The Budget and the Green Economy – is the Chancellor taking us in a sustainable direction?
By SDMember on July 10, 2015
The self-proclaimed “greenest government ever” announced its latest Budget on Wednesday. It should have been a momentous one for green issues; an opportunity for the government to lead by example in the run-up to the Paris Climate Talks at the end of this year. It was a chance to reassure the renewable energy sector that the government would provide long-term stability, make energy efficiency a national infrastructure priority, and tackle the problems that led to the financial crisis by looking to build a more sustainable economy. It was a Budget to set the economic tone for the next five years, at a moment when we are running out of time to address climate concerns - n point that has recently been picked up by high-profile figures including the Pope.
Going in it didn’t look good; threats to renewables subsidies, rumours of 90% cuts to DECC’s staff and resource budget and uncertainty over the future of the Green Investment Bank didn’t bode well. The Conservative election manifesto was certainly hostile towards renewable energy, and the party does have a decidedly mixed track record when it comes to the environment as a whole.
The last four Budgets gave no mention to climate change, but how did the first ‘true blue’ Budget since 1996 measure up?
The Chancellor highlighted the government’s support for a ‘two degrees’ deal in Paris later in the year and claimed it will ‘continue to promote’ low carbon investment and innovation. But it is difficult to see from the detail of the Budget how he plans to make this happen. That ambitious two degrees target will need dramatic shifts in our energy and transport infrastructure, and dramatic shifts were hard to find in the 2015 Budget.
More tax breaks for gas and oil
“The government believes in making the most of the UK’s oil and gas resources, including the safe extraction of shale gas.”
A further £1.3 billion worth of tax breaks have been given to North Sea gas and oil, propping up a declining industry that by its nature cannot go on indefinitely. Reserves have peaked, and extraction will only get more expensive, but the government is committed to spending public money - which could be invested in developing sustainable energy generation - on squeezing out every last drop. The Energy and Climate Intelligence Unit (ECIU) estimates that these tax breaks could increase UK emissions by 45 million tonnes of carbon dioxide.
Nothing meaningful for energy efficiency or clean technologies
“The government will continue to promote the low carbon investment and innovation needed to support global action on climate change, focussing on the best value for money policies to keep costs down for consumers.”
This was an opportunity to drive the transition to a zero carbon economy, focusing on building clean power and demand reduction, creating jobs and boosting growth in an expanding industry. In actuality, there is very little to say about the Budget’s stance on low carbon. Aside from a sweeping statement of support, the Chancellor appears to have ignored the business case for investment in home-grown renewable technologies that would create long-term jobs and energy security.
Further uncertainty has been brought to the renewables sector through the removal of the Climate Change Levy (CCL) exemption for renewables, meaning that they will be taxed the same as fossil fuels. RenewableUK has said that the change will cost green energy producers £1 bn by 2020-21, and the share price of Drax (currently converting its stations from coal to wood pellets) has fallen by more than a quarter since the announcement.
A focus on roads and VED reform
“The government believes that a modern infrastructure network is vital.”
This modern infrastructure network appears not to include public transport, with the focus of the Budget on investment in roads. Ultra Low Emission Vehicle (ULEV) company cars will receive new tax relief, however Vehicle Excise Duty (VED) exemptions for lower emissions vehicles will be removed to pay for further road building and maintenance. The new reform will see duty paid based on emissions in the first year, but 95% of cars will from then be taxed at a standard band of £140 per year. This will see the VED on a Land Rover Discovery fall from £800 and a Toyota Prius hybrd plug-in rise from £10.
Departmental budget cuts
The Budget drives for a further £13bn in savings from government departments by 2017-18. Many feel that departments and agencies dealing with environmental issues such as flooding are already struggling. Of high profile has been the £70m cut to DECC’s budget, which could severely threaten the government’s ability to deliver a secure and low-carbon energy supply.
Many in the green economy believe that the Summer 2015 Budget has missed an opportunity to set the stage for a sustainable future. Radical changes are needed if we are going to meet climate commitments, and radical changes are distinctly lacking on paper. Considered altogether, the offering of this Budget contains little good news for the UK’s low carbon transition.