As befits a coalition government composed of blues and yellows, the Government has stated that it wants to be "the Greenest Government ever".  On Wednesday, George Osbourne announced a number of measures intended to assist the Green Economy and help the Government achieve that objective.  Brief details of a few of the key measures which are likely to be of particular interest to the Energy Sector are as follows.

The Government has brought forward the date on which the Green Investment Bank will become operational by one year.  The Bank will now begin to operate in 2012-13 and will initially be capitalised with £3 billion.  It is predicted that, with additional private sector finance, the Bank could provide £18 billion of investment in green infrastructure by 2014-15.  The Bank will not be given borrowing powers until 2015-16, and then only if national debt levels have been met.

The commitment to the Green Investment Bank is now clear.  What remains uncertain, however, is what powers the Bank will actually have and what type of investment products it will be able to provide. 

The Government consulted in December 2010 about the possibility of introducing a carbon floor price for electricity generation.  This will now be introduced with effect from 1 April 2013 and is intended to promote investment in the low carbon sector. The carbon floor price will start at around £16 per tonne of carbon dioxide and it is intended that it will increase to £30 per tonne by 2020. The carbon floor price will work by taxing fossil fuels used in electricity generation under the Climate Change Levy and fuel duties. This will be achieved by extending the fuels which are subject to the Climate Change Levy.  Some commentators have suggested that the proposed floor price is not high enough to drive investment in low carbon energy.

The Government announced an intention to introduce a relief for carbon capture and storage and combined heat and power.

The Government also announced a welcome increase to the tax reliefs offered to investors under the Enterprise Investment Scheme and Venture Capital Trusts.  The increase in the rate at which EIS and VCT relief will be available in the future is what has caught the headlines, but the small print contained some details which may not be so welcome for those operating in the Energy Sector.  It was announced in the Budget that legislation will be introduced in the 2012 Finance Bill providing that companies whose trade consists wholly or substantially in the receipt of feed-in tariffs (FITs) or similar subsidies will only be eligible for EIS or VCT where commercial electricity generation commences before 6 April 2012.  Shares issued before 23 March 2011 will not be affected.  Many smaller companies operating in the Energy Sector rely on EIS and VCT as a means of encouraging investment, so this change could have very adverse consequences.

© MacRoberts 2011

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