United Kingdom

United Kingdom

Fiscal emphasis on clean power

Google Translate

A business energy tax and extra support for energy efficiency and renewables are among initiatives announced in one of the "greenest" UK national budgets ever. The tax is expected to reduce carbon pollution by 1.5 million tonnes a year and play a major role in helping meet the UK's emission reduction targets. The tax, or levy, on the business use of energy starts from April 2001. It will entail no increase in the overall tax burden on companies as the revenues will be recycled in full to business, promised Chancellor of the Exchequer Gordon Brown in his budget on March 9.

Businesses will also benefit from an extra £50 million to encourage them to invest in new environmental technologies and renewables such as solar or wind. Brown proposes significantly lower rates of tax for energy intensive sectors that agree targets for improving their energy efficiency. The levy will apply to gas, coal and electricity used by business, agriculture and the public sector.

A consultation document on the detailed design and implications of the levy suggests that all electricity will be levied at one rate irrespective of how it is produced -- whether it is from coal or renewable sources. This is the same approach being taken in Germany. The paper notes that under present electricity pool trading arrangements, output from small scale renewable generators tends not to be supplied direct to final consumers, though in future this could be changed, making exemption from the tax possible for renewables. Views are invited on whether incentives could be applied through the levy to increase the proportion of electricity from renewables. In particular, it asks whether suppliers could demonstrate that their electricity was from small scale renewable energy sources. Responses are needed by May 28 at the latest.

Emissions trading too

The reforms follow the recommendations of a Treasury task force headed by Lord Marshall which looked at the role of economic instruments and the business use of energy (Windpower Monthly, January 1999). The government is also taking forward Lord Marshall's other key recommendation for a dry run emissions trading pilot and is discussing with industry the details for setting it up.

Environmental group Friends of the Earth approves the government's "first steps towards green economics." The £50 million fund for companies to invest in energy efficiency and renewables was welcome, but should be targeted at small and medium enterprises, it says.

The Confederation of British Industry -- the organisation representing UK business -- would have preferred a full exemption from the tax for companies taking part in negotiated agreements or emissions trading.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in