Pale green UK budget

It his latest budget, UK Chancellor Rishi Sunak froze fuel duty for the eleventh year in a row; announced that corporation tax would rise from 19% to 25% for the most profitable companies; and unveiled plans to create an Infrastructure Bank, with £12bn to invest that will help the government’s ‘green industrial revolution’.

The Infrastructure Bank will be the world’s first green sovereign savings bond and will allow investors to put money into green projects and further the UK government’s commitment to reach net zero emissions by 2050.

In a budget considered to be relatively ‘pale green’ by some commentators, there were several shoots of encouragement. Some £20mn is to fund a UK-wide competition to develop floating offshore wind demonstrators and help support the UK government’s aim to generate enough electricity from offshore wind to power every home by 2030. An additional £68mn is earmarked to fund a further UK-wide competition to deliver first-of-a-kind, long duration energy storage prototypes that will reduce the cost of net zero by storing excess low carbon energy over longer periods.

A £4mn biomass feedstocks programme will be used to identify ways to increase the production of green energy crops and forest products that can be used for second generation biofuel production.

There are also plans for at least £15bn of green gilt issuance in the coming financial year, to help finance critical projects to tackle climate change and other environmental challenges, fund important infrastructure investment, and to create green jobs across the UK.

On a regional basis, £27mn is to be invested in the Aberdeen Energy Transition Zone and £5mn in the Global Underwater Hub in Scotland, as the first stage in delivering the North Sea Transition Deal. And £4.8mn is to be used to support development of a demonstration hydrogen hub in Holyhead, Anglesey.

Reaction to the new green initiatives was varied. Harriet Lamb, CEO of climate solutions charity Ashden remarked: ‘Despite some welcome initiatives, this was not the green growth budget that we need to counter climate change and create jobs. With just eight months to go until the UK hosts COP26 in Glasgow, this was a missed chance for global green leadership.’

However, Richard Cockburn, Partner and Head of Energy at law firm Womble Bond Dickinson was more positive: ‘This is a welcome commitment by the UK government which will help to accelerate North East Scotland’s transition to clean energy. Aberdeen and the surrounding area have a long heritage in oil and gas and this new investment will build on that expertise as the area transforms itself into a global energy cluster. Alongside the announcements of a new Global Underwater Hub and further money to develop the North Sea Transition Deal … these constitute strong messages of support for the Scottish Energy sector.’ He added: ‘Green bonds are very popular at the moment as they facilitate the funding of climate-related projects. The UK is tapping into that demand, following similar measures by Sweden, Germany, France, Poland and Ireland. And the UK government sees this as another way to encourage the economy to “build back greener”.’

Julia Derrick, Energy Partner of law firm Ashurst was of the opinion that: ‘Though the funding being made available by the UK government towards implementing the energy transition in the UKCS may only be a small proportion of the scale of funding and investment that will ultimately be required. It is nonetheless a positive step, confirming the government’s commitment to the road maps in the 10-point plan and the Energy White Paper.’

Meanwhile, Petroleum Retailers Association (PRA) Chairman Brian Madderson welcomed the Chancellor’s decision to freeze fuel duty again, after heavy campaigning against any rises. ‘Fuel duty is a regressive tax on business and livelihoods, so any attempt to increase it would have been entirely counter-productive as the economy gets back on track,’ he said.

Photo: © HM Treasury