Budget offers hope for green business

Businesses seeking to improve their environmental impact have been offered a mixed bag of policies in this year’s Budget speech, including a brand-new carbon floor price and bigger tax breaks for green company cars.

As expected, chancellor George Osborne confirmed in his Budget address that the UK would become the first country in the world to impose a floor price on carbon, starting at £16 per tonne of CO2 in 2013 and rising to £30 a tonne by 2020. The floor is designed to ensure the price on carbon imposed through the European Union emissions trading scheme does not fall below a set level - a move that potentially bolsters the case for companies investing in green measures, such as renewable energy and low-carbon fleets.

Stuart Wilkinson, head of carbon taxes at KPMG, warns that while investors would benefit from greater levels of certainty, the price tag on carbon might need to be higher to drive investment.

“It creates a stronger, more certain and more consistent carbon price signal, and this should, in turn, allow businesses to make more effective investment decisions in relation to low-carbon energy which should, therefore, stimulate low-carbon investment,” he says.

Consumer concern

However, some companies are concerned they will face increased energy costs as a result of the new floor price. A spokesman from Tata Steel told Financial Director that steel manufacturers in particular would suffer.

“As the power sector is not subject to international competition, these unilaterally imposed additional costs will be passed on to energy consumers such as steel producers, which are subject to international competition and so will not be able to pass them on,” he says.

In an attempt to offset such energy price hikes, Osborne promised a bigger tax break to companies committing to Climate Change Agreements (CCAs). CCAs allow energy-intensive businesses to receive an 80 percent discount from the levy, in return for meeting agreed energy efficiency or carbon-saving targets, but the discount is being reduced to 65 percent from April this year. The Treasury will again increase the Climate Change Levy electricity discount to 80 percent from April 2013 for companies that sign up to CCAs, and the scheme will be extended until 2023.