Budget 2010 clean energy summary

In the Chancellor's 2010 Budget published on 24 March 2010, it was stated that the Government sees support for the low carbon economy as central to providing a platform for strong, long term sustainable growth. The Government sees failure to tackle climate change as threatening the economic development of the world. It is one of the aims of Budget 2010 to support the financing of low-carbon investment and new low-carbon jobs.

As such, Budget 2010 announces:

  • A commitment to reform the energy market to provide clean, secure and affordable energy in the long term following the assessment launched in the 2009 Pre-Budget Report. Published at the same time as Budget 2010 is a report setting out the Government's initial conclusions on the Energy Market Assessment. Four key challenges are identified in delivering the Government's objectives beyond 2020:
    • the economics of low carbon generation;
    • the finance requirements of low-carbon generation;
    • security of supply; and
    • fairness for consumers.
  • The intention to establish a Green Investment Bank with a mandate to invest in the low-carbon sector to address the gap in the provision of equity capital to large, complex low carbon infrastructure projects. It is intended that the Green Investment Bank will operate on a commercial basis involving both public and private sector capital and will consider new energy and transport projects in particular. The Government has pledged to invest up to £1 billion from the sale of certain assets and will seek to match this with at least £1 billion of private sector investment. The establishment of the bank will be consulted on in the Summer.
  • The launch of UK Finance for Growth ("UKFG") to streamline the Government's financial support of small and medium-sized enterprises ("SME") to help business commercialise low-carbon technologies. UKFG will work in partnership with the Department of Energy and Climate Change and Regional Development to co-ordinate all public SME equity schemes.
  • With the aim of ensuring that the UK benefits from the rapid manufacturing and supply chain needed to meet the increased deployment of offshore wind, £60 million will be made available for the development of port sites to meet the needs of offshore wind turbine manufacturers looking to locate new facilities in the UK. It is proposed there will be a competition to select locations for and recipient of this funding.
  • A commitment to reduce government department's carbon emissions by at least 30 per cent by 2020. All government departments will shortly be publishing individual carbon reduction plans. Budget 2010 also announces a pay as You Save to help households meet the cost of installing insulation and energy generation systems from the savings they make on their energy bills.
  • A halving in company car tax for ultra-low carbon cars (those producing 1 and 75 grams of carbon dioxide per KM) for five years from April 2010 in order to contribute to making the UK one of the best places in the world to design and build low-carbon vehicles.
  • To help drive efficiencies in business and the public sector, the climate change levy rates will be raised in line with inflation from 1 April 2011. Self driving magnetic motors and biomass air heaters will be included in an update to the technologies qualifying for enhanced capital allowances.
  • Fuel duty will increase by one penny per litre in real terms on 1 April each year from 2010 to 2013. The fuel duty increase for 2010 - 2011 will be staged. From 1 April 2010 the Government will introduce a new first year rate of vehicle excise duty, all cars emitting up to 130 grams of carbon dioxide per kilometre will pay no vehicle excise duty in the first year. Rates for cars emitting over 255 grams will be increased up to £950.
  • A future increase in the standard rate of landfill tax to £56 per tonne. The list of wastes that qualify for the lower rate of landfill tax will remain broadly the same.
  • The grandfathering of support for biomass under the renewables obligation at the point of accreditation. This will be consulted on later in 2010.
  • VAT:
    • place of supply rules for supplies of natural gas and heating and cooling to be extended to supplies in all categories of natural gas pipeline and heating and cooling supplied through networks such measures coming into effect on and after 1 January 2011; and
    • in order to combat missing trader intra-community fraud on and after 1 November 2010 a reverse charge (where the purchaser of services has to account for and pay the VAT) for supplies of emissions allowances to replace the current zero rating of such supplies.

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