June 2010 Budget: environmental announcements

Practical Law UK Legal Update 6-502-5827 (Approx. 7 pages)

June 2010 Budget: environmental announcements

by PLC Environment

Introduction

The following is a summary of the main environmental announcements in the June 2010 Budget, delivered by the Chancellor, George Osborne, on 22 June 2010.

For more information on the June 2010 Budget, see:

This is the second Budget this year. The previous Budget was delivered by the Labour government in March 2010 (see Legal update, March 2010 Budget: environmental announcements).

Deregulation

The government wants to reduce regulatory costs in general, by introducing a "one-in-one-out" system for new regulations. The government's plans include the following:

New regulations will not be implemented until they have been reviewed and re-agreed by the newly created Reducing Regulation Committee, which will be chaired by Business Secretary Vince Cable. For more information on this new Committee, see Department for Business, Innovation and Skills press release.
Regulations will cease to be law after seven years unless Parliament has confirmed that they are still necessary and proportionate or a longer timeframe has been explicitly set out ("sunset clauses").

The Department for Business, Innovation and Skills will publish more detail in July 2010.

Low-carbon economy

The Conservative-Liberal Democrat coalition government acknowledges that climate change is one of the most serious threats currently facing the world and the Prime Minister, David Cameron, has pledged to make this the "greenest government ever".

The government estimates that the move to a low-carbon economy will require £200 billion of investment until 2020 to provide secure low-carbon energy, and reform of the energy market to attract additional private sector funding.

Carbon price

The government will consult, in the autumn, on proposals to reform the climate change levy to provide more certainty and support to the carbon price. Subject to the outcome of that consultation, the government intends to bring forward legislation in the Finance Bill 2011.

For details of the other changes the government is planning to make to the climate change levy, see Climate change levy below.

Green Investment Bank

The government will set out, following the Spending Review in October 2010, detailed proposals on the creation of a Green Investment Bank.

For background on the previous (Labour) government's proposals for a Green Investment Bank, see Legal update, March 2010 Budget: environmental announcements: Green Investment Bank.

Infrastructure UK

The government has confirmed that Infrastructure UK (IUK) will be established, to enable greater private sector investment in infrastructure (such as roads, railways and power stations).

In addition, the government will publish a national infrastructure plan, which will include priority public and private sector investments.

The government also plans to carry out an investigation on how to reduce the cost of civil engineering works for major infrastructure projects.

For background information on the previous (Labour) government's proposals on national infrastructure, see Legal update, March 2010 Budget: environmental announcements: Strategy for national infrastructure.

Green Deal for households

The government will establish a Green Deal for households through the proposed Energy Security and Green Economy Bill, to help households invest in energy efficiency improvements that can pay for themselves from the resulting savings in energy bills.

The government has also said it will continue to work on green financial products for individuals.

For more information on this Bill, see Legal update, Queen's Speech 2010: environmental implications: Energy Security and Green Economy Bill.

Reducing the government's own emissions

The government has pledged to reduce its greenhouse gas emissions by 10% between mid-May 2010 and mid-May 2011.

The previous (Labour) government had pledged to reduce emissions from central government departments by at least 30% by 2020.

EU Emissions Trading Scheme

The government has confirmed that (as announced in the March 2010 Budget) it intends to include nitrous oxide gases from nitric acid production in the EU Emissions Trading Scheme (EU ETS) from 2011.

For more information on the EU ETS, see Practice note, EU Emissions Trading Scheme.

Climate change levy

The government has announced that it will consult, in autumn 2010, on proposals to reform the climate change levy to provide more certainty and support to the carbon price. Subject to the outcome of that consultation, the government intends to bring forward legislation in the Finance Bill 2011.

In addition, the government has confirmed that:

The rates of the climate change levy will be raised in line with inflation on 1 April 2011 (as announced in the March 2010 Budget).
The discount from the climate change levy obtained by participating in a climate change agreement will be reduced from 80% to 65% from 1 April 2011 (as announced in the 2009 Pre-Budget Report). At present those who are subject to the climate change levy can benefit from an 80% discount if they have entered into climate change agreements and have met their targets under those agreements. From 1 April 2011, the discount will be reduced to 65%.

For more information on the climate change levy and climate change agreements, see Practice note, Climate change levy and climate change agreements.

Landfill tax

The government has confirmed that (as announced in the March 2010 Budget):

The standard rate of landfill tax will increase by £8 per tonne each year from 1 April 2011, until at least 2014.
There will be a floor under the standard rate so that this rate will not fall below £80 per tonne from April 2014, until at least 2020.
The Finance Bill will set out new qualifying criteria for lower rated wastes, to come into effect on 1 April 2011. For more information, see June 2010 Budget - BN32 - Landfill Tax: Criteria for Determining Material To Be Subject to the Lower Rate.

For more information on landfill tax, see Practice note, Landfill tax.

Aggregates levy

The government has confirmed that (as announced in the March 2010 Budget) the rate of aggregates levy will increase from £2 per tonne to £2.10 per tonne on 1 April 2011.

For more information on the aggregates levy, see Practice note, Aggregates levy.

Air transport

The government will consider changes to the aviation tax system, including the possibility of switching from a per-passenger to a per-plane duty (to encourage fuller planes). Any major changes will be subject to public consultation.

For background on the previous (Labour) government's proposals, see Legal update, 2008 Pre-Budget Report: environmental announcements: Aviation.

Low-carbon vehicles

The government has confirmed that:

From April 2011, the basic threshold for the 15% band of company car tax will be reduced by 5 grammes of carbon dioxide per kilometre (g of CO2 per km), so that this band will apply to cars emitting 121-129g of CO2 per km. The percentage of list price subject to tax will continue to increase by one percentage point with every 5g of CO2 per km increase in emissions, to a maximum of 35%. The cap on car list prices used to calculate the taxable benefit arising from company cars will also be abolished on this date, as will discounts for early uptake Euro 4-standard diesel cars, higher-emitting hybrid cars and alternative fuel company cars.
From April 2012, the 10% band for cars emitting 120g of CO2 per km or less will be removed, and the system of bands will be extended so that they increase by one percentage point with every 5g of CO2 per km increase in emissions, from 10%. This 10% band will apply to cars that emit 99g of CO2 per km or less.
The Finance Bill will introduce an enhanced capital allowance for zero-carbon goods vehicles, which will apply to vehicles purchased from April 2010 and will be in place for five years. For more information, see Legal update, June 2010 Budget: key business tax announcements: Zero-emission goods vehicles: 100% first year allowance and June 2010 Budget - BN05 - Zero-Emissions Goods Vehicles: 100 Per Cent First-Year Allowances.

Comment

This is perhaps not the most exciting of green budgets given the coalition government's statement that climate change is one of the most serious threats currently facing the world and that it wants to make this the "greenest government ever" (see Budget 2010: Green policies 'sidelined', campaigners say, Guardian, 22 June 2010). However, the Chancellor clearly has more pressing financial concerns.

Few of the former government's proposals on climate change have been reversed. However, some legacy announcements, such as the creation of a Green Investment Bank, need to be fleshed out properly. The British Property Federation (BPF) commented as follows (see BPF Emergency Budget Analysis):

"The BPF believes that the most effective function of a Green Investment Bank would be to help to finance the transition from an electrical grid which is dependent upon fossil fuels to one which relies on greener sources of energy in greater proportions. It should also be used to finance "exemplar" projects to establish whether outstanding energy efficiency commands a market premium. However, it remains to be seen from where the seed funding for such a bank would be found, particularly against the backdrop of today's austerity Budget."

Many of the environmental aspirations of the coalition government are non-fiscal (for example, on planning reform and nuclear power) and have already been set out in the coalition agreement and the Queen's Speech in May 2010. For more information, see Legal update, Coalition agreement final version: environmental implications and Legal update, Queen's Speech 2010: environmental implications.

The government states that changes to the climate change levy will support the carbon price. However, there is no indication yet of what the floor price for carbon is likely to be.

Serge Younes, from WSP Environment, has commented on the landfill tax increase, and said that he hopes that "a combination of increased taxation on landfill waste and the Green Investment Bank will further stimulate the market and push through some much-needed investment in the construction of additional waste-to-energy plants" (see Budget promises wave of autumn green policy announcements, BusinessGreen.com, 22 June 2010). For more information on waste-to-energy plants in general, see Practice note, CHP and EfW: combined heat and power, and energy from waste.

June 2010 Budget: environmental announcements | Practical Law