Industry NewsThe Climate Change Levy (CCL) may be dramatically altered in 2011, following the promise of a consultation in the June emergency Budget. As part of a package of policies to reduce the national debt, the new coalition Government has announced plans to reform energy taxation to enhance investment and support carbon prices. This may suggest that the CCL becomes a direct carbon tax, as suggested in some quarters. Any decision will be enacted in the Finance Bill 2011, which will follow next year's Budget.
Chancellor George Osborne MP unveiled his emergency Budget with the aim of cutting into the high national debt. It is estimated that the country has to find savings worth around ?74 billion per annum. Amongst the changes – including an increase in VAT to 20 per cent and a freeze on public sector pay – were a number of environmentally-focused policies. Changes in energy taxation had been indicated early in the life of the new Government, with the coalition indicating that they were keen to take action to secure a floor price for carbon. It is felt that current pricing levels do not provide the right incentive for renewable energy investment. Changes to the CCL will be designed to rectify this.
A number of stakeholders have been critical over the pace of change, with some expecting that the details of CCL changes and carbon taxation would be included in this Budget. However, this does neglect to consider the potential ramifications of a sudden change in policy, as well as the possible conflict with EU legislation on taxation and the operation of the Emissions Trading Scheme. As such, a period of consultation and the planned introduction of changes in early 2011 may help mitigate any negative impacts, and the timeframe suggested by the Government is shorter than previous environmental plans.
Elsewhere in the Budget, further details were announced of the Green Investment Bank, which will provide additional investment for renewable energy projects and energy efficiency schemes. Consumers will also benefit from a Green Deal with regard to investing in environmental home improvements. There was no change in fuel duty so to speak, beyond that highlighted in the previous March 2010 Budget, but the new coalition has promised to make the system 'fairer'. The Office for Budget Responsibility will look into the development of a 'fair fuel stabiliser' which will refine taxation with respect to wholesale prices to mitigate the impact on consumers. In addition, a direct discount for rural fuel users is being considered.
Reacting to the Budget, Richard Gledhill, of PricewaterhouseCoopers, commented, "Sustainability was a major focus in the Chancellor's speech, but from an economic and fiscal perspective rather than in relation to the environment. Climate change hardly featured."