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What does the UK budget mean for the biomass industry?

PRESS RELEASE. York, UK - 22 March 2012. Chancellor George Osborne re-affirmed the Government's committment to renewable energy and offered new support for green vehicle fleets and micro-renewable heat and power generation but other aspects of his annual budget address have left the industry cold.

Date Posted 22 Mar 2012
Story Source Dr Matthew Aylott, NNFCC
Relevant Industries Feedstocks Bioenergy Biobased Products Biofuels Biorefining

Budget 2012The chancellor gave a strong indication he wants to see increased investment in the UK renewable energy sector by revealing "renewable energy will play a crucial part in Britain's energy mix".

But he also announced major investment in new North Sea oil and gas exploration and warned that he will "always be alert to the costs we are asking families and businesses to bear; environmentally sustainable has to be fiscally sustainable too."

Of the most significant green policies to benefit from the budget was support for the carbon floor price, a mechanism designed to tackle the UK's most energy-intensive businesses.

The chancellor announced that the support rate would increase from an indicative rate published last year of £7.28 to £9.55 per tonne of carbon dioxide, in response to the dramatic fall in carbon prices seen since last summer.

It was also announced that landfill tax on biodegradable waste would rise, support for low carbon company cars would increase and planning would be simplified for micro-renewable energy generation, such as biomass boilers.

Speaking after the budget announcement, Dr Jeremy Tomkinson, Chief Executive of NNFCC, said: "We welcome much of the content of the budget, but also feel this is a missed opportunity. It was always going to be challenging for the Government to live up to its title of being the greenest Government ever, particularly under the current financial climate, but investing in renewable energy and improving energy efficiency are drivers for change and have the potential to abate the rising costs of irreplaceable fossil fuels."

"Clearly fossil fuels need to be part of our short-term energy strategy while we build up low carbon infrastructure but the simple fact remains that there is no such thing as oil production just oil reduction. We urgently need clear and decisive action to support the developing low carbon economy and in particular bioenergy and biofuels," he added.

Renewable energy use in the UK currently replaces the equivalent of 7.7 million tonnes of oil each year, but this figure must more than quadruple by the end of decade if we want to meet our renewable targets and avoid fiscal penalties from the European Union.

Biomass currently accounts for more than 80 per cent of the renewable energy produced in the UK and has an important role to play in developing a low carbon economy but without ambitious green policies we are in very real danger of falling behind our European and International competitors.

Key bioenergy and biofuels budget announcements at a glance

  • Fossil fuels - Government to publish a strategy for gas generation in autumn 2012, "recognising that gas-fired electricity generation will continue to play a major role in UK energy supplies over the next decade and beyond" and invest £3 billion in new oil and gas exploration targeted at the West of Shetland
  • Carbon Reduction Commitment (CRC) - Consult on simplifying the CRC energy efficiency scheme to reduce administrative burdens on business and bring forward proposals in autumn 2012 to replace CRC revenues with an alternative environmental tax; allowances sold with respect to 2012–13 emissions will be £12 per tonne of carbon dioxide
  • Carbon Floor Price - Government will set 2014-15 carbon price support rates equivalent to £9.55 per tonne of carbon dioxide; fossil fuels used to generate heat in good quality combined heat and power (CHP) plants will not be liable to the carbon price support rates but will be subject to climate change levy rates from April 2013
  • Support for fuel efficient fleets - Government to extend 100 per cent first year capital allowance for low emission business cars for two years to March 2015 and drop the CO2 eligibility threshold from 110g CO2/km to 95g/km from April next year; the main rate of capital allowances for business cars will also fall from 160g/km to 130g/km

  • Taxation of high emission company cars - Percentage list price subject to tax for company cars will increase by one per cent for cars emitting more than 75g/km to a maximum of 35 per cent in 2014-15, rising to maximum of 37 per cent between 2015-17

  • Used Cooking Oil (UCO) - UCO biodiesel will no longer receive a 20p duty differential from April this year, and will instead receive double certificates under the Renewable Transport Fuel Obligation (RTFO)
  • Landfill tax - Government will increase the standard rate of landfill tax by £8 per tonne to £72 per tonne from 1 April 2013; lower rate of landfill tax will remain frozen at £2.50 per tonne in 2013–14
  • Planning simplification – Government will introduce a number of measures to further deregulate and simplify the planning system. New permitted development rights for micro-renewable energy installations will come into force in April 2012
  • Green Investment Bank (GIB) - GIB to make first set of green investments in April 2012
  • Zero-carbon homes relief – Stamp duty relief for zero-carbon homes will end as planned on 30 September 2012

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