As the UK prepares to host COP26 later this year, there were several campaigns for the Chancellor to use his Budget as an opportunity to focus on climate change and to build further on our green recovery from COVID-19. However, Wednesday’s Budget wasn’t as green-focused as many may have hoped. We’ve summarised the most significant energy-related announcements for businesses below.
Carbon Price Support has been held at £18 per tonne in 2022/23, and fuel duty was frozen for the eleventh consecutive year – however, Sunak hinted that these rates may be adjusted in the future in line with the net zero emissions goal. Earlier in the week, BEIS confirmed details of the UK emissions trading scheme, announcing that the first auction will be held on 19 May – the Chancellor also suggested that plans to expand the scheme would be set out over the coming months.
It was reported that plans for a carbon tax across consumer goods were blocked by the Prime Minister ahead of the Budget, and the Treasury provided no indication that any future measures were being considered, although it did state it is committed to carbon pricing ‘as a tool to drive decarbonisation’.
Super deduction tax incentive
A new ‘super deduction’ was announced to encourage firms investing in qualifying plant and machinery, which could include, green and energy efficiency technologies. The temporary change will allow companies to cut their tax bill by claiming a 130% first year capital allowance of the qualifying assets. This is expected to be a tax benefit of £25 billion over the two-year period. An additional first-year 50% reduction in tax is available for qualifying special rate assets.
In its recently published “Build Back Better” Strategy, the Treasury confirmed its plans to introduce a ‘Green Taxonomy’ to provide a common standard for measuring firms’ environmental impact, stating that firms will be required “to disclose the climate risks they face in line with the recommendations of the Taskforce on Climate-Related Financial Disclosures.”
High quality carbon offsetting
A taskforce has been established to explore how to turn the UK and the City of London into a global leader in the carbon offset market and capitalise on the expected growth in demand as more organisations explore voluntary offsetting as part of their net zero journeys
Funding clean infrastructure
Sunak declared that ‘our future economy needs investment in green industries across the United Kingdom, announcing details of the first UK Infrastructure Bank. Based in Leeds, with £12 billion capitalisation and a primary focus on investment in public and private green projects.
Also, as part of this investment-led recovery, the Chancellor confirmed the new Net Zero Innovation Portfolio, which was outlined in the Energy White Paper. The £1 billion fund will provide funding for low-carbon technologies and systems, supporting our journey to net zero.
Other funding projects include a £68 million competition for energy storage prototypes, more support for offshore wind technologies, including plans to upgrade port infrastructure in Teesside and Humberside, £27million to create an ‘energy transition zone’ in Aberdeen, and £4.8million to create a hydrogen hub in Holyhead, Wales, to pilot the use of cleaner fuel in heavy goods vehicles.
Economic policy and green bonds
In a significant move, the UK’s net zero goal has been added to the government’s ‘overall policy objective’ and will become part of the Bank of England’s remit, ensuring that economic growth is also sustainable and consistent with the net zero transition.
The Government has launched the ‘green gilt’ – the UK’s first sovereign green bond. The aim is to issue a minimum of £15billion in green government bonds this year, along with a green savings bond for retail investors through the National Savings & Investment (NSI) bank.
What does it mean for businesses?
With an expected £25 billion value, the “super-deduction” will be a welcome tax break for many businesses. Guidance is high level, but it is clear that this could be a powerful tool to de-risk investment in new, green and clean technology, if companies take advantage of the opportunity.
The coming months will be crucial to unlock the detail behind the net zero strategy. As an overall policy directive, the direction of travel towards decarbonisation is locked in and organisations yet to begin mapping out their own net zero journey should strongly consider starting soon.
To discuss what net zero means for your business and where to begin, or to discuss any opportunities emerging from the new budget, contact us today on 0330 166 4444 or email [email protected]