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March 23, 2012

UK Budget – Green Issues

The Chancellor’s Spring Budget Statement has been met with mixed reaction from the green lobby.  Environmental groups welcomed a shift in rhetoric from Chancellor of the Exchequer George Osborne who had warmer words for the green economy compared to his 2011 Autumn Statement when he criticized environmental burdens on business.  Osborne signaled support for renewable energy and pointed to flagship green policies including the Green Investment Bank and Carbon Floor Price.  The Chancellor announced a review of the Carbon Reduction Commitment, tax breaks for low emission company cars and Combined Heat and Power Plants, and more ambitious recycling targets.  The Chancellor stressed, however, that “environmentally sustainable has to be fiscally sustainable too.” 

Renewables “crucial” part of UKs energy mix.   In a bid to provide comfort to both the renewable industry and Tory MPs who have complained to the Prime Minister about subsidies for “inefficient” windfarms, the Chancellor said “renewable energy will play a crucial part in Britain’s energy mix – but I will always be alert to the costs we are asking families and businesses to bear.”   Climate Change Minister Greg Barker, said the Budget demonstrated the Chancellor’s “unwavering commitment” to the renewable sector.  The Renewable Energy Association welcomed the “noticeably more positive tone of the Chancellor towards renewable energy in the Budget today” but said it was disappointed there were no specific new measures to help the industry and said the Chancellor is “wrong” equating renewable energy with higher costs.


Boost for fossil fuels.  Green groups have reacted with anger to tax incentives for deep sea oil development in waters north of Scotland.  The Chancellor announced a £3bn allowance for new oil and gas fields in the west of Shetland, “the last area of the [North Sea] basin left to be developed – a huge boost for investment in the North Sea.”  Osborne said gas will be the UK’s largest single source of electricity in the coming years and pointed to the Government’s new gas generation strategy which will be published by the Energy Secretary Ed Davey in the fall.  Andy Atkins, Executive Director of Friends of the Earth, said the Budget “gives a massive thumbs down to new [clean] jobs and cutting our reliance on expensive gas and oil.”  Climate Change Minister Greg Barker, however, rejected criticism that tax breaks for oil companies made the Budget a “polluters charter” and said it was “nonsense” to suggest that a gas strategy would undermine wider plans to decarbonize the economy as gas is a “transition” fuel.


Battle over planning reforms.  The Budget promises to introduce new “growth-friendly” planning regulations, as the Government pushes ahead with controversial reforms.  The Communities Secretary Eric Pickles will publish the National Planning Policy Framework on Tuesday March 27, reducing planning guidance and introducing a presumption in favor of “sustainable development.”  The Chancellor has pledged that “our most precious environments” will be protected, however, draft revisions have been met with ferocious opposition from conservation groups including the National Trust and Campaign to Protect Rural England.  Green groups claim the plans put short-term economic gain ahead of other community interests and create a false choice between economic growth and the environment.  The Daily Telegraph is also running a “hands of our land” campaign against the changes.


Carbon Reduction Commitment reformed or replaced.  The Chancellor said the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) was “cumbersome, bureaucratic and imposes unnecessary cost on business.”  The CRC is a mandatory carbon trading scheme affecting large organizations in the UK.   The Government will seek to find “major savings” in the administrative costs for businesses and if these fail to materialize the Chancellor pledged to bring forward proposals in the fall to replace the revenues with an alternative environmental tax.  Industry has broadly welcomed the review, and while cautious over what may replace the CRC, many argue the scheme should be scrapped.


Environmental regulations cut.  In the Autumn Statement, the Chancellor had said he was “worried” about over-burdening business with “endless social and environmental goals.”   Ahead of the Spring Budget, and as part of the Government’s broader Red Tape Challenge, the Government published its review of environmental red tape.  Environment Secretary Caroline Spelman maintained that the process was not to “roll back” environmental safeguards, “this was about getting better rules, not weaker ones” to help grow the green economy.  132 regulations will be “improved”; 70 kept as they are; and 53 repealed as obsolete.  The Climate Change Act and its support regulations remain unchanged, but changes are proposed for rules on chemicals and waste among other areas.  Green groups question whether the changes will produce financial savings and maintain environmental protection.   The Guardian is posting views on the proposed changes.


Habitats & Birds Directives Implementation Review.  Singling out the Habitats Directive, Osborne said in his Autumn Statement the Government would ensure “gold plating” EU rules was not putting “ridiculous” costs on UK companies.  Review of the Habitats and Birds Directives have caused alarm from wildlife groups such as the RSPB.  On 22 March, Defra published the Report of the Habitats and Wild Birds Directives Implementation Review.  Environment Secretary Caroline Spelman stated her strong support for the Directive, but said cases have arisen which have “undermined” the reputation of the regulations.  The Government will issue new guidance to maintain the “integrity” of the Directives but reduce burdens on business, and is setting up a new Major Infrastructure and Environment Unit to help deliver large infrastructure projects and protect habitat. 


Natural Capital Committee Chairman Announced.  As part of the Budget, it was announced that Dieter Helm has been appointed the new Chair of the Natural Capital Committee.  A Professor of Economics at Oxford University, Helm specializes in energy issues and has served in several government advisory roles.   The Natural Capital Committee, which was announced in the Natural Environment White Paper, will report to the Economic Affairs Committee (chaired by the Chancellor of the Exchequer) and provide independent advice on the state of English natural capital.

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