March 2015 Budget: key environmental announcements

Practical Law UK Legal Update 9-605-0881 (Approx. 7 pages)

March 2015 Budget: key environmental announcements

Landfill tax

Rates

The standard and lower rates of landfill tax will increase in line with Retail Price Index (RPI) rounded up to the nearest 5 pence from April 2016.

(Budget Report, paragraphs 2.172-2.174.)

For more information on landfill tax in general, see Practice note, Landfill tax.

Landfill Communities Fund

The value of the Landfill Communities Fund (LCF) for 2015-16 will be set at £59.4 million, with the cap on contributions by landfill operators amended to 5.7%. The value of the LCF reflects devolution of landfill tax to Scotland from 1 April 2015 and the ongoing high levels of unspent LCF funds. The saving from the LCF will be used to fund a one-off £4.2 million increase in Environment Agency funding to address waste crime.

The government is also consulting on a package of measures to reform the LCF, in order to accelerate the spending of funds on community projects, reduce administrative costs and simplify administrative processes (see Legal update, Landfill tax: HMRC consults on reform of Landfill Communities Fund).

As announced in the 2014 Autumn Statement, legislation will be introduced in the Finance Bill 2015 to introduce a loss on ignition (LOI) testing regime for fines (residual waste from waste processing) that qualify for a lower rate of landfill tax, from 1 April 2015 (see Legal update, Landfill tax: consultation on draft legislation and guidance to clarify tax liability of residual waste fine materials (fines)).

(Budget Report, paragraphs 2.173 and 2.174.)

Aggregates levy

The aggregates levy will remain at £2 per tonne in 2015-16.

For more information on the aggregates levy in general, see Practice note, Aggregates levy.

Energy

Climate change levy (CCL)

The climate change levy (CCL) main rates will increase in line with RPI from 1 April 2016.

For more information on the CCL in general, see Practice note, Climate change levy (CCL) and climate change agreements (CCAs).

Carbon price support (CPS) rates

The government has confirmed that the carbon price support (CPS) rates from 2016-17 to 2019-20 will remain capped at £18/tCO2.

As confirmed in the 2014 Autumn Statement, from 1 April 2015, the government will exclude from the CPS rates fossil fuels that are used by combined heat and power (CHP) plants to generate good quality electricity that is self-supplied or supplied under exemption from the requirement to hold a supplier licence (see Legal update, 2014 Autumn Statement: key environmental announcements: Carbon price floor).

(Budget Report, paragraphs 2.178 and 2.179 and Overview of Tax Legislation and Rates, paragraph 2.20.)

For more information on the CPS in general, see Practice note, Climate change levy (CCL) and climate change agreements (CCAs): Carbon price floor (CPF).

Energy intensive industries (EIIs)

The government announced, in the 2014 Budget, a package of reforms to reduce the energy costs faced by the most energy intensive industries (EIIs) to ensure that they are as competitive as possible. This included compensation for the indirect costs of feed-in tariffs (FITs) and the Renewables Obligation (RO) for 2016-17.

The government has said in the March 2015 Budget that it will bring forward the FITs component of the compensation to the earliest point at which state aid approval is received in 2015-16.

(Budget Report, paragraph 1.117.)

For more information about the proposed package of reforms for EIIs, see Practice note, Feed-in tariffs (FITs): overview: Proposed relief for electricity intensive industries.

Venture capital schemes for renewable energy: EIS, SEIS, VCTs and SITR

As announced in the 2014 Autumn Statement, companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from also benefiting from the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) with effect from 6 April 2015. This is with the exception of community energy generation undertaken by qualifying organisations, which will in future become eligible for the Social Investment Tax Relief (SITR).

The government will provide a transition period of six months following state aid clearance for the expansion of SITR before eligibility for EIS, SEIS and VCT is withdrawn.

(Budget Report, paragraph 2.77.)

For more information on EIS, SEIS, VCTs and SITR for renewable energy, see Practice note, Renewable energy: overview: Venture capital tax reliefs for investment in community energy.

Swansea tidal lagoon CFD

The government has decided to enter into the first phase of negotiations on a Contract for Difference (CFD) for Swansea Bay tidal lagoon (without prejudice to the planning decision on the project). The negotiations will determine whether the project is affordable and value for money for consumers, and whether it will drive down costs of future lagoons. The government estimates that lagoon technology could theoretically contribute the equivalent of 8% of the UK’s electricity consumption in 2013.

(Budget Report, paragraphs 1.133 and 2.258.)

For more information on the announcement, see Legal update, CFDs: government announces negotiations and publishes response to consultation on Swansea Bay tidal lagoon.

Landlord's Energy Saving Allowance

The Landlord's Energy Saving Allowance (LESA) will no longer be available from:

31 March 2015 for corporate landlords.
5 April 2015 for unincorporated landlords of let residential properties.

(Budget Report, paragraph 2.176.)

For more information on LESA in general, see Practice note, Energy efficiency in buildings: overview: Landlord's Energy Saving Allowance.

Deep geothermal energy

To help unlock the potential of deep geothermal energy, the government will consult in the next Parliament on bringing planning notification arrangements for the sector in line with those for onshore oil and gas planning applications.

(Budget Report, paragraph 2.256.)

Oil and gas

For information about the key announcements relating to oil and gas, see March 2015 Budget: key business tax announcements: Oil and gas.

Other energy announcements

The March 2015 Budget contains a number of other energy-related announcements but these are not covered in this legal update as they are currently outside our scope.

Practical Law currently focuses on the overlaps between energy law and environmental and competition law (see Energy toolkit). However, we are planning to expand our coverage of energy law more widely and would welcome your views on what topics and materials you would find helpful. To contact us, please use the Ask question form.

Flooding

For information about announcements relating to flooding measures, see Legal update, March 2015 Budget: key property announcements: Flooding.

Comment

Unsurprisingly, the Swansea Bay tidal lagoon announcement has been warmly welcomed by the renewables industry. RenewableUK called it the "most significant part of today’s Budget speech" (see RenewableUK press release, RenewableUK comments on Chancellor's Budget announcement on financial support for pioneering Tidal Lagoon energy project, 18 March 2015). However, it went onto warn that, as the Levy Control Framework is a "finite pot, the Government should ensure that other renewable technologies such as wind, wave and tidal stream are also allocated sufficient financial support, through an application process appropriate to their stage of development, to continue to develop to their full potential".

Greenpeace UK Executive Director, John Sauven, said:

"Announcing some progress on a new clean technology like tidal power is a welcome move, but the UK’s renewable industry needs a long-term strategy not just a belated wink to green voters. This eleventh-hour move hardly makes up for six budgets of business bungs for fracking, tax breaks for oil giants, and neglect for the green technologies of the future. Osborne’s tenure at No 11 has weakened Britain’s appeal to green investors, and we’re now lagging behind every other EU country on delivering renewable energy targets. It’s a disappointing legacy for the man who once promised to turn the Treasury into a ‘green ally’ for the fight against climate change.”

(See Greenpeace press release, Osborne's wink to green energy is too little too late, 18 March 2015.)

The absence of "big ticket" environmental announcements in this Budget is not surprising as the pre-electoral purdah is about to start at the end of March in preparation for the general election on 7 May 2015 (see Article, March 2015 Budget: a load of hocus pocus or a spell for re-election?).

March 2015 Budget: key environmental announcements | Practical Law