There is a ‘climate-shaped hole in the budget’.
Renewable energy will no longer be exempt from the Climate Change Levy leading critics to question the government’s support for the green economy.
After unprecedented legal action forcing Denmark to address head on its apparent failure to tackle domestic climate change, campaigners expected the UK Chancellor at the very least support the push for continued development in renewable energy, and perhaps go further by giving some financial backing.
In fact what George Osborne did was to announce that renewable energy will no longer be exempt from the Climate Change Levy. The levy applies to energy consumed by business and the move is predicted to raise £1bn a year for the Treasury.
It’s estimated that the changes would cost green energy producers around £450m this year and up to £1bn by 2020-2021. As one furious green campaigner Alasdair Cameron said, it’s “like making apple juice pay an alcohol tax.”
Dr Gordon Edge, Director of Policy at RenewableUK described the move as “punitive”. He said, “We’re suddenly looking at a substantial amount of lost income for clean energy companies which was totally unexpected. For example Levy Exemption Certificates account for just over 6% of onshore wind generators revenues. Yet again the government is moving the goalposts, pushing some marginal projects from profit into loss. It’s another example of this government’s unfair, illogical and obsessive attacks on renewables.”
Phil Grant, of management consultants Baringa Partners, said the budget was bad news for investors in green power. “(They) were perturbed by recent decisions … to reduce subsidies for new renewable plants and we’ve seen the share prices of companies exposed to renewables take a further hit.”
One of those is Drax, the power generator which is in the business of converting stations from burning coal to wood pellets. More than a quarter of its stock market value was wiped. It says it’ll lost £30m this year and £60m next year.
Greenpeace said the Chancellor was “a man out of step with the times” and the Green Party MP Caroline Lucas said it was a “serious blow for the fight against climate change”.
Those claims are rejected by Mr Osborne who insisted the Conservatives would maintain its support for low carbon investment and confirmed it would back a deal at the UN talks in Paris to limit global warming to 2C.
The UK is increasing its use of renewable energy, with a recent report from the Office of National Statistics showing it made up around 5.6% of the country’s total energy in 2013 – it has quadrupled since 2000. The levy was brought in in 2001.
There have been significant reductions in emissions – greenhouse gas emissions went down by almost 24% from 1990 – 2013, and material resource consumption also decreased from 12.6 tonnes per capita in 2000 to 9.2 tonnes in 2013.
But compared with other countries – the UK lags far behind the majority in terms of green credentials. The growth in renewables is slower than in other EU countries. In fact it is the 4th worst out of 28 member states when it comes to green energy.
Before the budget announcement, and following their successful court action in The Hague, campaigners warned of more civil rights style legal challenges to governments forcing action on climate change. What George Osborne presented won’t stem that tide.