North Sea oil rigs moored in Cromarty Firth, Scotland. Photo: Christopher Ames
Industrial and environmental policy in #Budget2016: Is that it?
Like the rest of the Budget, measures announced today to address industry, energy and the environment were distinctly underwhelming. I’ve just ploughed through the Budget document (the so-called ‘red book’) and perhaps the Guardian’s Aditya Chakrabortty sums it up in my favourite tweet of the day:
No, George, you are not the builders. You are the perpetual announcement that the builders are coming
— Aditya Chakrabortty (@chakrabortty) March 16, 2016
The Budget gave some support for oil and gas. The red book states:
“The government believes in making the most of the UK’s oil and gas resources. The oil and gas industry delivers significant economic benefits, supports hundreds of thousands of jobs and supplies a large portion of the nation’s primary energy needs.”
So it does, and many of those working in the sector are trade union members. The Budget announcement included the effective abolition of the Petroleum Revenue Tax by permanently reducing the rate from 35% to zero. It will also reduce the Supplementary Charge from 20% to 10%. This support is welcome, but limited. George Osborne had some good knock-about at the expense of the Scottish National Party in his speech, but for an authoritative response to the oil and gas announcement, it’s worth checking out the STUC, our sister organisation in Scotland. The STUC has said that the Chancellor could have provided significantly more support to oil and gas, particularly on exploration incentives and investment allowances.
Elsewhere, the government has said it will implement the recommendations of the National Infrastructure Commission’s energy study, ‘Smart Power’, as an opportunity to transform the UK’s electricity sector. The idea is to position the UK to become a world leader in flexibility and smart technologies, including electricity storage.
The government will auction Contracts for Difference of up to £730m this Parliament for up to 4 gigawatts of offshore wind and other less established renewables. It has also launched the first stage of a competition to identify the best value small modular nuclear reactor in the UK.
The main announcement – if we can call it that – is the allocation of at least £50m for innovation in energy storage, demand side response and other smart technologies over the next five years. Forgive my lack of excitement, but that amounts to £10m per year. I know that times are tight, but energy storage is a major issue. Renewable sectors, such as those in wind turbines, are thinking hard about this, but I’m not sure how much progress they can make with just £10m per year to play with.
In last year’s Autumn Statement, the Chancellor quietly dropped a £1bn competition aimed at commercialising Carbon Capture and Storage (CCS) technology, which is seen as crucial to the UK meeting its climate targets. DECC, the lead department for climate change, took a huge hit. DECC maintains its continued support for CCS, whilst the Prime Minister has appeared to question the technology. Either way, having been clobbered weeks before the UK signed the Paris Agreement, supporters of green technology had hoped for something to keep their show on the road in this Budget. They will have found little comfort today.
Finally, the government has abolished the CRC energy efficiency scheme, which was designed to cut CO2 emissions in public and private sector organisations that are high energy users, and has increased the Climate Change Levy to recover the revenue in a fiscally neutral way. If this is a tax simplification, it can be welcomed, but we’ll need to reserve judgement until we see who might be affected. The Budget also sought to rebalance Climate Change Levy rates for different fuel types, incentivising a long-term reduction in the use of gas, in support of the UK’s climate change targets.