EEF calls to scrap ‘complex’ renewable energy tax system

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The Engineering Employers Federation (EEF), representing engineering companies throughout the UK, has published a report calling for a shift, from levies and taxes, such as the carbon price floor and climate change commitment, towards tax breaks to incentivise the renewable energy sector.

This is in light of recent subsidy cuts being brought in by the Government under its review of ‘green’ energy taxation and subsidies announced in the July budget.

Taxes too complex

EEF maintains the current “bewildering” system of taxes and levies is far too complex and highlights two key schemes as being particularly damaging:

  1. The Carbon Price Floor which is a system under which polluters must pay a minimum for the right to emit carbon.  Affected companies must pay a top up fee if the price of CO2 falls below a certain level; and
  2. The Carbon Reduction Commitment which is a system for encouraging certain kinds of companies to become more energy efficient or face financial penalties.

Cost to consumers

The Carbon Price Floor will cost energy consumers £23bn between 2013 and 2020 but it is estimated that only £6.5bn will be used to support renewables.  Whilst the Carbon Reduction Commitment (CRC) scheme is expected to cost businesses almost £900m in 2015/16, but only deliver £334m of investment in the next ten years.

The Federation suggests that the Government could end the carbon price support mechanism and CRC energy efficiency scheme, whilst recovering some of the lost revenue through an adjusted Climate Change Levy.  They also suggest combining all levies on bills supporting low carbon electricity into one and bringing in a voluntary tax discount scheme supporting energy efficiency.

Commenting, EEF Director of Policy, Paul Raynes, said: “The current system of energy taxation is too complex and is hurting Britain’s competitiveness.  So instead of simply hitting firms with the big stick of ever-higher carbon taxes and levies, we should be offering them the carrot of tax breaks to invest in potentially very profitable advanced low carbon technologies.”

Investment halt

Meanwhile, the Trillion Fund, which was founded in 2011 to open up opportunities to profit from clean energy, said it was halting new renewable power funding in a move which followed government policy changes.

A statement from the Fund said: “UK renewable energy projects have been our primary focus to date, but recent changes in government policy have rocked investor confidence and made the landscape for future renewable energy projects very uncertain.  As a result we will not be able to offer any new renewable energy loans for the foreseeable future. In these uncertain times, the company will instead focus on offering technology and crowdfunding services to other businesses across all sectors.”

For more information, help or advice please contact Andrew Davison on 0191 211 7950.