friends of the Earth senior economics campaigner David Powell said: “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.”

In response to the announcement that the exemption from the climate change levy would be removed for the electricity from renewable energy sources, Dr Doug Parr, Greenpeace policy director said: "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 businesses 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."

Chief Executive of the Renewable Energy Association, Dr Nina Skorupska said: “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.”

RenewableUK’s Director of Policy, Dr Gordon Edge, said: “The Chancellor’s announcement that renewable electricity will no longer be exempt from the Climate Change Levy is a punitive measure for the clean energy sector. Until now, Levy Exemption Certificates (LECs) generated as a result of the CCL have provided vital financial support for renewable energy producers.

“The Chancellor says the removal of the exemption will earn the Treasury £450 million in 2015/16, rising to £910 million in 2020/21.

“We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected. For example, Levy Exemption Certificates account for just over 6% of onshore wind generators’ revenues.

“The Government had already announced an end to future financial support for onshore wind – even though it’s the most cost-effective form of clean energy we have. Now they’re imposing retrospective cuts on projects already up and running across the entire clean energy sector.

“Yet again the Government is moving the goalposts, pushing some marginal projects from profit into loss. It’s another example of this Government’s unfair, illogical and obsessive attacks on renewables."

Nick Blyth of the Institute of of Environmental Management and Assessment (IEMA) commented: “IEMA supports the clear commitment from the UK Government to push for a global climate deal that keeps the goal of limiting global warming to 2 degrees firmly within reach.

“However, in other respects 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.”

ABDA Chief Executive, Charlotte Morton, commented: “Despite addressing the need to secure Britain’s future – both in terms of financial and national security – there was no reference to the importance of food and energy security, or the need to support green industry to drive economic growth.

“While ADBA’s latest market report demonstrates that the number of biomethane plants has tripled between 2014 and 2015, there are unlikely to be any new biomethane plants without signalling an extension to the RHI budget beyond March 2017.

“Without additional biomethane capacity the AD industry will be unable to contribute to the EU Renewable Energy Directive target of 12 per cent heat from renewable sources by 2020. Home grown green gas can potentially meet as much as 30 per cent of the UK's domestic gas demand - reducing our dependence on imported natural gas from Qatar and Russia - or fuel around 80 per cent of heavy goods vehicles (HGVs).

“By announcing an overhaul of the Vehicle Excise Duty (VED), the Chancellor may be signalling an end to the system which was designed to promote low carbon vehicles.

“To support operators and investors to generate storable, low carbon gas, the Chancellor of the Exchequer’s Autumn Statement must provide the policy certainty that will encourage continued growth by extending the RHI beyond next year.”

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