27 April 2009: UK Budget 2009

At a time when all the talk is of the need for massive cuts in expenditure, in the Budget on 22 April 2009, the UK Government managed to find some extra money to help control climate change. In fact, there was significant extra money for energy efficiency and renewables. However, the proportion of UK public money being spent on tackling climate change is still far lower than it is in Obama’s recovery package (see President Obama’s green economics), but the 2009 UK Budget is a move in the right direction.

The Chancellor, Alister Darling, announced that there will be:

  • £405m to support development and deployment of low-carbon technologies.
  • £70m for decentralised and community low-carbon energy.
  • £65m in interest-free loans for energy efficiency in schools, hospitals and other public sector organisations.

The Government also proposes to increase Renewable Obligation Certificates (ROCs) 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. Darling also announced that the UK has received capital from the European Investment Bank (EIB), which will be used to make up to £4 billion of new loans to support low-carbon technologies.

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. In addition, the support for decentralised energy and district heating is a major opportunity for biomass technologies.

However, the time-limited increase in ROC-banding for offshore wind will not increase construction. Instead, it will mean that turbine prices will 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.

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