The Chancellor of the Exchequer, George Osborne, today delivered his eighth Budget in the House of Commons. His package of reforms relevant to the environment, planning and energy sectors is as follows:

  • abolition of the Carbon Reduction Commitment Energy Efficiency Scheme (“CRC”) following the 2018-2019 compliance year, and a scheduled move to a single energy consumption tax. This  is supported by an increase in the Climate Change Levy (“CCL”) from 2019, to incentivise energy efficiency among CCL-paying businesses. Eligibility for the Climate Change Agreement scheme is also to continue until at least 2023. Separately, HM Treasury announced a consultation to take place in the summer of 2016 on mandatory reporting of emissions with a view to simplifying the existing regime. The changes will come into effect in 2019;
  • financial incentives for renewable energy, including auctioning Contracts for Difference of up to £730 million, for up to 4 GW of offshore wind and other less established renewables;
  • tax cuts for the oil and gas industry, continuing  the Chancellor’s reduction to the supplementary tax on the oil and gas industry (from 20% to 10%), and effective abolition of the Petroleum Revenue Tax by permanently reducing the rate from 35% to 0%. Both of these measures will be backdated to 1 January 2016;
  • funding f lood defence packages for works throughout northern England by increasing the insurance premium tax from 9.5% to 10%;
  • setting statutory 3 month deadlines for Secretary of State decisions on called-in applications and recovered appeals to prevent time-delays on decisions on infrastructure, housing and regeneration projects;
  • the carbon price support rate will be capped at £18 p/tCO2  to 2020;
  • introducing the following measures to reform the planning system:-
    • devolving further powers to local authorities to allow for the  move towards a more zonal and “red line” planning system throughout the UK. It is understood that this change will (currently) only relate to residential housing – and not the wider property development market;
    • streamlining the use of pre-commencement planning conditions; and
    • review the process of deemed discharge of planning conditions; and
  • For the Chancellor, these changes are needed to “Keep Britain moving”, but for the UK’s only Green MP, Caroline Lucas, this is a “climate-wrecking budget”.

Our thoughts:

Certainly, the changes to CCL and the abolition of the CRC will have profound effects. Whilst touted as revenue-neutral, the distributional effects of these changes could be material depending on whether individual businesses are currently covered by the CRC.

In addition, since last year, renewable energy has been subject to the CCL, so the planned increase in the rates of CCL amount to a further tax increase on renewables, which could impact investment in the sector.

That said, the freezing of the carbon price f loor, reduction of taxes for the oil and gas sector and further simplification of the planning system are likely to be strongly welcomed across a wide range of businesses.