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Carbon Brief Staff

Carbon Brief Staff

05.12.2013 | 12:30pm
ScienceA summary of green levy reforms in the chancellor’s autumn statement
SCIENCE | December 5. 2013. 12:30
A summary of green levy reforms in the chancellor’s autumn statement

After a week of pre-briefing and speculation, chancellor George Osborne finally announced the government’s full spate of green levy reforms in today’s autumn statement. The reforms could significantly change how the government and energy companies cut greenhouse gas emissions and help consumers save energy – and money.

The government trailed some of the changes in the days prior to the chancellor’s statement, but energy companies and commentators will still have had ears pricked for any last minute surprises.

Here’s a quick summary.

What’s new

The chancellor confirmed tax breaks for shale gas companies – an idea first floated back in July, hoping the tax break will incentivise investment in the fledgling industry.

He announced that energy companies exploring for shale gas would only have to pay half the normal rate of tax on early profits. The chancellor said the UK should not turn its back on “new forms of energy, such as shale gas” that could help secure the UK’s energy supply and bring down costs.

Many analysts don’t believe shale gas will help reduce bills for another couple of decades, however. And there are concerns that pursuing a shale gas boom could mean the UK’s emissions rocket.

Already knew

The government gave a preview of the changes in a flurry of announcements over the past week, and Osborne today confirmed a number of reforms. Sunday’s headlines were dominated by the government’s plans to cut £50 from consumer energy bills.

As expected, this involves weakening an insulation scheme for poorer households, known as the Energy Company Obligation ( ECO). The costs of ECO are added to consumer bills, and energy companies have argued that it’s too expensive.

The government also announced a variety of measures to improve its energy efficiency policies and ensure it’s still tackling f uel poverty. But many of the changes looked like pre-existing programmes that have been recycled, extended or incentivised.

Yesterday, the government also announced it would be changing renewable energy subsidies. Osborne today confirmed the decision to cut the guaranteed price of electricity for onshore windfarms and solar plants – known as the strike price – while slightly boosting support for offshore wind. The government claims the changes won’t hurt its plans to expand renewables – and the industry appears to agree.

Osborne also reiterated the government’s commitment to securing the UK’s energy future, pointing to a recent deal to build a new nuclear power plant.

Chief secretary to the Treasury, Danny Alexander, announced yesterday the government had signed a preliminary agreement with Japanese technology firm, Hitachi, and UK-based energy company, Horizon, to build a new nuclear plant. The deal is only the first stage of a long process, however. The government still needs to agree the precise costs of the project with the companies, and the new plant would be unlikely to produce power until the mid-2020s.

And one that didn’t happen

The Spectator magazine suggested the UK’s carbon tax – the ‘carbon price floor’ – was for the chop.

The tax tops up the EU’s carbon price, forcing companies to pay a minimum price for their carbon dioxide emissions. The Treasury set the price floor at around £5 per tonne of carbon dioxide this year, rising to around £21 in 2017.

The prime minister earlier this year promised to “roll back” green levies, and given the broad unpopularity of the carbon price floor, it would have perhaps been an easy measure to cut. Despite speculation, this particular green levy is safe for now. Though that’s perhaps not surprising, as carbon price floor revenues go straight to the Treasury coffers.

Costing the earth

Osborne today said “going green doesn’t have to cost the earth”, and today’s announcement seemed to prioritise short term cost reductions over the government’s longer term climate commitments. Nonetheless, Osborne’s statement didn’t contain too many surprises – and many green levies remain.

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