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Budget 2018: Government prepares for no-deal Brexit carbon pricing as renewables ignored

Budget 2018.

Chancellor Philip Hammond delivered his speech yesterday, three weeks ahead of schedule to avoid clashes with Brexit negotiations.

The government has said it would put a carbon emissions tax in place to replace the EU Emissions Trading Scheme in the result of a no-deal Brexit, but renewables have been omitted from yet another Budget.

Chancellor Philip Hammond delivered his budget yesterday afternoon and while the clean economy was barely mentioned, the Red Book documents include some details regarding taxation.

This included the first sign of a plan for an alternative for the EU Emissions Trading Scheme (ETS), should the country fall out of the European Union without a deal on 31 March 2019.

The documents state that a ‘Carbon Emissions Tax’ would be introduced in the “unlikely event” of a no-deal Brexit, applying to all stationary installations that currently participate in the ETS from 1 April 2019. A rate of £16 per tonne of carbon dioxide above an installation’s allowance would be applied.

However the government is also legislating for a longer term carbon price option.

Meanwhile, HM Treasury has also confirmed that it is to freeze the existing carbon price support rate at £18/tCO2 until 2020/21, although again in the longer term the government has stressed it will seek to reduce that rate if the total carbon price – should the UK remain in the EU ETS – remain high.

Energy UK chief executive Lawrence Slade said that while leaving the ETS was not the “preferred solution”, the trade organisation was otherwise “encouraged” by the intent to maintain a carbon price signal.

“Energy UK believes that maintaining a robust carbon price signal is critical to boost the confidence of potential investors in low-carbon generating technologies,” he added.

But the wider exclusion of the clean economy and renewables in general from Budget 2018 has been pilloried by the industry. Climate change was not mentioned by the chancellor once during his speech and there is no mention of renewable energy in the Red Book either.

Philip Hammond.
Hammond omitted any mention of renewable energy or the government's 'clean growth' agenda in his Budget speech yesterday.

Instead, the government has outlined its intent to remove Enhanced Capital Allowances and First Year Tax Credits for all energy efficiency technologies from 2020, arguing there to be “more effective ways” of supporting energy efficiency.

The savings from scrapping ECAs are to be reinvested in a so-called ‘Industrial Energy Transformation Fund’ designed to support intensive energy users cut their energy bills and reduce their energy demand.

ECAs will however be maintained for electric vehicle charge points until at least 31 March 2023.

James Court, policy and external affairs director at the Renewable Energy Association, said: “It is frustrating that another Budget comes and goes, yet the opportunity for the UK to be a genuine leader in crucial future technologies slips by. There is huge support for renewables across the country, parliament, and even within government, yet the Treasury continues to stymie the potential growth in this sector.”

His opinion was echoed by Solar Trade Association chief Chris Hewett, who said the chancellor had once again missed an opportunity to “do the right thing” and put into place fair tax and market treatment for PV and other renewables.

“This government claims to support clean, green technologies, but this rhetoric is far from being matched by even the most modest of actions. Solar is the biggest clean energy market in the world today and by putting obstacles in the path of this technology the government is frustrating the urgent energy transition and putting British industries at a disadvantage in global clean energy markets,” he said.

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