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UK Sets Carbon Price, Boosts Public Money for Clean Energy Bank

The U.K.’s annual budget, published yesterday, introduced numerous and sweeping changes for clean energy and carbon finance.

The budget said that the country’s carbon floor price will start at £16 ($25.60) per ton of CO2 in 2013 and rise to £30 ($48) per ton by 2020. After the announcement, European Union carbon permits fell to their lowest price in nine days, Bloomberg said. U.K. utilities may choose to use natural gas as a result of the change, Emmanuel Fages, an analyst in Paris at Orbeo, told Bloomberg.

Some critics said the price is not high enough to drive low-carbon investments, BusinessGreen reported.

The budget also raised the discount available on the electricity component of the U.K.’s climate change levy. The discount, offered to energy-intensive companies such as manufacturers if they commit to energy efficiency improvements, is rising from 65 percent in 2011 to 80 percent from 2013.

The Treasury said that the carbon tax guarantees a minimum cost for burning fossil fuels, even if EU carbon prices fall. This will encourage private investors to finance the building of five nuclear reactors or 5,000 wind turbines, the Treasury said, and will reduce utilities’ carbon emissions by 263 million tons by the end of 2030.

Businesses were surprised by a move to increase the company car tax by one percentage point on vehicles with emissions between 95 and 219 grams per kilometer, Business Green said. The tax will now be frozen for cars emitting less than 95 grams of CO2 per kilometer.

The government reduced the fuel duty by one penny (£0.01, or $0.016) per liter and created a “fair fuel stabilizer”, which it said will hold down the fuel tax when oil prices are high. That promise was harshly criticized by environmental groups.

The country’s nascent Green Investment Bank, which is designed to invest in low-carbon energy projects, was boosted by £2 billion ($3.2 billion) in funding from government asset sales. This is in addition to the £1bn already promised by the government. The government also announced that the bank will launch in 2012, a year earlier than had previously been announced.

George Osborne, the chancellor of the exchequer – the U.K.’s equivalent to the secretary of the treasury – said that the public investment will bring in another £15 billion ($24 billion) of private sector investment. But the bank will not be allowed to borrow until fiscal year 2015/16, leaving critics to accuse the bank of being under-financed, BusinessGreen said.

Osborne axed a proposed energy tax to fund carbon capture and storage projects, but said that three demonstration plants will still be publicly funded.

The budget delayed a proposed increase in air passenger duties until 2012, and Osborne said the government was abandoning plans for a tax that would have forced airplanes to fill up their planes more. This levy would have breached international aviation treaties, he said.

And the budget removed an obligation for all new homes to source their energy from carbon-neutral sources by 2016. Homebuilders would be responsible for emissions from heating, lighting and hot water, but not from cooking or appliances, the government said.

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One thought on “UK Sets Carbon Price, Boosts Public Money for Clean Energy Bank

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