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Renewables no longer exempt from CCL announces Osborne

The summer budget has been released and while many businesses will be rejoicing at lower corporation taxes and a fuel duty price freeze, they won’t be as happy to see that renewable energy is no longer exempt from Climate Change Levies (CCL). Check out the official government document here.

Suppliers will now have to pay tax on renewable energy which will be passed on in its prices to their customers. Business customers who had previously employed the use of levy exemption certificates (LECs), will now see an additional 0.456p/kWh placed onto electricity purchased.

Renewable electricity has been exempt from the CCL since its introduction in 2001 to support renewable electricity generation and reduce carbon emissions.

The removal of renewables exemption has caused a stir amongst environmentalists and energy experts. Jamie Stewart of Icis explains:

“In short, this will mean the UK burns more fossil-fuels to generate electricity, as opposed to using renewable power, than it would have done had the exemption remained in place.”

Osborne defended his decision however saying that the exemption is now “outdated” as the government has a “long term framework for investment in renewable energy in place”. He explains:

“This change will correct an imbalance in the tax system by preventing taxpayers’ money benefitting renewable electricity generated overseas, and by helping ensure support for low carbon generation provides better value for money for UK taxpayers.”

It seems this money will be used to expand investment in the North Sea oil and gas industry. The government will also bring forward proposals for a sovereign wealth fund for communities that host shale gas developments. Osborne also made no secret of his support for fracking commenting:

“The government believes in making the most of the UK’s oil and gas resources, including the safe extraction of shale gas.”

This won’t go down too well with environmentalists or locals in the north after Cuadrilla’s plans to frack in Lancashire were turned down by local councils. Fracking has become even less popular after it was reported that house prices would plummet in fracking areas if given the go ahead as well as higher insurance premiums.

So it seems the new government really isn’t all too won over by renewable energy, first cutting wind farm subsidies and now scrapping CCL exemption.

We wonder why the government is so set on fracking – surely it can’t just be to create jobs?

Got questions about how new CCL rules will affect your business? Call 0800 051 5770 or see Ofgem’s FAQs here.