Thursday, 17 March 2016

Climate change: and the budget >>> fossil fuel tax breaks and a clean energy tax hike

The Chancellor's enthusiasm for devolving powers to the LEPs has come under scrutiny:
Futures Forum: Devolution, LEPs and today's budget

His lack of enthusiasm for acting on climate change has also been noted by the New Economics Foundation:

Short-changing the next generation

On the lack of action to tackle climate change, David Powell, Associate Director at NEF said:

“If this was a Budget where we act now to avoid paying later, a Budget for the next generation, then where was the action on climate change?”
“With the price of oil at rock bottom, now would have been the perfect time to raise fuel duty to help pay for vital services. Fuel duty has fallen steadily in real terms since 1999, with each 1p raise not implemented costing over £300m a year.”
“Just months after the Paris Agreement on climate change the Chancellor has cut oil and gas drilling taxes by another 20% as part of his drive to drill ‘every drop’ of North Sea fossil fuels – this will cost £1 billion in lost revenues over this Parliament alone, not to mention the long-term consequences of failing to curb our carbon emissions.”

Short-changing the next generation | Press | New Economics Foundation 

With comment from the Business Green website:

Budget 2016: Osborne accused of ignoring Paris Agreement with fossil fuel tax breaks and clean energy tax hike

Green business groups welcome retention of mandatory carbon reporting rules and increased flood protection funding, but fears remain over support for low-carbon transition

Chancellor George Osborne today announced a "Budget for the next generation", but immediately drew fire from green groups for failing to take bolder steps to protect young people from escalating climate risks.

In a typically wide-ranging address, Osborne offered a series of potential boosts to green businesses, announcing cuts to corporation tax and business rates, confirming a further £730m will be made available to support offshore wind projects through the government's contract auction process, and revealing plans for a £700m increase to flood defence funding over five years.

The promise of new support for offshore wind projects was welcomed by trade body RenewableUK, which argued that the sector was well positioned to meet the cost reduction goals imposed by the government. "The budget is tight but we're up for the challenge," said deputy chief executive Maf Smith. "We're confident that today's announcement will deliver 3.5GW of new offshore wind capacity between 2021 and 2025 – powering more than 3.5 million British homes."

Osborne also said he would respond to business complaints about the complexity of the Carbon Reduction Commitment (CRC) by scrapping the scheme from 2019. He added that the move would remain fiscally neutral as the Climate Change Levy will be increased from the same date to compensate for lost revenues. However, Climate Change Agreement tax breaks will also be retained, meaning businesses that take steps to curb their energy use can reduce the financial impact of the levy.

Meanwhile, Budget documents confirmed that the Carbon Price Floor will be held at £18 a tonne, declaring that more details on the long-term direction for the tax will be set out in the Autumn Statement.

The reforms also mean the government appears to have retained mandatory carbon reporting rules for listed firms. The move represents a victory for green business groups and investors who had feared the reporting rules could be scrapped and this month called on the chancellor to retain the regulations, which they argued help firms identify cost savings and provide investors with greater transparency.

Nick Blyth, policy and engagement lead at the Institute of Environmental Management Assessment (IEMA), offered the proposed changes a cautious welcome.

"As IEMA has previously encouraged, we are pleased to see government retain Mandatory Carbon Reporting," he said. "In scrapping the Carbon Reduction Commitment, 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 such a tax may be difficult to make effective. The timeline for these changes feels positive – the expected consultation has been announced – and indications that the new simplified policy regime will be in place from 2019 is also a welcome move."

Julie Hirigoyen, chief executive of the UK Green Building Council, similarly welcomed attempts to streamline energy taxes, but warned there was a risk that effective environmental policies could be diluted. "The emphasis in today's Budget is on energy taxation at the expense of carbon pricing – in a so-called attempt to 'protect businesses'," she said. "Yet our membership demonstrates the willingness of business to take action on climate change, not for altruistic reasons but because it is now a commercial imperative to do so. While we support the chancellor's desire to streamline the business energy tax landscape, this must not come at the expense of ambition... For a Budget that is aimed at putting the next generation first, some of the content seems remarkably short-termist."

The manufacturing sector offered a more fulsome welcome to the chancellor's energy tax changes. Richard Warren, senior energy policy adviser at trade group EEF, said 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". He also welcomed the continuation of the Climate Change Agreement programme. "The scheme strikes the correct balance between penalty and reward, working with the grain of business to drive investments in energy efficiency," he added.
However, the changes brought an angry response from the Renewable Energy Association (REA), which warned that renewable energy generators would be hit by increases to the Climate Change Levy, which despite nominally being a carbon tax was controversially extended in Osborne's last Budget to cover clean energy generators. "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," said REA chief executive Dr Nina Skorupska.

Separately, the Budget offered some encouraging news for a host of prospective clean technologies, as the Treasury confirmed £30m will be made available to support new modular nuclear reactor projects; technology firm Dyson is to receive a grant worth up to £16m to support research and development for battery technology; Cornwall is to create a new MarineHub Enterprise Zone around the world-leading Wave Hub test site; and further funding is to be made available for driverless car trials and smart motorway upgrades.

Crucially, the chancellor added that he would accept the recommendations of the new National Infrastructure Commission (NIC) on transport and energy, backing plans for High Speed 3 and Crossrail 2 and declaring his support for the Commission's recent report on the need for smart energy infrastructure. Among a range of measures, the NIC's energy report called for significantly more funding for energy storage research and development; a greater focus on delivering demand response schemes; and a sizeable expansion in interconnectors with neighbouring countries. The group predicted that its proposed reforms could save the UK economy £8bn a year from 2030, while slashing carbon emissions and improving energy security.

However, a host of green business groups and campaigners argued that any positive moves for the low-carbon economy were tempered by the chancellor's decision to hand further tax breaks to the North Sea oil and gas industry, freeze fuel duty for a sixth year in a row, and offer little clarity on how non-offshore wind clean energy projects will be supported beyond 2020.

Budget 2016: Osborne accused of ignoring Paris Agreement with fossil fuel tax breaks and clean energy tax hike

The Guardian's environment editor has been much more critical:

A 'budget for the next generation' can't ignore climate change

‘We’re not afraid to put the next generation first,’ said George Osborne. But his lack of action in the face of global warming indicates the opposite

Damian Carrington Wednesday 16 March 2016

“Doing the right thing for the next generation is what the government and this budget is about,” chancellor George Osborne told parliament on Wednesday. “I am not prepared to look back at my time here in this parliament, doing this job and say to my children’s generation: I’m sorry. We knew there was a problem … but we ducked the difficult decisions and we did nothing.”

However, despite rising global temperatures now shattering all records, the issue of climate change did not get a single mention in his speech. Worse than the missing words, the budget did almost nothing to support the clean energy economy the UK needs to develop for the 21st century, and did a lot to block it.

Osborne and David Cameron talk tough on climate change, citing it as “one of the most serious threats facing our world ... a threat to our national security and economic prosperity” and promising a zero-carbon Britain . So to ignore the climate crisis, in a speech centred on “doing the right thing for the next generation”, is bewildering. Or, as Green MP Caroline Lucas bluntly puts it, “sheer hypocrisy”.

Let’s start with the one unalloyed piece of good news: the £700m more for flood defences. Flooding is the UK’s number one threat from global warming and Cameron and Osborne had — until now — ignored a torrent of warnings about the idiocy of earlier budget cuts. But finally realising this folly doesn’t really warrant huge praise.

Nonetheless, common sense prevailed, unlike elsewhere. After Wednesday’s budget, renewable energy faces an even higher “climate change levy”, despite being part of the solution not the problem.

Most fossil fuels must be kept in the ground if global warming is to be tamed, but Osborne renewed his zeal to squeeze every last drop out of the North Sea. The oil and gas industry’s pleading was rewarded with a £1bn tax break handout: it got the same in 2015 too. Overall, the Treasury looks likely to be paying the oil industry in the next five years, not the other way around, as crazy as that sounds.

The UK is struggling to meet green targets, particularly in cutting emissions from transport. The answer, according to this budget, is to build more roads and freeze fuel duty as petrol prices plummet. Meanwhile, illegal levels of air pollution will continue to cause tens of thousands of premature deaths a year.

Osborne did announce “up to” £730m of support for offshore wind and other “less established” renewables, to be delivered from 2021-22 onwards via auctions. But there will have to be far, far more investment to keep the lights on in a sustainable, affordable way in the 2020s. At the moment, the uncertainty for investors means consumers will pay more.

There was no support at all for the established, cost-effective renewables that the government has slashed: solar power and onshore wind. It admits thousands of jobs are being lost in this sector but, unlike oil and gas jobs, these seem not to matter. Energy efficiency programmes, which should always be the first choice in tackling energy and climate problems, are being cut 80% by Osborne.

Small modular nuclear reactors got a modest £30m boost, which might bear useful fruit in 2030 or so. But the UK needs clean energy now. Perhaps the most intriguing of Osborne’s words were the blink-and-you-missed-it reference to National Infrastructure Commission: “I am also accepting [its] recommendations on energy.”

The NIC backed a smart and flexible vision of energy supply — saving consumers £8bn a year by 2030 — that contrasts starkly with Osborne’s current plans, which are founded on fossil fuels and massive “white elephant” nuclear plants. Perhaps Osborne hasn’t actually read the NIC report. Nonetheless, there’s £50m for storage and other smart energy technologies over the next five years.

Richard Black, director of the Energy and Climate Intelligence Unit, sums up Osborne’s doublethink budget: “The chancellor said several times that this was a budget for future generations, [but] it’s not evident that he has internalised the implications of the recent Paris climate summit. The concrete measures he’s announced barely make a difference to this generation.”

“We’re not afraid to put the next generation first,” Osborne said. We are fast running out of time for him to prove it.

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