UK Chancellor Jeremy Hunt unveiled a series of energy policies in his Spring Budget, introducing fresh funding for carbon capture technologies, reclassifying nuclear as a “sustainable” energy option and extending energy efficiency relief for households.
Our colleagues over at Edie.net have produced this comprehensive overview of the measures announced:
Energy cost relief
The Chancellor unveiled his budget just hours after the Treasury confirmed that the Energy Price Guarantee (EPG) would be kept at £2,500 for an additional three months from April to June, preventing the public from reaching the upper limit of Ofgem’s Price Cap between April and June – which stands at £3,280.
He also confirmed an update to the Climate Change Agreement (CCA) for businesses that was first promised more than two years ago.
Back in 2020, the Government extended its CCA scheme for businesses by two years. Launched in 2014, it provides businesses with tax breaks on the basis that they become more energy-efficient and reduce their Scope 1 (direct) and Scope 2 (power-related) emissions. It sets energy-reduction targets for businesses which, if met, result in a discount on the Climate Change Levy (CCL) on their energy bills.
Almost 9,000 facilities currently benefit from the CCA scheme and the Chancellor stated that eligible business can collectively gain £60m of tax relief based on energy efficiency measures.
Carbon capture and innovation
Mr Hunt announced that £20bn would be ringfenced to support the early development of CCS technologies, starting with projects on the East Coast, Merseyside and North Wales. He said the funding will support around 50,000 jobs and help capture 20-30 million tonnes of CO2 per year by 2030.
Ahead of this Budget, a coalition of NGOs working on environmental and social issues had called for at least £6bn to be set ahead annually for the next decade to support the improvement of energy efficiency in buildings and the installation of heat pumps.
The coalition, including Greenpeace UK, National Energy Action and Age UK, is recommending an initial £5bn for home insulation and £3bn for heat pumps, with spending to be targeted at fuel-poor homes in the first instance.
Mr Hunt confirmed that nuclear would officially be considered as “environmentally sustainable” and will be updated in the green taxonomy.
The Chancellor has also unveiled a new support package for nuclear in the UK, including a new innovation fund competition for Small Modular Reactors (SMRs). An innovation fund for demonstrator projects was also unveiled – new “investment zones” that will each receive £80m in government funding over the next five years to scale up research and development across the pillars of digital technology, life sciences, advanced manufacturing and the green economy.
The eight places proposed innovation zones are: East Midlands Mayoral Combined County Authority, Greater Manchester Mayoral Combined Authority, Liverpool City Region Mayoral Combined Authority, a proposed North East Mayoral Combined Authority, South Yorkshire Mayoral Combined Authority, Tees Valley Mayoral Combined Authority, West Midlands Mayoral Combined Authority and the West Yorkshire Mayoral Combined Authority. The Government is yet to clarify which of these zones will be ringfenced with green economy funding.
Small and medium-sized businesses (SMEs) will be able to claim credit for investments into research and development. Mr Hunt confirmed that SMEs would be able to claim £27 for every £100 they spend in R&D provided that accounts for more than 40% of their total expenditure.
What was omitted?
While green groups will welcome efforts to beef up the energy relief support packages, Hunt’s Budget failed to introduce measures or funding for renewables, hydrogen, efficiency and planning mechanisms.
Prior to the budget, green groups called for more ringfenced funding for energy efficiency measures, as well as a greater focus on how nature can be incorporated into policy and business plans. However, these measures failed to surface during the Budget announcement.
Hydrogen and renewables were the surprising omissions from the Budget.
While nuclear is now classed as “environmentally sustainable” hydrogen needs more policy support if the sector is to transition from blue to green in alignment with the net-zero transition.