2012 Budget: environmental announcements

A summary of the main environmental announcements in the 2012 Budget, delivered by the Chancellor on 21 March 2012. (Free access.)

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This update summarises the main environmental announcements in the 2012 Budget, delivered by the Chancellor, George Osborne, on 21 March 2012 ...show full speedread

This update summarises the main environmental announcements in the 2012 Budget, delivered by the Chancellor, George Osborne, on 21 March 2012.

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2012 Budget documents

This legal update focus on the main environmental announcements in the 2012 Budget.

For links to all Budget documents, see:


CRC Energy Efficiency Scheme

As previously announced in June 2011, the government will consult in 2012 on how to simplify the CRC Energy Efficiency Scheme (CRC) to reduce administrative burdens on organisations covered by the scheme. According to the press, the consultation will be published on 27 March 2012 (see Comment below).

However, the government has said in the 2012 Budget that, if it is not possible to achieve very significant cuts in the administrative burdens, the government will bring forward proposals in autumn 2012 to replace the CRC with an alternative environmental tax. It will consult with business before that to identify the potential options.

For more information on the:


Carbon price floor

The government will set carbon price support rates for 2014-15 equivalent to £9.55 per tonne of carbon dioxide, in line with the carbon price floor (CPF) that was set out in the 2011 Budget. The government has also said that it will also make a number of additional provisions in the Finance Bill 2012, with effect from 1 April 2013, including provisions to ensure that fossil fuels used to generate heat in good-quality combined heat and power (CHP) plants are not subject to the CPF rates.

For more information on the CPF, see:


Climate change levy (CCL) and climate change agreements (CCAs)

The rate of the climate change levy (CCL) will increase in line with the Retail Prices Index ( www.practicallaw.com/5-377-4351) (RPI) from 1 April 2013.

Energy used in certain metal recycling processes will be liable to a 20% reduction of the main CCL rates from 1 April 2012.

As previously announced in the 2011 Budget:

  • Climate change agreements (CCAs) will be extended to 2023.

  • The CCL discount for CCA participants available from 1 April 2013 will be increased to 90%.

  • The CCL exemption for electricity from CHP plants supplied indirectly to business energy consumers will be removed from 1 April 2013. However, the government has said in the 2012 Budget that electricity utilities will be able to continue to allocate CHP levy exemption certificates (LECs) until 31 March 2018 to give them time to use up their stocks.

For more information on the CCL and CCAs, see Practice note, Climate change levy and climate change agreements ( www.practicallaw.com/8-204-8341) .


Feed-in tariffs (FITs) and Renewable Heat Incentive (RHI)

As announced in the 2011 Budget, from April 2012, plant and machinery covered by the feed-in tariffs (FITs) and the Renewable Heat Incentive (RHI) will not be entitled to enhanced capital allowances (ECAs).

In addition, expenditure on solar panels will be designated as special rate expenditure for capital allowances purposes from April 2012.

For more information on:


Gas generation strategy

As previously announced, the government will publish a strategy for gas generation in autumn 2012. It will launch a call for evidence on barriers to investment in gas generation beforehand to inform the gas generating strategy.

This builds on the government's announcement, on 20 March 2012, about the Emissions Performance Standard, which will limit carbon dioxide emissions from individual fossil-fuelled power stations. For more information, see Legal update, Government confirms Emissions Performance Standard for new power stations ( www.practicallaw.com/1-518-5446) .


Green Investment Bank

The government has confirmed that the recently-established Green Investment Bank (GIB) will make its first set of green investments in April 2012 and will be based in Edinburgh.

For more information on the GIB, see:


Zero carbon homes

As previously announced, the Stamp Duty Land Tax (SDLT) relief for zero-carbon homes will end on 30 September 2012.

For more information on zero carbon homes, see Practice note, Zero carbon buildings ( www.practicallaw.com/2-375-5085) .


Habitats review

The government will publish, on 22 March 2012, its review of how the Habitats Directive (Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora) and Wild Birds Directive (Directive 2009/147/EC on the conservation of wild birds) have been implemented in England and Wales. The review had been announced in the 2011 Autumn Statement.

The government aims to:

  • Reduce unnecessary cost and delay to developers.

  • Set up a Major Infrastructure and Environment Unit, to help developers of nationally significant infrastructure projects address potential issues under the Habitats Directive.

  • Streamline guidance.

  • Set clearer standards for evidence.

  • Change the culture of statutory bodies.

For more information on the:


Landfill tax

The government will increase the standard rate of landfill tax from £64 per tonne to £72 from 1 April 2013. The lower rate of landfill tax (for inert waste) will remain frozen at £2.50 per tonne in 2013-14.

The Landfill Tax (Amendment) Regulations 2012 (SI 2012/885) were laid before Parliament on 21 March 2012 and will come into force on 1 April 2012. The Regulations change the maximum credit that landfill site operators may claim against their annual landfill tax liability from 6.2% to 5.6% when making contributions to the Landfill Communities Fund (LCF).

For more information on the landfill tax, see Practice note, Landfill tax ( www.practicallaw.com/2-204-8315) .


Aggregates levy

The government will delay the planned increase in the aggregates levy rate from £2.00 to £2.10 per tonne until 1 April 2013, to avoid putting additional pressure on the aggregates industry in Northern Ireland following the suspension of the aggregates levy credit scheme.

For more information on the aggregates levy, see Practice note, Aggregates levy ( www.practicallaw.com/7-204-8959) .



The government will legislate later in 2012 to increase packaging recycling targets for the period 2013-17. Targets will increase annually by 3% for aluminium, 5% for plastic and 1% for steel. Glass recycling targets will be split by end use.

For more information on:


VAT for energy-saving materials in charitable buildings

Charitable buildings will be removed from the scope of the reduced rate of VAT for the supply and installation of energy-saving materials. There is no explanation in the 2012 Budget as to why the change is being made.

The reduced rate of VAT will continue to apply to the supply and installation of energy-saving materials in residential accommodation, including residential accommodation operated by charities. Legislation will be introduced in the Finance Bill 2013.


Simplification of environmental, and health and safety, legislation

As previously announced, the government is planning to simplify and rationalise environmental, and health and safety (H&S), legislation as part of its Red Tape Challenge.

In particular, the government has said that it will scrap or improve:

  • Over 100 pieces of environmental legislation.

  • 84% of H&S regulation, including bringing forward legislation in 2012 to amend strict liability provisions so that employers will no longer be in breach of their duties if they have done everything that is reasonably practicable and foreseeable to protect their employees.

The government also announced in the 2012 Budget that it will launch sector-based reviews of environmental regulation, starting with chemicals manufacturing, volunteer events and small businesses in food manufacturing.

For more information, see:


Planning reform

The government will reform the planning system and publish the National Planning Policy Framework (NPPF) by the end of March 2012. This will come into force for plan-making and planning decisions from that point onwards. The NPPF will include a "powerful presumption" in favour of sustainable development (which will underpin all local plans and decisions) and will localise choice about the use of previously developed land (thus putting an end to nationally imposed targets).

The government will also bring forward legislation to remove duplication in the planning consent regime for major infrastructure development and will shortly publish draft revised guidance to clarify the regime.

For more information on the environmental implications of the current planning regime, see Practice note, Planning Act 2008: environmental implications ( www.practicallaw.com/0-384-6874) .



The 2012 Budget was somewhat of an anti-climax given that key environmental announcements were expected on:

  • The CRC.

  • Duty on companies to report on their carbon emissions.

  • Habitats review.

CRC. There had been speculation in the press in the lead up to the 2012 Budget that the government might scrap the CRC and replace with a modified CCL and a duty on companies to report on their greenhouse gas emissions (GHGs). Although the government has not said in the 2012 Budget that it will scrap the CRC, it has certainly laid the ground for that option. According to the press, the Department of Energy and Climate Change will consult on the CRC on 27 March 2012 (see Green Budget 2012: Carbon Reduction Commitment to be reformed or axed, BusinessGreen.com, 21 March 2012).

Carbon reporting for companies. It is surprising that there has been no indication yet of whether the government is proposing to impose a duty on companies to report on their GHG emissions. Section 85 of the Climate Change Act 2008 states that, by 6 April 2012, the government must either:

  • Make regulations under section 416(4) of the Companies Act 2006, requiring directors' reports to contain certain specified information about GHG emissions from activities for which a company is responsible; or

  • Lay a report before Parliament explaining why no such regulations have been made.

For more information, see Practice note, Environmental reporting for companies: mandatory: Climate Change Act 2008 ( www.practicallaw.com/5-501-2161) .

Habitats review. The eagerly-awaited report on whether the current implementation of the Habitats and Wild Birds Directives leads to unnecessary costs and delays to development is due to be published on 22 March 2012, and not on the same day as the 2012 Budget, as previously expected.

Renewables. The renewables industry welcomed the Chancellor's indication in his Statement that clean energy will be an infrastructure priority under the National Infrastructure Plan, alongside road, rail and broadband:

"I also want to see investment in our world-leading energy sector, including renewables".

But, as a nod to the concerns of backbench Conservative MPs, he cautioned that:

"Renewable energy will play a crucial part in Britain's energy mix - but I will always be alert to the costs we are asking families and businesses to bear. Environmentally sustainable has to be fiscally sustainable too."

For more information, see:

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