Skip to content

British Government Scraps Climate Change Levy Exemption

Alliance News

UK Chancellor of the Exchequer George Osborne confirmed Wednesday that his previously announced financial initiatives to revitalise the UK North Sea oil and gas industry will go ahead, and also said he would remove the climate change levy in his first budget since the Conservatives won the UK general election in May.

In the first Conservative-only budget since the break up of the coalition government, Osborne confirmed that his previous pledges to help the UK oil and gas industry would go ahead as planned whilst he would scrap the “out-dated” climate change levy.

Osborne said he would remove the exemption that generators of renewable electricity have had from the climate change levy. Currently, tax is not paid on renewable electricity supplied to businesses and the public sector under renewable source contracts, regardless of whether it is generated in the UK or abroad.

“Now we have a long-term framework for investment in renewable energy in place, we will remove the out-dated Climate Change Levy exemption for renewable electricity that has seen taxpayer money benefiting electricity generation abroad,” the chancellor said on Wednesday.

“This change will correct an imbalance in the tax system by preventing taxpayers? money benefiting renewable electricity generated overseas, and by helping ensure support for low-carbon generation provides better value for money for UK taxpayers,” Osborne added.

The climate change levy was introduced in 2001 with the aim of improving industrial and commercial energy efficiency to reduce greenhouse gas emissions. It was originally put in place to encourage and increase demand for renewable energy.

“More effective policies have been put in place to support renewable electricity generation. These target support directly at renewable generators, whilst the climate change levy exemption seeks to support renewable generation indirectly through stimulating demand,” said the government in a statement.

HM Revenue and Customs claimed the cost to the UK over the current parliament would be around GBP3.90 billion without action against the exemption, and more energy that does not contribute to climate change targets would be produced.

From August 1, the government will remove the climate change levy exemption for renewable-sourced electricity, but there will be a transitional period for suppliers from August 1, to claim the climate change levy exemption on any renewable electricity that was generated before that date.

Full story