The Chancellor has unsettled renewable energy investors by unequivocally backing a central role for gas in Britain’s energy mix, in a Budget that also held out the hope of scrapping one of the country’s most contentious green taxes.
Gas is “cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years”, said Mr Osborne, who also unveiled £3bn of tax allowances to boost North Sea oil and gas investment.
The development of technology to extract the shale gas found in many countries, and that was once hard to reach, has prompted a debate about whether this will encourage more investment in fossil fuel for years to come and make it harder to curb CO2 emissions.
“I am concerned about the focus that the Budget took on fossil fuels,” said Mark Kenber of The Climate Group, an international non-profit organisation. “In 2010 David Cameron pledged to become the ‘greenest government ever’ but with announcements like this it looks doubtful.”
Still, the tone of Mr Osborne’s speech differed notably from some of the comments he made about environmental costs in November’s autumn statement, when he said “we are not going to save the planet by shutting down our steel mills”.
Instead, he remarked: “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.”
Gaynor Hartnell, head of the Renewable Energy Association, welcomed the “noticeably more positive tone”, but added that the government’s own advisers had found that volatile gas prices, not renewable energy costs, were responsible for recent soaring electricity bills.
Industry groups were quick to welcome Mr Osborne’s announcement that he would review – and possibly abolish – the Carbon Reduction Commitment, a controversial scheme to cut corporate greenhouse gas emissions that was launched by the previous Labour government.
The measure is “cumbersome, bureaucratic and imposes unnecessary cost on business”, said Mr Osborne, promising that if he could not find savings in administrative costs for business, “I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax”.