Supporters of the budget have heralded the decision to freeze the Carbon Floor Price (CFP), a key mechanism introduced to incentivise companies to curb carbon emissions, as good news for UK businesses struggling with the cost of energy.
Critics says this will jeopardise investment in renewable energy by sending a signal of support to fossil fuel polluters.
Under original proposals, the CPF would have increased to almost £30 per tonne by 2020. Chancellor George Osborne has now pledged to freeze the CPF at £18 per tonne in 2016/17 until the end of the decade.
REA chief executive, Dr Nina Skorupska, said: “By freezing the Carbon Price Floor, the chancellor is rowing back on his own policy and once again moving the goalposts for investors in green energy. Government must explain in black and white how investment in renewables is protected from the freeze, or risk undermining the investment required to replace ageing coal power stations with technologies that can keep the lights on without damaging the climate.”
Phil Grant, partner in Baringa Partners’ Energy Advisory Practice, said: “The original intent of the Carbon Price Floor was to help provide certainty for investors by underpinning the uncertainty on future carbon costs reflected in the wholesale power price. Therefore it is critical that any change in the trajectory of the Carbon Price Floor through to 2020, as well making the change in the tax level for 2016/2017, there is clarify and certainty in the longer term trajectory.”
Paul McCullagh, the CEO of Glasgow-based UrbanWind, said: “A freeze on the Carbon Price Floor demonstrates a further eroding of the government’s commitment to renewable energy, and is a further blow to the UK’s climate commitments. It is a step backwards in the process of facilitating the transition from coal energy to cleaner options such as wind.”
David Taylor of UFW said: “This afternoon’s budget has been widely acknowledged as a decent ‘work in progress’ report with reference to a strengthening UK economy, falling unemployment and inflation rates, and growth for this year projected to be amongst the strongest of any Western economy. However, despite economic measures announced today for the individual, families and businesses, it is disappointing that the government has not done more to address one of most significant issues facing the global economy: global warming.”
Executive director of Greenpeace, John Sauven, said: “Freezing the carbon floor price without further measures to ensure that coal is driven off the grid shows that this government has caved into pressure from the coal lobby and downgraded climate action. Clearly nothing has been learnt from the recent flooding. The public have sent clear signals that they want action on climate change to minimise extreme weather events, but Osborne and Cameron have not listened.”
RenewableUK’s director of policy, Dr Gordon Edge, said: “By freezing the CPS there will inevitably be a squeeze on the pot of money set aside to support renewables – the Levy Control Framework. This will limit the government’s room for manoeuvre as it strives to meet its 2020 renewable energy target.
“The UK’s wind, wave and tidal energy industries need stability, certainty and confidence. That’s why the announcement on the CPS sends an unwelcome message to our sector, and represents a missed opportunity for some of the UK’s most forward-looking new industries.”