New tax allowance for onshore oil and gas, Green Deal reform, and £5 million  investment in large-scale electric vehicles…these are just some of the  proposals in the Autumn Statement 2013 delivered by the Chancellor of the  Exchequer on 5 December 2013. 

Shale gas tax allowances

One of the most significant announcements was the introduction of a new tax  allowance for the exploration and development of shale gas in the UK, which  the Government hopes will encourage global operators to invest in the UK’s  indigenous oil and gas resources. In addition to a generous tax reduction from  62 per cent to 30 per cent, companies will receive an allowance equal to 75  per cent of their capital spend on shale gas projects. According to the  Chancellor, this move would make the UK’s tax regime the most generous in  the world. 

CRC Energy Efficiency  Scheme

Of particular importance to the  carbon market is the confirmation  that the price of allowances under the  CRC Energy Efficiency Scheme for  2014/15 will be set at £15.60 per  tonne of carbon dioxide in advance of  the forecast sale, and £16.40 in the  buy-to-comply sale. Readers should  note that the Autumn Statement  document refers to CRC allowances  as an environmental tax, although in  practice the scheme is treated by  landlords and tenants as a matter of  energy usage, and the scheme does  not form part of the Finance Bill 2014.  Given the forthcoming registration  deadline for the Initial Phase of the  CRC, this updated classification may  impact how responsibilities are  defined in tenancy agreements. 

Climate Change  Agreements

The scope of Climate Change  Agreements (CCA) will be extended  to cover the data centres sector by  the end of 2014, along with other  energy intensive sectors already in  the scheme. From 1 April 2014, the  Government will also introduce a  mixed use exemption from the  Climate Change Levy (CCL) for solid  fuels used in certain gasification  processes. The exemption would  include coke, coal and anthracite  used partly as fuel and partly for their  structural properties as a bedding  agent in gas extraction from waste. 

ECO

The Energy Companies Obligation  (ECO) scheme requires energy  companies to improve energy  efficiency for low-income households.  It is designed to help means-tested  customers fund insulation measures.  The ECO covers those customers  who will not be able to benefit from  the Green Deal as their income is not  appropriate for the loan arrangements  underlying the Green Deal. 

The Chancellor announced plans to  revise the ECO as part of this loan to  reduce annual household energy bills  by £50. To achieve these savings the  ECO scheme will be extended to  March 2017 giving energy suppliers  an additional two years to meet their  ECO targets. 

The detail on the ECO reforms will be  released in a consultation in the  spring of 2014. The issue here is that  energy suppliers will face pressure to  decrease their charges prior to the  changes to the legislation being  made. Both the energy companies  and anyone involved in the ECO  arrangements will need to be alive to  the changes being reported as they  impact on contracts that have  already been signed but which were  designed to meet the original 2015 deadline.

Green Deal

The Chancellor announced the  Government’s intention to simplify  the Green Deal scheme, which has  so far been implemented with low  uptake, partly due to the interest  rates payable on Green Deal loans.  Given the current level of mortgage  rates, it has been cheaper for  consumers to extend their  mortgages to install these types of  measures. 

Some changes proposed for the  Green Deal involve amending the  golden rule and the legislation to  allow both landlords and tenants to  benefit from the scheme; extending the list of energy improving measures  available as part of the Green Deal,  and improving the finance offer that  the Green Deal Finance Company is  able to provide. Further, the  Government will consider providing  funding to private landlords through  the Green Deal to enable them to  achieve minimum energy efficiency  standards by 2018, as required by  wider energy efficiency policies. 

Other levies

No reform measures have been  introduced in relation to levies for  renewables and other low-carbon  technologies which are being dealt  with separately by the Department of  Energy and Climate Change. This  also means that there will be no cut  or removal of the Carbon Price Floor  (CPF) as had been hoped for by the  coal mining sector and some energy  intensive industries. For further  details on the energy market reform  please continue reading the Energy  and Projects section of this  newsletter. 

Following the Autumn Statement,  HMRC published the Draft Finance  Bill 2014 for consultation on 10  December 2013 which includes  proposals set out above. The draft  legislation is available for comments  until 2 February 2014.