Putting low carbon development at the heart of the Chancellor’s strategy for renewed growth

Fuel duty
The planned rise in fuel duty, expected to add 5p to a litre of petrol from 6th April 2011, was postponed and instead the Chancellor announced a 1p reduction. Individuals and small businesses will find this helpful although it seems contrary to the commitment to increase environmental taxes. But fuel duty is already significantly in excess of other fuel taxes in terms of the price it places on carbon dioxide emissions.

 

Air passenger duty
Proposals to reform air passenger duty (APD) into a per plane tax have been set aside, for the moment, as this would be contrary to international law (while the Government lobbies to get that changed). A small planned increase in APD has also been postponed until next year. A broader consultation will now take place on other potential changes to APD with the aim of simplifying the tax. There are currently four bands and the consultation proposes to reduce this to three or two bands.

Carbon price floor
The introduction of a carbon price floor for the power sector was widely expected. The precise details and its interactions with other mechanisms are not yet clear. The carbon price floor is in line with current market expectations for carbon prices, so there is a reasonable prospect of the floor providing certainty to investors, without embedding a big extra cost to the power sector.

Green Investment Bank
The amount of funds available to the Green Investment Bank is to be tripled to £3bn. The Government anticipates that this will, together with private capital, ensure £18bn of funds is available by 2014/15. The Government also confirmed that the bank will not be allowed to borrow until 2015 at the earliest and even then it will be subject to national debt reduction targets being met.