This year’s budget has been criticised for many things, but one aspect that passed many people by was the Chancellor’s intention to implement a new tax regime to invest in shale gas. This controversial method of gas extraction is still facing a wall of public reluctance, and ‘fracking’, despite getting the go-ahead after a decidedly shaky start, is turning into one of the UK’s biggest energy controversies. But look closely at this year’s budget, and the fracking debate wasn’t the only energy controversy in the Chancellor’s little red box.
While most headlines focused on the freeze on petrol duty, other energy strategies were unmasked in the annual financial stock-take by the Chancellor. The salient points included:
• Some energy-intensive industries may be exempt from the Climate Change Levy from next year.
• Confirmation that the Peterhead project and Drax’s White Rose project are the government’s preferred bidders in its £1bn carbon capture and storage commercialisation programme competition.
All of these points have the potential to be ‘headline grabbers’, and industry watchers are concerned that while the proposals will generate some much-needed focus on alternative energy production, the fracking issue will overshadow everything else and dominate the debate to the detriment of other key energy factors. “We’re reaching a tipping point when it comes to the public debate on energy production and fulfilling the UK’s energy needs,” comments Graham Paul, Service Delivery Director of expert wholesale energy analysts EDW.
“We’ve raised concerns before that the energy production of the UK could be facing a crisis in the next few years, and alternative sources have to be found. Shale gas extraction is just one of those options, but what we don’t want to see is that the debate revolves solely around one method alone. What we need to do is ensure that the government engages in a comprehensive and wide-ranging analysis of all the options available,” he adds.
The exemption of some industries from the Climate Change Levy is also causing some to ask just how committed this government is to reducing the country’s carbon footprint. “This budget was an ideal opportunity to show just how committed the government was to reducing carbon emissions, and to allow some industries to effectively duck under the radar will not do anything to boost public confidence,” comments Graham Paul of EDW. “The carbon capture programme does perhaps go some way to balancing the governments green credentials, but even this needs to be explained in greater detail to the public if they are to understand exactly what role CC has to play in the UK’s future,” he adds.
Bloomberg New Energy finance also predicts that the cost of the UK carbon floor price could reach €35/t by 2015, as the UK government tries to shore up the price of carbon to compensate for the slumping price of the commodity under the EU Emissions Trading Scheme. “Overall, it’s been a budget of mixed messages for the energy industry,” comments Graham Paul. “While the rough outline for the next couple of years may have been sketched out by the Chancellor, what we need now is detailed consultation between the government and the industry to work out the details, and then present that to the public. Shale gas, carbon capture and the Climate Change Levy all need to be given a much wider forum for debate, so that a clear roadmap that will benefit industry, the government’s coffers and ultimately the consumer can be worked out. Otherwise the UK could become an energy-impoverished country reliant on outside suppliers,” he concludes.
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