Energy Implications of the Spring Budget announced by the Chancellor 2nd March 2021
Below is summary of the energy implications of the Governments Spring 2021 Budget. If more in depth analysis is required please contact Ian.Shinwell@energy-potential.com.
Climate Change was not the headline act of Wednesday’s Spring Budget for obvious reasons. However, interested parties were no doubt looking for confirmation that the government is not rolling back on some of the promises made in the Energy White Paper “Powering Our Net Zero Future” published on 14 December and the Prime Minister’s 10-point plan published in November. The Chancellor did state that his “budget lays the foundations for a strong recovery and a greener economy”. Indeed, green finance has been added to the remit of the Bank of England.
The White Paper described how the UK intends to clean up its energy system in order to reach net zero emissions by 2050. Since the White Paper the UK experienced a huge resurgence in new Covid 19 infections and deaths which prompted the enforcement of a severe lockdown of the British economy, the closure of schools, severe limitations on social interaction and the shut-down of non-essential shops and travel and virtually all hospitality.
As a result of the lockdown the Chancellors budget on 3 March was, perhaps understandably, designed to protect companies and jobs. He extended furlough and support for the self-employed until September 2021. The cost of this was added to the extraordinary public health spending on Covid 19 testing and vaccines together with the reduced tax revenues from the shrinking economy and the support given to businesses particularly since the March 2020 lockdown. As a result of this enormous cost the highest tax rises for 30 years were announced. The most significant of these are freezing of tax-free allowances and a 6% increase in corporation tax.
This background was not the most promising for those wishing for more climate change action.
To be fair the Chancellor did not overtly roll back on the White Paper. Let’s look at some of the measures announced and see if the government’s is still committed to net zero.
As part of the Bank of England’s aforementioned remit it is expected to facilitate an increased supply of green finance and encouragement for infrastructure projects via:
Finally, Carbon price support will be frozen at £18/tonne of CO2. This UK Government policy was implemented to support the EU Emissions Trading System (EU ETS) in 2013 to underpin the price of carbon at a level that drives low carbon investment, which the EU ETS has not achieved. It remains to be seen if it will continue to be required when we are reliant on the UKETS.
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