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Budget 2018: what does it mean for business energy users?

The Chancellor’s Budget may have been light on energy and environmental news this week, but there were still some announcements and updates that will have an impact on business energy in the coming months.

High cost of carbon continues: Wholesale prices have risen in recent months, in part due to the high cost of carbon. The EU Emissions Trading Scheme (EUETS) has risen to around £15/teCO2, which has resulted in a double whammy for power generators when combined with the UK’s Carbon Price Support of £18/teCO2. Despite hopes that the higher EUETS price would result in a reduction in the carbon price, the Chancellor has confirmed that Carbon Price Support for 2020/21 is frozen, although it may be reduced in future years if the price of carbon remains high.

Much of this will depend on Brexit outcomes: it has been confirmed that the UK will leave the EU ETS in the event of a ‘No Deal’, but this would be replaced by a straightforward carbon tax priced at £16/te.

CCL on gas going up: The Government has already announced its intention to shift the rates of CCL on gas and electricity by the mid-2020s. Despite speculation that the Government would bring forward this taxation unity, gas will instead rise to 60% of the value of electricity in 2021/22 – and while gas will rise, the levy on electricity will fall. For businesses using large volumes of gas, this will have a significant impact on the bottom line, so it pays to re-forecast using new figures.

Industrial Energy Transformation fund: The enhanced capital allowance scheme for certain energy and water efficiency technologies will be scrapped from April 1 2020.  Attention will shift to the Industrial Energy Transformation fund, which commits around £315m for carbon reduction measures for large energy users.

There will also be a call for evidence on improving business energy efficiency (this is a requirement under the current European Energy Efficiency Directive and requires member states to encourage energy efficiency from SMEs).

EV transport targeted: As part of its efforts to encourage low carbon vehicles on the road, the Government has announced that first year tax allowances will be available for electric vehicle charge-points, which could be of interest to those looking to invest in fleet or customer charging in their portfolio. The Chancellor also announced that Vehicle Duty will be based on the worldwide ‘harmonised light vehicle test’ procedure – this means that fuel economy will be based on ‘real world’ tests, which should reduce the tax benefits of hybrids and favour fully electric vehicles.

To discuss what changes to the CCL and a sustained high carbon price means for your portfolio, or to find out more about how to benefit from funding for carbon reduction measures, give us a call today on 08451 46 36 26 or email