Carbon price support (CPS) – The price of EU Emissions
Trading System (ETS)
allowances has risen significantly over recent months, raising
the Total Carbon Price (currently made up of the
EU ETS price and
the CPS rate). The government will
freeze the CPS rate at £18/tCO2 for
2020-21. From 2021-22, the government will seek to reduce
the CPS rate
if the Total Carbon Price remains high. (64)
Carbon pricing following EU exit – The government continues to
plan for all scenarios as it prepares for EU exit. In the
unlikely event no mutually satisfactory agreement can be reached
and the UK departs from the EU ETS in 2019, the government
would introduce a Carbon Emissions Tax to help meet the UK’s
legally binding carbon reduction commitments under the Climate
Change Act. The tax would apply to all stationary installations
currently participating in the EU ETS from 1 April 2019. A
rate of £16 would apply to each tonne of carbon dioxide emitted
over and above an installation’s emissions allowance, which would
be based on the installation’s free allowances under the
EU ETS. The
government is also legislating so it can prepare for a range of
long-term carbon pricing options.
Climate change levy (CCL) – The Budget sets
the CCL main
rates for 2020-21 and 2021-22 and continues with the government’s
commitment to rebalance the main rates paid for gas and
electricity. The electricity rate will be lowered in 2020-21 and
2021-22. The gas rate will increase in 2020-21 and 2021-22 so it
reaches 60% of the electricity main rate by 2021-22. Other fuels,
such as coal, will continue to align with the gas rate. The
discount for sectors with Climate Change Agreements will change
to reflect the change in CCL main rates. (60)
Enhanced Capital Allowances (ECAs) – The government will end ECAs
and First Year Tax Credits for technologies on the Energy
Technology List and Water Technology List from April 2020. These
ECAs add complexity to the tax system and the government believes
there are more effective ways to support energy efficiency. The
savings will be reinvested in an Industrial Energy Transformation
Fund, to support significant energy users to cut their energy
bills and transition UK industry to a low carbon future. (43)
Enhanced Capital Allowances (ECAs) for electric vehicle charge
points – The government will extend the ECA for companies
investing in electric vehicle charge points to 31 March
2023. This will help achieve the government’s ambition for the UK
to become a world-leader in the ultra-low emission vehicle
market.
