This update summarises the main environmental announcements in the 2010 Budget, delivered by the Chancellor, Alistair Darling, on 24 March 2010.
Introduction
The following is a summary of the main environmental announcements in the March 2010 Budget, delivered by the Chancellor, Alistair Darling, on 24 March 2010.
For further information on the March 2010 Budget, see:
The Government intends to establish a Green Investment Bank (GIB), involving both public and private sector capital, to invest in the low-carbon sector, focusing initially on offshore wind.
The Government plans to start by investing up to £1 billion from the sale of government-owned infrastructure-related assets (such as the Channel Tunnel rail link), and hopes to match this with at least £1 billion from private sector investment.
The establishment of the GIB will be managed by the recently created Infrastructure UK (IUK), which will consult on this in summer 2010. For more information on IUK, see Strategy for national infrastructure below.
The Government is also planning to improve and streamline its financial support for small and medium-sized enterprises (SMEs) by launching UK Finance for Growth (UKFG), which will (among other things) co-ordinate the UK Innovation Investment Fund's low-carbon fund and the Carbon Trust's venture capital activities.
Development of ports to support offshore wind
The Government plans to make £60 million available for the development of ports, to help manufacturers of offshore wind turbines looking to locate new facilities in the UK. It intends to launch a competition to identify possible locations for, and recipients of, this funding, subject to EU state aid approval.
Support for biomass under the Renewables Obligation
The Government intends to grandfather a minimum level of support under the Renewables Obligation (RO) for biomass installations at the point of accreditation. The Government will be consulting on this later in 2010.
It will also be consulting on sustainability criteria for biomass used for heat and power.
The Government had announced, in the 2009 Pre-Budget Report, the creation of IUK to advise the Government on long-term priorities for national infrastructure, including how to deliver the UK's transition to a low-carbon economy.
IUK has published, alongside the 2010 Budget, a Strategy for national infrastructure, which provides an overview of the UK's current infrastructure, identifies the key challenges and opportunities, and sets out areas for action.
IUK's responsibilities will include:
Developing a National Infrastructure Framework, which will provide a long-term, cross-sectoral analysis of infrastructure needs, to help decisions on priorities and timing of new projects.
The Government had launched, in the 2009 Pre-Budget Report, an assessment of the capacity of the electricity market to deliver clean, secure and affordable supplies of electricity in the long term (the Energy Market Assessment).
The Government has published, alongside the 2010 Budget, a report setting out its initial conclusions on the Energy Market Assessment. The report includes a number of possible policy options for reform of the energy market and identifies four key challenges:
The economics of low-carbon generation.
The finance requirements of low-carbon generation.
Security of supply.
Fairness for consumers.
The Government plans to consult, in autumn 2010, on "mechanisms to provide greater certainty for low-carbon investment". It then plans to set out its final conclusions in a White Paper by spring 2011.
The Government has announced in the 2010 Budget that it intends to include nitrous oxide gases from nitric acid production in the EU Emissions Trading Scheme (EU ETS) from 2011.
The Government has announced that it is committed to reducing greenhouse gas emissions from central government departments by at least 30% by 2020.
All central government departments will shortly be publishing individual carbon reduction plans. They will then be required to show how they intend to deliver on these departmental carbon budgets in the next Spending Review.
It has announced in the 2010 Budget that this support will be extended to ultra-low carbon cars, so company cars emitting emitting 1-75 grammes of CO2 per km, will be subject to tax of 5% of their list price for five years from April 2010.
The Government also announced in the 2009 Pre-Budget Report that 100% first year capital allowances will be available for new zero-carbon goods vehicles bought from April 2010. The Government has indicated in the 2010 Budget that this measure will be in place for five years and that it plans to introduce legislation to give effect to this measure as soon as possible in the next Parliament.
Landfill tax
Rate of landfill tax:
The standard rate of landfill tax was increased to £48 from 1 April 2010 by the Finance Act 2009.
The standard rate will increase by £8 per tonne (bringing it to £56 per tonne). The HMRC's Budget Note 52 states that the new rate of £56 per tonne will apply to disposals made on, or after, April 2011. However, the Budget Report itself (see section 1.28 in Chapter 1 and section 7.47 in Chapter 7) states that the increased rate will apply from April 2014. It is not clear whether the latter date is a typographical error.
The lower rate of landfill tax will be frozen at £2.50 per tonne in 2011-12.
The Government confirmed in the 2010 Budget that the standard rate will not fall below £80 per tonne in future.
Reform of the landfill regime:
The Government has been consulting on an overhaul of the landfill tax regime. A summary of responses to that consultation was published in December 2009.
The Government has announced in the 2010 Budget that:
the list of wastes that will qualify for the lower rate will remain broadly the same;
it does not plan to go ahead with changes to the definition of taxable disposal.
Landfill Communities Fund:
The Landfill Tax (Amendment) Regulations 2010 (SI 2010/924) were made on 23 March 2010 and will come into force on 1 April 2010. They amend the Landfill Tax Regulations 1996 (SI 1996/1527) to change the maximum credit a landfill site operator can claim against annual landfill tax liability from 6.0% to 5.5%, for contributions made to environmental bodies enrolled under the Landfill Communities Fund.
For more information on the landfill tax regime, including the proposals for reform, see Practice note, Landfill tax.
Aggregates levy
The Finance Bill 2010 will increase the rate of the aggregates levy (AL), from £2 per tonne to £2.10 per tonne from 1 April 2011.
For more information on the AL in general, see Practice note, Aggregates levy.
The Government says it wants the UK to become a world leader in low-carbon industries, which should provide an important source of future jobs. The Government's approach is said to be based on four core objectives:
Enabling investment in large-scale low-carbon infrastructure.
Supporting investment and growth in UK-based supply chain businesses.
Providing co-ordination for research and development, and for businesses commercialising new low-carbon technologies.
Facilitating finance for households investing in energy efficiency.
So what do commentators think of the Government's ability to deliver on these objectives based on the announcements in the 2010 Budget?
On 23 March 2010 (before the Budget was announced), RenewableUK (the leading UK renewable energy trade organisation) published a document entitled Rebirth of UK Manufacturing, highlighting the manufacturing opportunities in the renewables sector in the UK, including:
Creating manufacturing super hubs around strategically positioned UK ports.
Ensuring that the renewables sector is properly funded with the introduction of a Green Bank.
According to RenewableUK's reaction on 24 March, it welcomes the proposals in the March 2010 Budget relating to ports and the GIB (see Reaction: Green sector passes judgement on today's UK Budget, clickgreen.org, 24 March 2010). However, it emphasised the need for the GIB to attract substantial capital from the private sector.
According to the Financial Times (FT), the GIB is not likely to start until 2011 (not least because of the impending national election in May this year). The FT believes this increases the risk of the GIB never coming to fruition (see Green investment fund hit by delays, Financial Times, 23 March 2010).
It is not yet known whether the Conservatives would back these proposals, in particular as they have already outlined alternative plans for their own green bank, which would involve the sale of "Green ISAs" backed by the Treasury (see Tories' green bank to fund wind and nuclear power, The Times, 19 March 2010). Interestingly, according to the article in The Times, this alternative green bank could be used to fund new nuclear power stations, not just renewable energy projects.