Impact Of The Energy Bill On Businesses
The Energy Bill is designed to boost low-carbon investment and support global action on climate change.
It was confirmed in today’s Summer Budget that the government is ditching its target to increase the level of environmental taxes. This will be welcome news to businesses.
The government also repeated its objectives to develop a clear, fair and more efficient energy environment for businesses. The aim is to reduce unnecessary administrative burdens and create incentives for business to invest and stimulate sustainable and profitable growth. A consultation to review the business energy efficiency tax landscape will take place in Autumn 2015.
So far so good…
We then moved on to the Climate Change Levy. This is a tax on business power usage, designed to encourage energy efficiency and reduce carbon emissions. The CCL exemption for renewable electricity is to be removed from 1 August 2015.
The aim of the change is to “… 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”.
A detailed update on the Levy Control Framework was anticipated but failed to happen. The LCF sets an annual budget to cap government spending on low-carbon technologies to avoid unforeseen rises to consumer bills. The government previously announced a review of the £7.6bn LCF which is meant to provide clean energy subsidies through to 2020/21. However recent projections indicate that this cap will be exceeded by 20% which amounts to a further £1.5 billion. The governments own analysis suggests that the money pot has already dried up.
So in just 2 months since the election there has been a subsidy cut for onshore wind and the sale of a £1.4bn stake in the Green Investment Bank. The Department of Energy and Climate Change is also facing budget cuts of up to 90% under continuing austerity measures. A lack of funding of course threatens its continued ability to deliver key energy and climate policies.
All in all the Summer Budget was a bit of a damp squib. It was vague and pushed on with future “reviews” – without any concrete regard for pressing environmental and economic concerns or the case for investing in clean energy. Ironically the government appears to have brushed past green issues and bolstered oil and gas.
Gordon Edge, RenewableUK director of policy, has already voiced concerns that the budget has done very little to help the offshore sector. Not only are there concerns about the potential level of funding which will ultimately be available, but the UK has also successfully attracted large multinationals such as Siemens and MHI-Vestas to commit to opening up major wind turbine factories in the UK. Edge argues that continuing in this vein risks “thousands of jobs, stifles future job creation, and risks seeing billions of pounds of investment slip away.”
Article written by Rachel Furniss.
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