healthier, happier and richer

Despite the grim economic context, the UK Government managed to find some extra money to help control climate change. The Chancellor said that the Budget:

provides more than £1.4bn of extra targeted support for the low carbon sector. These measures, together with announcements made since last autumn, will enable an additional £10.4bn of low carbon investment over the next three years.

The most significant financial measures announced were:

 

• A banding review aimed at increasing Renewables Obligation Certificates (ROC) from 1.5 to 2.0 for offshore wind projects, but only if new orders are placed before the end of April 2010, and then 1.75 in 2010-11. The Government says this will provide an extra £525m.
• £405 million to support development and deployment of low carbon technologies such as wind and marine energy (for example, building facilities to test prototype models) Funding will be delivered through existing programmes such as the already existing programmes such as the Environmental Transformation Fund,  the Grant for Business Investment and the Strategic Investment Fund. The Government says that this “will help attract and protect investment in the UK’s low-carbon supply chain”.
• £70 million for decentralised small-scale and community low-carbon energy with £45 million for small-scale renewable electricity and heat, primarily through the Low Carbon Buildings Programme and the other £25 million for at least ten community heating schemes.
• An additional £65m for energy efficiency of schools, hospitals and other public sector organisations. All public sector organisations will be eligible to apply for interest-free loans to install energy efficiency technologies.
• An additional £100m of interest-free energy efficiency loans for small and medium businesses.
• Seeking approval from the EU to prolong the Climate Change Levy (CCL) exemption for Combined Heat and Power (CHP) from 2013. CHP is currently exempt to 2013 and the Government wants to extend this to 2023. The Government says that “this could help bring forward an additional £2.5bn of investment in CHP”.
• Up to £4 billion of new loans, made possible by capital from the European Investment Bank. The money will be lent directly to energy projects or indirectly via banks. The Government says that this initiative can bring forward £1 billion of small and medium-sized UK renewables projects that have already been given planning consent.

The Government also announced that it has accepted the Climate Change Committee’s recommended carbon budgets for 2008 – 12, 2013 – 2017 and 2018 – 2022. Its aim is to meet these budgets through domestic action alone, so there will be a zero limit for non-traded sector on offsetting through international credits for the first budget period. The revised target is to reduce emissions to 34% below 1990 levels by 2022 and this will be tightened if global agreement is reached in Copenhagen in December.

The Government should be congratulated on the Budget package. Energy efficiency is the quickest way to control carbon emissions and the grants for public sector organisations will reduce public spending after a few years. It will also create tens of thousands of jobs in the construction sector. The support for decentralised energy and district heating is a major opportunity for biomass. Prolonging the CHP CCL-exemption will, provided the EU allows it, encourage this way of generating electricity without wasting most of the energy in the form of heat going up the power station’s chimney. However, the time-limited increase in ROC-banding for offshore wind will not increase construction. Instead, it will mean that turbine prices go up, as there is a global shortage of turbines and manufacturers know that UK developers have an incentive to sign contracts by the end of March 2010. And higher ROC banding is not the best way to promote offshore wind. The Government should replace this with repayable capital grants to cover the cost of grid connection.