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HM Treasury building, London, England, UK.
Alex Segre/Shutterstock
UK POLICY
19 March 2014 13:37

Budget 2014: Key climate and energy announcements

Mat Hope

Mat Hope

03.19.14
Mat Hope

Mat Hope

19.03.2014 | 1:37pm
UK policyBudget 2014: Key climate and energy announcements

Chancellor George Osborne today delivered his fifth budget. Among a few pre-election treats for voters were some important changes to the government’s energy and climate policies – few of them good news for the UK’s low carbon credentials.

Here’s a summary of the key announcements:

Carbon price floor frozen

The chancellor was widely expected to freeze the UK’s top up carbon tax – the carbon price floor – at 2014 levels, and he did just that.

The carbon price floor will be frozen at £18 per tonne of carbon dioxide until the end of the decade, instead of rising to around £30, Osborne said. He hopes that will cut industry energy costs, and help the UK’s manufacturing sector.

Campaigners and industry alike criticised the policy when it was introduced in 2013. But as Osborne’s announcement drew closer, many environmental groups and industry representatives seemed to change their tune.

The economic impact of the change remains to be seen, with green groups claiming it could give a lifeline to old coal plants that would otherwise be forced to close. Perhaps more significantly, scrapping the plan just a year after it was introduced sent a message to voters and the rest of the world that the government was no longer fully committed to combatting climate change, they argue.

More compensation for polluting industries

In the run up to the budget, business and energy minister Michael Fallon called for  further compensation for energy intensive industries he claims are being hit by the government’s green levies. The chancellor duly obliged.

Osborne announced a compensation package worth £3 billion to some of the UK’s most polluting companies. Energy intensive industries will not have to pay the costs of two policies desinged to support renewable energy generation, the renewables obligation or feed-in tariffs, he said. It could save companies £50,000, and households £15 per year on their energy bills, the chancellor claimed.

The new package comes on top of  existing policies to compensate the most energy intensive industries for  the cost of the carbon price floor, and the European emissions trading scheme.

The chancellor hopes the measures are enough to stop companies moving abroad, where operation costs are lower – which would be bad for the economy overall, he argues. In doing so, Osborne prioritised the UK’s short term “economic security” over curbing the manufacturing industries’ considerable greenhouse gas emissions – with the latter potentially providing economic benefits in the long run.

Increased flood defence spending

The government was embarrassed at the start of this year after cuts to flood defence spending emerged during one of the UK’s wettest ever winters. In response, Osborne today announced £140 million of new funding to go towards flood repairs and maintaining existing flood defences.

The announcement comes months after David Cameron told parliament he “very much suspected” the floods were due to climate change, and that the UK could expect more of the same in coming years. His statement re-emphasised the rift between the party leadership and climate skeptic environment secretary, Owen Paterson, over how to tackle climate change.

No low carbon infrastructure specifics

Osborne was expected to call for private sector investment in a wide-ranging portfolio of infrastructure projects in his budget, many of them with low carbon credentials. But despite many mentions of the UK needing to improve its infrastructure, there were no explicit references to low carbon projects.

Earlier this week, the Financial Times reported the budget would feature a list of projects needing around £50 billion of investment, including a number of renewable energy projects. Environmental thinktank Green Alliance previously estimated 70 per cent of the government’s planned infrastructure projects could be classed as low carbon.

It’s currently unclear how the new list changes that figure, though any new investment is likely to be welcomed by the renewables industry after a number of high profile projects were abandoned in recent months.

Not a green budget

So that’s that for 2014’s budget. In the end in went off as expected with one climate policy abandoned, high emitting industries let off the hook, and little in the way of new support for the UK’s low carbon agenda.

Osborne did make a single nod to the continued development of renewable energy, alongside shale gas and nuclear. That’s unlikely to compensate those who see the chancellor as intent on leading the government away from its early low carbon promises.

If this budget is anything to go by, the chancellor appears to be increasingly abandoning the government’s green agenda as the 2015 election looms into view.

Main image: HM Treasury building, London, England, UK. Credit: Alex Segre/Shutterstock.

Updated, 19/03/14, 3pm: The figure on how much an energy intensive company may save was corrected.

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