As a key part of the EMR, the government is introducing a capacity market (CM) to ensure security of energy supply. The CM works by offering all capacity providers (new and existing power stations, electricity storage and demand side electricity reductions) a steady, predictable revenue stream (capacity payments) on which they can base their future investments. In return for the capacity, providers must deliver energy or face financial penalties. The CM is particularly intended to incentivise investment in new gas generating capacity as part of the government's Gas Generation Strategy (see Legal update, DECC publishes Gas Generation Strategy: environmental implications).

The government consulted on the final design of the CM in October 2013. For more information on the October 2013 consultation and on how the CM will function, see Practice note, Electricity Market Reform (EMR): Capacity market.

On 19 March 2014, alongside the 2014 Budget, the Department of Energy and Climate Change (DECC) announced the government's final decisions on the CM design, ahead of the first capacity auction that will take place at the end of 2014 (see DECC press release, Electricity Market Reform: Capacity Market design, 19 March 2014).

DECC confirmed that:

DECC indicated that full details of the government's response to the October 2013 consultation on the EMR, including CM design, will be published in late spring 2014, as secondary legislation is put before Parliament.

The government has confirmed that the draft legislation relating to a new tax regime for onshore oil and gas exploration (including shale gas), which it consulted on in December 2013 as part of the Draft Finance Bill 2014, will not be changed when it is included in the final version of the Finance Bill 2014 that will be published on 27 March 2014.

(Overview of Tax Legislation and Rates, paragraph 1.77.)

For more information, see:

The government is providing £60 million to support carbon capture and storage (CCS) technologies that show significant potential to reduce the cost of low carbon generation in the UK.

(Budget Report, paragraph 1.113.)

For more information on CCS in general, see Practice note, Carbon capture and storage: overview.

The standard and lower rates of landfill tax will increase in line with the RPI, rounded to the nearest 5 pence, from 1 April 2015.

The government will introduce a loss on ignition testing regime on fines (residual waste from waste processing) from waste transfer stations by April 2015. Only fines below a 10% threshold would be considered eligible for the lower rate. Full proposals will be set out in a consultation later in 2014. The government intends to provide further longer term certainty about the future level of landfill tax rates once the consultation on the testing regime has finished.

The value of the Landfill Communities Fund for 2014-15 will be reduced to £71 million. As a result, the cap on contributions that landfill operators can make will be reduced from 6.8% to 5.1% from 1 April 2014. The saving will be used to fund an equivalent one-off increase to address waste crime. This change is being made by the Landfill Tax (Amendment) Regulations 2014 (SI 2014/707), which were laid before Parliament today (19 March) and will come into force on 1 April 2014.

(Budget Report, paragraphs 2.170-2.171.)

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

The government will shortly publish its response to the consultation it carried out in 2013 on allowable solutions for zero carbon homes.

(Budget Report, paragraph 2.23.)

For more information on:

The government will provide £140 million of new funding in 2014-16 to repair flood defences that have suffered damage in the recent severe flooding.

In autumn 2014, the government will publish a long-term plan for how it will direct the £2.3 billion capital funding from 2015 that was allocated in the Spending Round 2013, to protect the country from future flooding.

(Budget Report, paragraphs 2.27 and 1.133.)

For more information, see:

The government will extend the enhanced capital allowance (ECA) for zero emission goods vehicles to 31 March 2018. The ECA will be limited to businesses that do not claim the government's Plug-In Van Grant.

(Budget Report, paragraph 2.109.)

The list of energy-saving and water-efficient technologies that qualify for ECA will be updated in summer 2014, subject to state aid approval.

(Budget Report, paragraph 2.172 and HMRC: Tax Information and Impact Note: Enhanced capital allowances schemes for energy-saving and environmentally beneficial (water efficient) technologies (March 2014)).

For more information on ECAs in general, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies.

The government will shortly be publishing its proposals for a new fuel poverty target and strategy, which will include looking at the challenges faced by households that are not connected to the gas grid.

(Budget Report, paragraph 1.185.)

For more information on fuel poverty in general, see Practice note, Energy efficiency in buildings: overview: Fuel poverty.

As part of the 2014 Budget, the government has published the National Infrastructure Plan: finance update (NIP Update 2014).

The NIP Update 2014 provides more detail on how the government plans to finance the infrastructure that was announced in the National Infrastructure Plan 2013 (NIP 2013) that was published in December 2013 (see Legal update, National Infrastructure Plan 2013: environmental aspects).

The NIP Update 2014 emphasises that the main debt and equity finance investment (project-specific financing) opportunities are likely to be in electricity generation. This is because the scale of the infrastructure development required means that utility companies are unlikely to fund it themselves on their balance sheets (NIP Update 2014, paragraphs 1.29-1.33). There could therefore be up to £52 billion worth of project financing needed from investors, depending on how much the utility companies choose to finance.

The NIP Update 2014 highlights infrastructure announcements that have already been made, and the potential for project-specific financing, including for:

For more information on the NIP 2013 in general, see Practice note, National Infrastructure Plans: construction, environment and property implications.

Given that this may be the penultimate budget before the next general election, the 2014 Budget did not go far towards meeting the Prime Minister's claim that it is "the greenest government ever".

There was wide-spread criticism of the announcement to freeze the CPS so soon after its introduction. Many commentators (from both the conventional and renewables power sector, as well as green groups) criticised the Chancellor for creating policy uncertainty and discouraging investors in renewable energy technologies and gas-fired power generation. There are also fears that the CPS freeze will favour coal-fired power stations and that it will result in increased carbon emissions.

Lord Stern of Brentford suggested that it would have been preferable, instead of freezing the CPS, for the Chancellor to simplify the "existing myriad of policies which have created a complicated and inconsistent system of carbon pricing across the economy".

However, some have welcomed the CPS freeze as it would ease energy bills for businesses and householders. In particular, Tim Yeo MP, chair of the House of Commons Energy and Climate Change Committee, said that the CPS would "actually [do] very little to reduce emissions overall" while it "damaged public trust in taxes on pollution".

Gareth Stace, from manufacturers' organisation EEF, said that the exemptions for EIIs from the RO and other levies for renewable energy would "help to level the playing field [that] these companies need to compete effectively with others around the globe and keep production here in the UK." Conversely, there are concerns that the exemptions will place more of the burden of green levies on household energy bills.

(See Budget 2014: The green business reaction, BusinessGreen.com, 19 March 2014 and Budget 2014: Osborne's carbon price freeze sparks green investment fears, BusinessGreen.com, 19 March 2014.)

On flooding, there is concern that the funding announced in the 2014 Budget is significantly below the level recommended by independent advisers (see Budget 2014: Critics claim increased flood defence spending fails to hit the mark, BusinessGreen.com, 19 March 2014).