Announcements included (but were not limited to):

• Plastic tax. The introduction of a new tax on the import/manufacture of plastic packaging (if it contains less than 30 percent recycled plastic).
• Oil and gas. Headline taxes will be maintained at their current level.
• Fuel duty. This will be frozen for the ninth year in a row.
• Facilitation of North Sea investment. Barriers to new investment in North Sea gas/oil projects will be eliminated via the introduction of a transferable tax history mechanism.
• £60m pledged to support tree planting.
• £20m pledged to support nuclear fusion research in the UK.

In addition, there were three energy policy changes outlined in the Budget that may have a considerable impact on UK businesses – alterations to the Climate Change Levy; new business energy efficiency fund; and the freezing of carbon price support – which we will discuss in more detail.

Energy Policy Changes #1: Industrial Energy Transformation Fund

Philip Hammond’s Budget announcement was a double-edged sword in terms of allowances and exemptions for businesses and energy: for whilst the UK government has announced plans to introduce a new £315m Industrial Energy Transformation Fund, it is also scrapping the existing Enhanced Capital Allowance for energy-and-water-efficient machinery and plant.

Introduced in 2001, the ECA was established to encourage investment in energy-and-water-efficient technologies through a 100 first-year allowance against the costs of qualifying equipment. Businesses now have until April 2020 to claim ECAs on first-year tax credits and approved technologies (though it should be noted that ECAs will still apply until 31 March 2023 for businesses that have invested in electric vehicle charge points).

After April 2020, ECAs will be replaced by the new Industrial Energy Transformation fund, which is being introduced to encourage ‘significant energy users’ to adjust to low-carbon procedures and improve overall energy efficiency. Plans to consult on the establishment of a new Business Energy Efficiency Scheme for smaller businesses were also announced.

Energy Policy Changes #2: Increase to CCL on Gas

The Climate Change Levy is an environmental tax that is charged on the energy utilised by businesses. The aim of the CCL is to encourage organisations to reduce their emissions by increasing energy efficiency throughout the operation.

The Autumn Budget outlined the government’s continued commitment to narrowing the gap between the CCL paid on gas and electricity, meaning that gas will now be more expensive for organisations subject to CCL.

Whilst the CCL rates for 2020/2021 have not yet been announced, the gas rate will be increased so that it reaches 60 of the electricity main rate by 2020/2021 (and the electricity rate will be lowered temporarily during this time). It seems certain, too, that general rates for both gas and electricity will be subject to a steep increase from April 2019.

Energy Policy Changes #3: Carbon Price Support Freeze

The present freeze on the Carbon Prize Support (CPS) rate will be maintained for 2020-21 (meaning that the rate will remain at £18/tCO2). This is largely in response to the rising price of the EU Emissions Trading System Allowances, which has led to an increase in the total carbon price; in light of this, the government may cut the CPS rate from 2021 onwards if the total carbon price is still high.

However, Brexit’s impact on these mechanisms remains to be seen. Should the UK end up with a ‘no deal’ Brexit, all stationary installations that currently participate in the EU ETS would be subject to a new Carbon Emissions Tax (at a rate of £16 for each tonne of CO2 put out above the installation’s emissions allowance).

If your business may be affected by any of these energy policy changes, it’s important that you plan ahead. Contact IBISS & Co today to learn more about your obligations and how to take advantage of any potential reliefs.