United Kingdom

United Kingdom

New UK pro-renewables energy tax in effect

The UK's new business energy tax came into effect as scheduled on April 1, just days after the European Commission had approved the broad outline of the British government's plans. The Climate Change Levy (CCL) is a key component of the government's climate change program for cutting carbon emissions and is expected to save five million tonnes of carbon per year by 2010. Half of the savings are expected from agreements with large energy intensive industries. In exchange for paying only 20% of the levy rate, some 40 industrial sectors have agreed targets for cutting their emissions. The levy is charged at different rates depending on the type of fuel. In the case of electricity it is £0.0043 per kWh. Renewable energy is exempt -- and buying power from renewables provides a means for industry and businesses to avoid paying the levy. Nearly 400 renewables generators with a total output of over 1200 MW have signed up for exemption from the levy. Around a quarter of the exempted renewables capacity comes from 54 wind energy plant. The exemptions for renewable energy and some other uses of energy have needed approval by the EC Competition Directorate under European Union state aid rules. The EC passed all the renewable exemptions and most others with one exception: it wants to investigate further the UK government's proposal to exempt "dual use fuels" used partly as fuel and partly as industrial feedstock. Renewable energy generators accredited as qualifying for exemption from the CCL are issued with Levy Exemption Certificates for their output. Non-domestic customers who buy output from certified producers will not have to pay the levy on their electricity.

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