The UK's green sector has given a negative reaction to the announcements made in today's Budget.
Reacting to the statement today, Friends of the Earth's Executive Director Andy Atkins said: "This Budget sticks two fingers up at David Cameron's promise to build a clean future - and gives a massive thumbs down to new jobs and cutting our reliance on expensive gas and oil.
"Safeguarding our environment and growing a strong economy go hand in hand - but the Chancellor has fired the starting pistol for more roads, airports and gas power that will keep the UK hooked on costly fossil fuels for decades to come.
"Business leaders are sick of the Chancellor's Jekyll and Hyde routine on developing a low carbon economy - and other countries are leaving us trailing.
"The few green crumbs of comfort offered by Mr Osborne will be completely swept away by a package of policies that make this a Black Wednesday for the environment."
Commenting on Government changes to the planning system, Andy Atkins said: "Trashing planning rules will do nothing to develop a fair and resilient economy - we need the right kind of development in the right place, with investment in clean energy and warm, affordable homes.
"Osborne says new planning rules will protect our most precious environments but unless they address the environmental challenges we all face, Ministers will pave the way for a development free-for-all that will cost us all a fortune in the long run.
"Bringing in the changes will put local plans at risk and allow developers to ride roughshod over local communities."
The British Property Federation welcomed the Chancellor's announcement that the Government will consult on simplifying the CRC Energy Efficiency Scheme to reduce administrative burdens on business.
He indicated that should very significant administrative savings not be deliverable, the Government will bring forward proposals in autumn 2012 to replace CRC revenues with an alternative environmental tax, and will engage with business before then to identify potential options.
Liz Peace, chief executive of the British Property Federation, said: "Today’s announcement of a review to reduce the burden of the CRCEES for business is to be welcomed. We would urge Government to rantionalise the fiscal element of the CRCEES and the Climate Change Levy into a simple retrospective tax on the carbon associated with building energy consumption. The price of carbon under this tax could be set in consultation with the Committee on Climate Change.
"The implications of this proposal would be that much of the administrative burden associated with the scheme would be reduced. This approach would also ensure that participants are not required to make crude estimates of the number of allowances required in advance.
"We have also argued that the league table which accompanies the CRCEES is not likely to incentivise significant levels of energy efficiency improvement and carbon reduction since the reputational drivers are concentrated upon the purchaser of energy, but energy efficiency in non-domestic buildings often requires the co-operation of both owner and occupier, even though in many tenancies both parties will not be caught by the scheme.
“Reputational drivers for carbon reduction and energy efficiency among property owners and occupiers should be delivered via a staged introduction of mandatory emissions reporting, starting with publicly listed companies."
Mark Kenber, CEO of The Climate Group, an independent, not-for-profit organization, said: “I am concerned about the focus that the Budget took on fossil fuels; specifically the Government’s plan to introduce a package of oil and gas measures to secure billions of pounds of additional investment in the UK Continental Shelf.
“In 2010 David Cameron pledged to become the 'greenest government ever' and with announcements like this it looks doubtful. To drive forward clean technologies we need a government that is willing to invest in low-carbon technologies while displaying strong and inspiring leadership.
“That said, I am very pleased to note that the Government is extending the 100 per cent FYA (first-year allowance) for businesses purchasing low emissions cars until 31 March 2015. The Climate Group’s EV20 Plugged-In Fleets report which was published in February highlighted that electric vehicles (EVs) can be commercially viable in business fleets. The report found that outside London there are sweet spots where an EV can save 7p per mile compared to a conventional vehicle and an electric van in central London will benefit from 100% Congestion Charge discount.
“As a bonus, it would have been fantastic to see households struggling with raising living costs being encouraged by the Government to invest in energy-saving technologies which would reduce the strain on the family purse.
“We believe that there are fiscal opportunities for the implementation of clean technology that the Government is missing out on and we look forward to working with them to address this.”
WWF Scotland's Head of Policy Dr Dan Barlow said: "New deepwater drilling West of Shetland is just not worth the risk because we should be phasing out our use of oil not chasing ever more difficult sources.
“The Shell spill from Gannet Alpha last year showed that even in easy waters, a long experienced operator can make a total mess of dealing with an oil leak. Any significant oil spill in this area could present a major threat to fishing, tourism and wildlife."
"We need to be ending our addiction to oil and gas, not supporting more ways to squeeze every last drop from beneath the seabed. However, the Chancellor has just handed the oil and gas industry billions in subsidy that will not only keep them drilling, but allow them to further expand their operations.
“Having made huge profits from decades of drilling it is perverse that the taxpayer is set to further subsidise this climate wrecking industry which will starve much needed government investment in clean energy alternatives."
The Solar Trade Association said it was disappointed that solar claiming FITs will not be benefit from Enhanced Capital Allowances and the sector remains severely constricted by the Levy Control Framework. Solar was the world's biggest renewable energy market in 2011 at an estimated $92 billion turnover. Illustrating dramatic price falls in crystalline solar total installations rose 69% while revenue rose 29%.
The Chancellor instead focussed a wide range of positive measures on gas, despite projections that, with sustained support, solar could be competitive with grid electricity shortly after this Parliament. The IEA has warned against 'lock-in' to fossil fuel generation, yet the Infrastructure document alongside the budget highlights 6.7GW of gas plant approvals in 2011. The budget document also makes clear that recovery could be put at risk if current oil price spikes continue.
The UK solar industry shared in the dramatic global growth over the last year, with over 1GW capacity installed. Around 25,000 people were employed in the sector in November. The Budget has confirmed today that not only will Enhanced Capital Allowances not apply to recipients of FITs and RHI payments, but regular Capital Allowances for expenditure on solar PV will be reduced from the standard rate (18%) to a “special” (lower) rate of 8%.
One of the justifications given by Treasury for a lower write down rate for solar was because the solar FIT tariff lasts for 25 years, longer than other technologies. However, DECC have proposed to reduce this to 20 years, the same as other technologies.
STA Chief Executive Paul Barwell said: “Enhanced Capital Allowances are immensely valuable for helping projects over the initial investment hurdle. We would argue there is a case for extending ECAs to solar PV, as looking forwards FITs alone are unlikely to give businesses the rates of return they need to invest.
“We also don’t agree that ECAs should end for solar thermal. The Renewable Heat Incentive was calculated on the basis that ECAs were available. Their removal places more pressure on DECC to provide more support for solar thermal – or risk alienating important investors.
“We cannot understand why solar has been singled out for rough treatment on Capital Allowances when it’s a popular technology which will soon reach grid parity and provide businesses with a real alternative to dependence on fossil fuels.”
There are also concerns for the sector going forward as the Feed-in Tariff scheme operates under a fixed cap imposed by Treasury as part of the Levy Control Framework. The cap created chaos for the scheme's management last year.
Paul Barwell continued: “We just want to be confident we can have a reasonable level of support for the sector over the next year, not least to safeguard public investment in building this exciting industry to date. Unfortunately, operating the FIT scheme under an inflexible budget cap creates unnecessary complexity and risk for the industry, and it puts unfair pressure on DECC Ministers."
Confusion remains about whether the FITs can be legally included under the Levy Control Framework, with a decision not due from the Office of National Statistics until April.
Barwell concluded: "Solar will more than pay for itself in jobs, tax revenues, greatly increased consumer choice and electricity sector competitiveness. Solar is demonstrably delivering exceptional price drops, but the UK industry needs stability and confidence. The Chancellor said 'stability comes first' - that should also be applied to solar."
And the Scottish Greens today claimed the UK Budget will undermine Scotland’s renewable energy ambitions.
They say Osborne's measures including further cuts in corporation tax for big business, incentives to extract more fossil fuels and no support for Scotland's massive renewable energy potential.
Green MSP Patrick Harvie added: "Scotland has the lion’s share of renewable energy resource in the UK, but the Chancellor has shown himself stuck on the dirty fuels of the last century. By investing in Scotland's renewable energy potential rather than old fashioned fossil fuels, the UK government could have given our economy the shot in the arm it needs.
“Tax breaks for big oil and gas corporations do nothing for the environment or equality – Scotland needs this budget like a hole in the head.
“Aside from the failure to support green energy, this budget is the clearest sign yet from this government that the rich can expect to get richer at the expense of the least well off. The millionaire Chancellor has offered up a true blue budget, and the LibDems have rushed to support it."
Josephine Bush, corporate tax partner at Ernst & Young, said the announcements made today in the Budget delivered a mixed bag for sustainability
She added: “The Budget today has delivered mixed messages in relation to the UK government’s support for renewable and sustainability initiatives. In terms of using the tax system to initiate behavioural change the new patent box regime will encourage innovation in UK cleantech businesses that are genuinely innovative and invest in new clean technologies resulting in intellectual property. All profits attributable to qualifying intellectual property can be taxed at 10% corporation tax rate from 1 April 2013.
“In addition, a new above the line R&D tax credit is also being introduced from April 2013. Not only will this benefit early stage loss making cleantech businesses to claim a payable credit, but large corporates for instance that are investing in the implementation of their sustainable strategies resulting in R&D claims may be able to specifically allocate the credit back to their sustainable budgets. This is good news if you are looking to maximise the return on your investment or improve cash flow.”
In relation to the tax implications of the Budget, Josephine added: “There continues to be support for 100% tax relief for capital spend that qualifies for enhanced capital allowances as the technologies qualifying are extended to include Heat Pump Driven Air curtains. Additionally there remains support for the surrendering of losses resulting from these enhanced deductions in return for first year tax credits.
“As well as supporting investment the government continues to tax activities that damage the environment – landfill taxes increase by £8 per tonne to £72 and air passenger duty in line with RPI. In addition, there has been a refinement of the legislation around the climate change levy (CCL) and carbon price support (CPS) rate. UK generators, including combined heat and power (CHP) and auto-generators, of fossil fuel based electricity, and those supplying such generators are affected by these measures.
“In short, it is proposed to reduce or eliminate the tax burden on CHP plants that are engaged in 'good quality' non-electricity outputs or carbon capture and storage. The exemption from CCL for electricity produced in CHP stations that is supplied by an electricity utility indirectly to an energy consumer has been withdrawn. Levy exemptions certificates will no longer be issued to utilities for electricity generated in CHP stations from 1 April 2013.
“Interestingly, the government has also said that it is intending on simplifying the Carbon Reduction Commitment (CRC) regime to reduce the administrative burden on businesses. In short, they propose an environmental tax as an alternate. In effect, after the abandonment of the recycling of payments, this measure had already be effected in practice but we should wait to see how this pans out after consultation.”
Josephine said greater clarity was still required, and added: “In the same breathe as the above, the government has indicated that EIS and VCT relief will not be available for some businesses that claim the Feed in Tariff. This requires further clarification but is likely to affect investment in micro-generation.
“Serial entrepreneurs, HNWI and PE/VCT funds will not like this move and appears at odds with the government’s head line support for renewable energy investment. In addition, businesses that claim Feed in Tariffs or Renewable Heat Incentives will not be entitled to enhanced capital allowances and expenditure on solar panels will designated as special rate expenditure for capital allowance purposes (ie 8% from April 2012).
“As much as the government is prepared to provide some investment support into renewable energy and tax carbon production, it is equally providing additional support for the producers of fossil fuels via the oil and gas field allowances the much desired clarity over tax relief for decommissioning costs. It has also stated that gas fired electricity generation will continue to play a major role in UK energy supplies over the next decade and beyond.
“The much needed clarity required around tax policy that supports the investment landscape in sustainable, renewable and cleantech investments is therefore still required but for those looking to invest it is possible to navigate round this in a meaningful way.”
Responding to the speech Martin Harper, RSPB Conservation Director, said: “While the Chancellor waves the flag for carbon reduction initiatives and green investment with one hand, he is pushing through tax incentives for oil and gas drilling off the coast of Scotland with the other.
“His plan for growth clearly involves building more infrastructure, more roads and more runways, but this must be compatible with the green economy we have been promised so many times by this Government.
“In the Autumn statement last year George Osborne set out a plan for short sighted economic growth based on the mistaken belief that environmental protection is a burden on business. In today’s speech he has continued to commit us to that path, locking us into an unsustainable economic plan that fails to take into account the very real value of our wildlife and countryside.
“The chancellor told us today that 'environmentally sustainable has to be fiscally sustainable'. This works both ways, and we must see an economic plan for growth which puts the environment at the heart of decision making.
“In the opening paragraph of the Government’s own Natural Environment White paper last year we were told that, ‘a healthy, properly functioning natural environment is the foundation of sustained economic growth, prospering communities and personal well being’. However the Treasury is being allowed to lead the charge without heeding these wise words from elsewhere in the Government.
“We know that many Liberal Democrats and pro-environment Conservatives are concerned about the impact of untrammelled growth in our countryside. They reflect the views of many members of the public for whom our natural environment is one of our most precious assets. If these views are ignored the Chancellor and his allies risk alienating a large section of our society.
“The announcement of new tax breaks for oil and gas exploration off the Shetland Islands is a cause for concern for both the climate and for the wildlife in that region. If oil and gas are going to be pushed further to the centre of our energy strategy, this is only acceptable if matched with robust environmental safeguards.
“We agree that development is necessary if the UK is to remain competitive, we agree that our economy needs to grow to enable all of us to prosper. But this must not happen at the cost of our environment.”
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