Chancellor backs shale gas and heavy industry

Tax incentives for shale gas exploration and exemption from the climate change levy for energy-intensive sectors were among the headlines from the 2013 budget

Presenting his fourth budget to parliament, George Osborne told MPs that “shale gas is part of the future and we will make it happen”, as the chancellor introduced what he described as a “generous” new tax regime to promote investment in the industry.

Following promises in previous statements to provide support for high-energy using sectors, Osborne also confirmed that the government would be exempting some industrial processes, such as ceramic and metal manufacture, from the climate change levy (CCL) from 1 April 2014. Draft legislation detailing the processes to be exempt will be published alongside the autumn statement, confirmed the chancellor.

“Creating a low-carbon economy should be done in a way that creates jobs rather than costing them,” said Osborne in his budget speech. “We will exempt from next year the industrial processes for the ceramic industry and some others from the CCL. And in the next spending round we will provide support for energy intensive industries beyond 2015.”

The budget also revealed higher than expected carbon price floor (CPF) levels for 2015/16 and beyond. From 1 April 2015, the cost of carbon will rise to £18.08 per tonne, almost double the cost predicted for that year in 2011, with prices expected to rise to £24.62 in 2017/18.

The CPF, which will come into force on 1 April, will not apply in Northern Ireland, the chancellor has confirmed, in order to ensure that electricity generators can “maintain their competitiveness with those in the Republic of Ireland”.

Other budget measures include: exempting state schools in England from the carbon reduction commitment energy efficiency scheme from April 2014; increasing the higher rate of landfill tax to £80 per tonne; and introducing two new company car tax bands for ultra-low emission vehicles from 2015.

The chancellor also scrapped the 1.89p per litre rise in fuel duty that had been due to take effect from 1 January 2013, but which he had postponed until 1 September 2013 in his 2012 autumn statement.

Cancelling the rise in duty will save a typical haulier £750 a year, according to the treasury, but could mean that the UK’s annual carbon emissions are 200,000 tonnes higher.