Government mandates more incentives for UK energy sector, but bears no gifts for renewables, says EY

20 March 2013

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Ben Warren, EY’s Environmental Finance Leader said:

"Today's budget may well be interpreted as environmentally unfriendly, but certainly reflects the challenge of encouraging low carbon energy infrastructure investment whilst maintaining the competitiveness of UK-based industry.

"With the exception of support for ultra-low emissions vehicles, the ceramics industry received an exemption from the Climate Change Levy, which may set expectations for other energy intensive, but potentially mobile, industries.  New financial support measures also emerged for the nascent energy technologies of shale gas, new nuclear and CCS.

"If there are two concrete take-aways from today's budget, these would be that it is now evident that government judges it necessary to offer investors in most UK energy infrastructure (whether renewable, gas, nuclear or clean coal) some form of incentive or support, and that the Treasury's near-term tax take is an increasingly important driver of energy and environmental policy.

"Whether seeking to accelerate the contribution shale gas makes to the UK’s coffers, or trying to stem an exodus of potters from the UK to other markets where it is cheaper to pollute, the Chancellor has made his strategy clear.

"The budget should not, however, be seen as a kick in the teeth for the UK’s renewable sector.  In fact, the incentives clearly required for all segments of the energy sector reflect the reality of needing to give investors confidence before they risk capital, and also help to further level the playing field between technologies, where renewables have benefitted from the RO regime for some years. 

"While the budget was devoid of any new gifts from the Chancellor, nothing was taken away either."