As detail emerges after the Chancellor of the Exchequer, Rt Hon George Osborne MP, announced the Summer Budget 2015 yesterday (8 July), the Anaerobic Digestion (AD) and Bioresources Association (ADBA) has calculated that the Budget’s smallprint includes an £11m hit on the anaerobic digestion sector alone.
The removal of the Climate Change Levy exemption for renewables will reduce revenue by around £5 per MWh. For the 2.2TWh of electricity generated by the AD industry this will cost around £11 million per year, impacting investor and operator confidence.
The Budget’s smallprint outlines how renewable electricity will no longer be exempt from the climate change levy.
It states that: “This change will correct an imbalance in the tax system by preventing taxpayers’ money benefitting renewable electricity generated overseas, and by helping ensure support for low carbon generation provides better value for money for UK taxpayers.”
According to ADBA, in reality, the budget documents reveal that two thirds of CCL revenue stays in the UK, supporting home-grown clean energy.
ADBA – “We are deeply disappointed that the industry was not consulted on this decision and remain concerned about the government’s real support for the green economy”
ADBA’s Chief Executive, Charlotte Morton, commented: “The claim that this change is to ‘correct an imbalance’ is misleading – only a third of the climate change levy goes to renewable electricity generated overseas.
“The rest of the levy is currently spent supporting the UK’s renewable electricity market at around £5 per MWh, which developers took into account when putting their business models together. Without the exemption for renewable sources, the AD industry will lose £11m in revenue each year – hurting existing operators and putting further investment at risk.
“This announcement comes as the industry is already facing uncertainty on a number of fronts given the imminent Feed-in Tariff review due and absence of confirmation that the Renewable Heat Initiative will be extended beyond March 2016.
“The UK needs renewable energy to keep the lights on and meet climate change targets.
“We are deeply disappointed that the industry was not consulted on this decision and remain concerned about the government’s real support for the green economy.”
Reacting to changes to the Climate Change Levy, Friends of the Earth renewable energy campaigner, Alasdair Cameron, said: “Making renewable electricity pay a carbon tax is ridiculous and completely counterproductive – like making apple juice pay an alcohol levy.
“The Chancellor constantly talks about making decarbonisation cheaper, and he then makes it more expensive, using a tax which was originally designed to encourage clean energy.
FEO – “The Chancellor constantly talks about making decarbonisation cheaper, and he then makes it more expensive, using a tax which was originally designed to encourage clean energy”
“If there are problems with renewable companies which might not be low carbon – like some biomass projects – they can be dealt with separately, but this blanket approach will only create more uncertainty, costing clean energy jobs and investment.”
The Institute of Environmental Management and Assessment’s (IEMA) Nick Blyth said: “IEMA supports the clear commitment from the UK Government to push for a global climate deal that keeps the goal of limiting global warming to 2 degrees firmly within reach.
“However, in other respects this is far from a green budget and we have concern over the Government’s commitment to the green economy. The Chancellor’s clear statement that the government will not extend the Coalition government’s commitment to increasing the proportion of revenue from environmental taxes to this Parliament is a backwards step.
The announcement that the government will review the business energy efficiency tax and carbon reporting landscape and consider approaches to simplify and improve the effectiveness of the regime receives a cautious.
“The majority of IEMA Members do believe there is a need for the Government to rationalise the number of energy and carbon schemes affecting the very largest organisations and we look forward to the Autumn consultation.”