On Wednesday the British Finance Minister, who is rather grandly called the Chancellor of the Exchequer, announced the budget for the coming financial year. I have never understood why it is called a budget because a principle of every budget it that it should balance. The economies of the world’s developed nations rarely have balanced budgets; it is all about borrowing and more borrowing. I always look at the budget measures from an environmental perspective, so how green is this budget?
The removal of the oil price escalator was announced because petrol and diesel prices are at an all time high and vehicle fuel is becoming less affordable. My view is that this was, from an environmental perspective, a retrograde step, because of the environmental pollution that the use of oil brings.
The newly announced tax on the oil companies bringing oil and gas out of the North Sea is a positive step, for the same reasons as the reduction in petrol tax. The oil companies have had a windfall caused by higher oil prices and the tax simply removes some of their windfall profits. I cannot see, as is claimed by some, that the higher tax will be passed on to the consumers. Oil and gas are international commodities and if the oil companies seek to pass on the additional tax to consumers, consumers will simply buy oil and gas from other suppliers. To allege that the oil companies will pass on the tax displays either great ignorance or a deliberate attempt to mislead.
Regulations governing the mis-named zero carbon homes will come into effect from 2016, but to keep the cost of house building down the house builders will only be accountable for emissions covered by the building regulations. This probably means a watering down of the zero carbon home concept, but in my view that will not make an environmental difference as the concept was never viable in its present form.
A price for carbon credits will be set at a minimum of £16 per tonne rising to £30 a tonne by 2020. I think, as regular readers know, that applying the principles of the casino to emissions saving will never produce results. We need instead a direct mandate to require polluters to introduce measures, not a gambling incentive so to so. In the carbon credits casino the government merely manufactures the chips that the players use, and the chips are moved from one polluter to another, according to their bets. I rather suspect that the price for carbon will produce a rather nice windfall for nuclear power stations as well as indirectly financing future nuclear power stations.
The Chancellor said that the government was committed to the Green Deal, but talk is cheap. The Green Deal starts in late 2012 to provide encouragement for householders and businesses to invest in green energy. I see no reason why it cannot start earlier.
The Carbon Capture and Storage levy will be scrapped and replaced by direct central government funding. This certainly removes an area of complexity. I hope that the government will then take the how issue of CCS research to its logical conclusion; this proposed technology is unlikely to provide any real benefits unless a specific academic institution is charged with the research, for the public good. Asking private companies to do this by means of competitions and prizes will never work, partly because the costs are higher than the rewards and partly because academics are more trustworthy.
The Green Investment Bank will start operation in 2013 and will be allocated £3 billion of which £2 billion will be found by selling state assets. The Bank will be able to borrow money from 2015, provided the UK’s debt reduction targets (as a percentage of GDP) have been met. I am still unsure how the Green Investment Bank will benefit the environment. IT would not be necessary if the incentives for green investment were sufficient to attract green investment on commercial terms. Setting up a Green Investment Bank suggest to me a recognition that the incentives are insufficient and a new bank operating in industries where there are insufficient incentives strikes me a a recipe for a future failed bank.
Filed under: banking, carbon dioxide, carbon emissions, carbon trading, climate change, gas, nuclear, nuclear energy, oil, petrol, pollution, renewables, the economy Tagged: | carbon capture and storage, ccs, CCS levy, george osborne, green budget, green deal, Green Investment bank, north sea oil tax, oil prices, petrol tax, the Budget