2014 Autumn Statement: key environmental announcements

Practical Law UK Legal Update 8-590-4607 (Approx. 11 pages)

2014 Autumn Statement: key environmental announcements

2014 Autumn Statement

On 3 December 2014, the Chancellor of the Exchequer, George Osborne, delivered the 2014 Autumn Statement, which sets out the UK government's economic and fiscal plans.

This update analyses the key environmental announcements.

For analysis of other aspects of the 2014 Autumn Statement 2014, see:

For a summary of environmental announcements in previous Autumn Statements and Budgets, see Practice note, Government budgets and autumn statements: environmental announcements.

Energy

Shale gas and carbon capture and storage

The government will:

Set up a new £5 million fund to provide independent evidence directly to the public on the robustness of the existing regulatory regime for shale gas. This is intended to ensure that the public is better engaged in the shale gas regulatory process.
Set up a long-term investment fund from tax revenues from shale gas for the north of England and other areas hosting shale gas developments. This forms part of a wider package of measures to create a "norther powerhouse" (see Legal update, 2014 Autumn Statement: key construction announcements: Northern powerhouse).
Allocate £31 million of funding to create the Energy Security and Innovation Observing System, consisting of two sub-surface research test centres to be run by the Natural Environment Research Council (NERC). This is intended to establish world-leading knowledge that will be applicable to a wide range of energy technologies, including shale gas and carbon capture and storage (CCS). One of the two sub-surface test centres will be located at the former Shell site in Thornton, in the North West.

(Autumn Statement 2014, paragraphs 1.121-1.123.)

For more information on shale gas and CCS in general, see:

Oil and gas

The government is planning to make significant reforms to the oil and gas fiscal regime to encourage the development of the shale gas industry in the UK and to maximise the economic benefits of the UK Continental Shelf (UKCS), in particular by:

Implementing an immediate 2% reduction in the rate of the Supplementary Charge from 32% to 30%, with effect from 1 January 2015.
Extending the ring fence expenditure supplement from six to ten years for offshore oil and gas activities.
Introducing, with immediate effect, a new cluster area allowance to support investment in the development of technically challenging high pressure, high temperature projects and encourage exploration and appraisal within "cluster" areas.
Providing an additional £6 million of funding for the Oil and Gas Authority in 2015-16 to help establish the body as a new arms-length regulator.

For more information on these announcements, see Legal update, 2014 Autumn Statement: business tax implications: Oil and gas.

Capacity market: interconnectors

The government will ensure that interconnectors can participate in the 2015 capacity auction under the Electricity Market Reform (EMR) and will estimate the eligible capacity of each interconnector on a case-by-case basis.

(Autumn Statement 2014, paragraph 2.214.)

For more information on the:

Interconnectors announcement, see DECC press release, Interconnectors to participate in the capacity market from 2015, 2 December 2014.
Capacity market and the EMR in general, see Practice note, Electricity Market Reform (EMR): Capacity market.

Carbon price floor

As announced in the 2014 Budget, from 1 April 2015, the government will exclude from the carbon price support rates, fossil fuels that are used by combined heat and power (CHP) installations to generate good quality electricity that is self-supplied or supplied under exemption from the requirement to hold a supplier licence. These provisions will form part of the Finance Bill 2015.

(Autumn Statement 2014, paragraph 2.117.)

For more information on the:

Budget 2014, see Legal update, 2014 Budget: key environmental announcements: Exemption of fuel used in CHP plants for electricity generated to supply manufacturing firms from the CPF.
Carbon price floor in general, see Practice note, Electricity Market Reform (EMR): Carbon price floor.

Nuclear

The government and NuGeneration Limited (a UK nuclear company owned by Toshiba-Westinghouse and GDF SUEZ) have signed a cooperation agreement and will work together to agree support through the UK guarantee scheme for a new nuclear power plant Moorside situated in Sellafield (subject to due diligence and ministerial approval). This is intended to encourage investment to get the project started more quickly. When fully operational, the new Moorside power plant will have a combined capacity of 3.4 gigawatts (GW), which is enough to power up to six million homes. The Moorside project will create 21,000 jobs and is expected to come online in 2024. Moorside joins Hinkley Point C as part of the government's wider nuclear programme, with plans for up to 13 new reactors on five different sites.

(Autumn Statement 2014, paragraph 2.215.)

The government will also provide £60 million to extend the capabilities of the National Nuclear Users Facility, which supports research across the full nuclear lifecycle.

(Autumn Statement 2014, paragraph 2.220.)

For more information on:

The Moorside project, see DECC press release, Cumbria nuclear plant moves another step forward, 3 December 2014.
Nuclear power in general, see Practice note, Proposals for new nuclear power stations.

Renewables

The government will exclude all companies that receive substantial benefits from other government support for the generation of renewable energy from also benefiting from tax-advantages for venture capital schemes (such as the Enterprise Investment Scheme (EIS)). This is with the exception of community energy generation undertaken by qualifying organisations.

(Autumn Statement 2014, paragraph 1.167.)

For more information on renewable energy in general (including community energy projects) and the relevant incentives, see:

Tidal lagoon

The Department of Energy and Climate Change (DECC) has started to explore the potential for a future tidal lagoon programme. The government will begin closer discussions with Tidal Lagoon Power Ltd to establish whether a potential tidal lagoon project at Swansea Bay is affordable (presumably under the Contracts for Difference (CFDs) programme) and value for money for consumers, without prejudice to the planning decision on the project. If the project progresses, it could become the first tidal lagoon project in the world.

(Autumn Statement 2014, paragraph 1.129.)

For more information on the:

Swansea Bay tidal lagoon project, see Tidal Lagoon Swansea Bay.
CFDs in general, see Practice note, Contracts for Difference (CFD).

Green Deal

As announced by DECC on 7 October 2014, the government will increase funding for a new phase of the Green Deal Home Improvement Fund by £100 million over 2014-15 and 2015-16. This is to support households installing energy efficiency improvements and stimulate the Green Deal, which has had a low uptake.

(Autumn Statement 2014, paragraph 2.208.)

For more information on:

DECC's announcement, see DECC press release, An additional £100 million for household energy efficiency, 7 October 2014.
The Green Deal Home Improvement Fund, see Practice note, The Green Deal: Cashback and Home Improvement Fund to encourage uptake.

Green Investment Bank

The government is working to bring private capital into the Green Investment Bank (GIB) through a new fund for private investment in operational offshore wind assets and wider options. It will report on progress in the Budget 2015. The GIB, which opened for business in November 2012, has made significant investments in offshore wind and encouraged increased private investment into the sector.

(Autumn Statement 2014, paragraph 2.218.)

For more information on the GIB, see Practice note, Climate change issues for investors, shareholders and insurers: UK Green Investment Bank (UK GIB).

Landfill tax

The government will introduce a loss on ignition testing regime on fines produced from the processing of waste at mechanical treatment plants from 1 April 2015. The government consulted on this in July 2014 (see Legal update, Landfill tax: HMRC consults on proposals to clarify tax liability of residual waste fine materials (fines)). Only qualifying fines below a 10% threshold will be considered eligible for the lower rate, although there will be a 12-month transitional period where the threshold will be 15%. This will form part of the Finance Bill 2015.

(Autumn Statement 2014: HMRC Overview, paragraph 7.3.)

The government is consulting on options to reform the Landfill Communities Fund to get funding to community projects more efficiently (see HM Treasury press release, Government considers options to improve the Landfill Communities Fund, 8 September 2014).

(Autumn Statement 2014: HMRC Overview, paragraph 7.4.)

Separately, landfill tax is being devolved to Scotland from 1 April 2015 (see Legal update, HMRC consults on draft legislation to devolve landfill tax to Scotland). The 2014 Autumn Statement confirmed that the UK government is working with the Scottish government to agree the terms of a block grant adjustment in relation to the devolution of landfill tax. The block grant is the money granted by the UK government to Scotland with no specific provision on how it is spent. The government has delayed agreement till after the Autumn Statement in order to ensure that the adjustment reflects the considerable changes to stamp duty land tax (SDLT).

(Autumn Statement 2014, paragraph 2.26.)

For more information on the:

Proposed changes to the SDLT, see 2014 Autumn Statement: key property announcements: Stamp Duty Land Tax (SDLT).
Landfill tax in general, see Practice note, Landfill tax.

Aggregates levy

The government will introduce an 80% levy credit for aggregate commercially exploited in Northern Ireland between 1 April 2004 and 30 November 2010 following its importation from another EU member state. This will form part of the Finance Bill 2015. However, please note that Practical Law Environment will not be tracking this development as it is beyond the scope of our coverage.

(Autumn Statement 2014, paragraph 2.120.)

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

Flooding

The government has confirmed its announcement, in the Spending Round 2013, that it will invest £2.3 billion in flood defences. This money will be applied to over 1,400 flood defence schemes over the next six years. An additional £60 million has been allocated to the Lower Thames Scheme beyond 2021 (subject to business case and local partnership contributions).

The government will legislate, in the Finance Bill 2015, to ensure that, from 1 January 2015, business contributions to Flood and Coastal Erosion Risk Management (FCERM) projects will be deductible expenditure for corporation tax and income tax purposes.

(Autumn Statement 2014, paragraphs 1.116, 2.103 and 2.216 and Autumn Statement 2014: policy costings, page 21.)

For more information, see Legal update, Flood defence projects to receive government funding.

Low emission vehicles

The 2014 Autumn Statement confirmed the following support for low emission vehicles:

£15 million between 2015-16 and 2020-21 for a national network of chargepoints for ultra-low emission vehicles on the Strategic Road Network (set aside under the Roads Investment Strategy).
Three further funds totalling £85 million to support ultra-low emission taxis, buses and cities.
Up to £50 million between 2017-18 and 2019-20 to support innovation in manufacturing of ultra-low emission vehicles in the UK. The government will contribute £25 million and will seek match funding from industry.
An additional £10 million between 2017-18 and 2019-20 to increase ultra-low emission vehicles in London, in support of the aim to introduce an Ultra-Low Emission Zone by 2025.
Up to £4 million to extend the Clean Vehicle Technology fund in 2014-15, which funds road vehicle modification by local authorities in order to reduce air pollution.

(Autumn Statement 2014, paragraphs 2.190-2.193.)

Planning and brownfield redevelopment

The government intends to take further action to speed up planning decisions. In particular, it will:

Keep the speed of decisions on major applications under review.
Consult, as part of the Budget 2015, on proposals to promote brownfield land for development by improving the compulsory purchase regime.

(Autumn Statement 2014, paragraph 1.114.)

The government will provide the first £100 million needed to fund the infrastructure and remediation works for the new garden city that will be built at Ebbsfleet in Kent.

(Autumn Statement 2014, paragraph 1.132.)

For more information on the planning announcements, see:

Infrastructure

The government published the National Infrastructure Plan 2014 (NIP 2014) on 2 December 2014. This sets out the government's long-term plan for investment in the UK's infrastructure. NIP 2014 included announcements on the proposed Swansea Bay Tidal Lagoon project, the new nuclear reactor at Moorside in Cumbria, ultra-low emission vehicles, flood defences and planning.

There are no additional infrastructure announcements in the 2014 Autumn Statement, which refers to the government's investment in roads, flood defences, science infrastructure, broadband, and compulsory purchase regime.

(Autumn Statement 2014, paragraphs 1.112-1.119.)

For more information on NIP 2014 and related announcements for Wales, see:

Devolution

The 2014 Autumn Statement confirmed the recommendations made in the Smith Commission report on 27 November 2014 for further devolution of powers to the Scottish Parliament. For information on the recommendations relating to environmental and energy issues, see Legal update, Smith Commission report on further Scottish devolution: environmental and energy issues.

The 2014 Autumn Statement also confirmed that the government will ensure the people of England, Wales and Northern Ireland have a bigger say over their affairs. The Secretary of State for Wales has announced a process to reach cross-party agreement on the Welsh devolution settlement by 1 March 2015, building on the Wales Bill that is currently progressing through Parliament. For information on the Wales Bill 2014-15, which will devolve a significant package of tax (including landfill tax) and borrowing powers to the Welsh Government, see Practice note, Wales: devolution of powers for environmental legislation and policy: Power to collect landfill tax.

(Autumn Statement 2014, paragraphs 1.97-1.105.)

Comment

Support for green businesses. The tax breaks and investment proposals (including investment in science) announced in the 2014 Autumn Statement may benefit green businesses. However, there has been criticism from green groups of the Chancellor's decision to introduce further tax breaks for the North Sea oil and gas industry (needed, he claims, because of the recent fall in the price of oil), instead of investing specifically in green technologies.

Howard Johns, of Southern Solar, observed that the government's preferred energy technologies to invest in are neatly illustrated by a comparison of the number of mentions of shale gas (35), renewables (3) and solar (0).

Further, shale gas is to be supported by the new "sovereign wealth fund" for the north of England, whereas companies receiving renewable energy subsidies will no longer be able to benefit from the tax advantages of venture capital schemes (save for qualifying community energy projects). The confirmation that this fund will support shale gas fracking is likely to cause political controversy, as the Secretary of State for Energy and Climate Change, Ed Davey, has already called for this fund to support low carbon projects.

Missed opportunity for energy efficiency. The Green Building Council criticised what it called the "mother of all missed opportunities" with the stamp duty reforms, arguing that the Chancellor should have linked stamp duty to the energy performance of properties, in order to incentivise energy efficiency improvements in the housing market.

Speed of planning decisions. The Chief Executive of the British Property Federation (BPF), Liz Peace, cautiously welcomed the ongoing review of the speed of decisions on major planning applications and said that "In theory, we welcome any measures that ensure the performance of local authorities improves. However, as many planning departments face further cuts in the next few years it would perhaps make more sense to prioritise resourcing and skills in local authorities."

Departmental spending cuts. There may also be concern within the Department for Environment, Food and Rural Affairs (Defra) over the Chancellor's announcement that spending cuts will continue in the next Parliament. Tight budgets have already caused cut-backs on spending on flooding, enforcement of environmental legislation and waste strategy. Campaigners have said that the £2.3 billion to be spent on flooding is not enough to protect the UK.

Green Deal. As anticipated, the government has given another shot in the arm for the Green Deal with a further round of incentives to encourage uptake of energy efficiency improvements in buildings. The BPF welcomed the injection, but expressed concern over the lack of detail. Liz Peace said, "Given that the funding for the first phase of the Green Deal Home Improvement Fund was all claimed within six weeks of going live, we had hoped that government would make clear how it plans to ensure that this extra funding does not disappear in an instant."

For more information, see:

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