Fracking and offshore wind given boost

9th August 2013

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Tax incentives to exploit unconventional sources of oil and gas largely through hydraulic fracturing, or "fracking", have been unveiled by the chancellor

At the same time, the government has outlined its strategy to support the growth of the UK offshore wind industry.

The Treasury says its tax proposals for shale gas will encourage early investment in the exploration and development of sites in the UK, bringing significant economic benefits.

The draft tax regime includes establishing a “pad allowance”, which would in effect cut the tax rate on some of the income from extracting the gas from 62% to 30%. A “pad” is the term used in the industry to describe the drilling and extraction site.

The government has also confirmed that communities hosting operations will receive £100,000 per shale gas site, and up to 1% of all production revenues.

In a further move to encourage the shale gas industry, the local government department has published new guidance for councils in England on hydraulic fracturing.

It makes local authorities responsible for determining shale gas planning applications and sets out the environmental, health and safety issues that need to be considered.

The Environment Agency has also produced a plan for streamlining the permitting process for shale gas projects.

The government’s offshore wind strategy, meanwhile, has the potential to unlock £7 billion in the economy by 2020, claim ministers. Measures announced by the business department to support the industry include investing £20 million to improve the UK supply chain for wind technologies, and £46 million to support innovation between the industry and academia.

“I would hope to see something approaching what we already see in the oil and gas sector where 70% of the supply chain is made in Britain,” commented business secretary Vince Cable.

Government support for fracking and offshore wind comes as analysis by the Green Alliance reveals that investment in low-carbon infrastructure projects are worth significantly more to the economy than high-carbon ones.

Offshore wind projects alone are worth more than four times planned gas power spending, it says.

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