Autumn statement 2016: Chancellor delays decisions on post-2020 energy policy

24th November 2016

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  • Adaptation ,
  • Mitigation ,
  • Fossil fuels



Industry and campaign groups have slammed the autumn statement for lacking detail on energy policy after 2020.

In the March budget, former chancellor George Osborne had pledged to set out the long-term direction for rates of the carbon price support (CPS) and the carbon price floor (CPF), both of which are designed to boost investment in renewable energy.

His replacement, Philip Hammond, yesterday said he would freeze the CPS at £18 tonne/CO2, adding only that the Treasury would continue to consider the appropriate mechanism for setting the carbon price in the 2020s. He also delayed a decision until the March Budget on the fate of the levy control framework, which caps future spending on low-carbon energy.

Dustin Benton, acting deputy director of the Green Alliance, said the postponement was disappointing given that renewable energy infrastructure could deliver an additional £22bn in private sector investment before 2020.

Dr Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit (ECIU), said Hammond had failed to offer clarity for the energy industry beyond the short term. ‘Considering the long-term nature of energy investments, clarity more than three years into the future is vital for the industry.

‘Vast swathes of the UK’s generating capacity are reaching retirement age, and long-term clarity on carbon pricing would provide investors with the platform to back much needed new low-carbon equipment. This statement is likely to see investment in new capacity continue at glacial pace,’ he said.

Friends of the Earth senior campaigner Liz Hutchins said the CPS needed to be extended till at least 2025 to support the phase out of coal-fired power.

Hammond announced £390m to support renewable fuels, ultra-low emission vehicles and driverless cars. But the Renewable Energy Association pointed out that more clarity on future power system decarbonisation was essential since electric vehicles would only reduce emissions if they were powered by low-carbon sources.

IEMA chief policy advisor Martin Baxter said that the statement had done little to demonstrate the government’s commitment to the environment and sustainability.

Baxter welcomed the chancellor’s announcement of investment in infrastructure, industry and skills, a programme he said that should have environment and sustainability skills at its core. But he added: ‘We are disappointed that this hasn’t thus far appeared to be prominent. We look forward to seeing this come through in the imminent industrial strategy, the emissions reduction plan and the 25-year environment plan.’

The solar industry was disappointed that Hammond did not act to prevent business rate rises for organisations supplying themselves with solar power. Rates are due to increase six to eight-fold from April, which would see return on investment fall by around 2.5%, according to the Solar Trade Association (STA).

Leonie Greene, STA head of external affairs, said: ‘Only the week after the UK ratified the Paris Agreement, the chancellor made no mention of climate change. It is deeply frustrating at this point in time that we have to battle against a tax regime that is rewarding investors in fossil fuels over solar energy. Very modest intervention is needed to unlock a billion of investment in solar over this parliament.

Other measures announced in the autumn statement include:

  • a freeze in fuel duty, the seventh year running that the tax has not risen. The move equates to an estimated drop of £850m in revenue for the Treasury;
  • tax breaks for employees buying bikes or electric cars will be exempt from changes to salary sacrifice schemes, which allow employees to buy benefits before tax;
  • £1.1bn for local road upgrades and £220m for strategic roads;
  • £170m in flood defence and resilience measures, £20m of which will be for new flood defence schemes, £50m for rail resilience projects, and £100m to improve the resilience of roads.


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