Spending Review Risk to Glass Industry

As part of the spending review, the government has decided to make some fundamental changes to the future and current environmental schemes: see http://cdn.hm-treasury.gov.uk/sr2010_completereport.pdf

For the CRC the following changes are noted in point 2.108

The CRC Energy Efficiency scheme will be simplified to reduce the burden on businesses, with the first allowance sales for 2011-12 emissions now taking place in 2012 rather than 2011. Revenues from allowance sales totalling £1 billion a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants. Further decisions on allowance sales are a matter for the Budget process.

This is worrying for the glass sector, even for those who are currently exempt while they have a Climate Change Agreement (CCA). The current agreements and levy relief are due to expire in March 2013. Consultation on the next phase of CCAs stalled in May and is yet to be resumed (we await a HMRC consultation). There is a real danger here for our glass manufacturers to fall under the CRC which would come at a cost of roughly £24m per year to the industry. Currently the sector saves 80% of the £16m pa CCL through the climate change agreements so if they are not replaced, the extra cost would be some £20m + even if the CCL was removed.

Better news for the RHI (Renewable Heat Incentive) which had previously been proposed as a feed in tariff for renewable energy sources funded by a levy on non-renewable energy. Point 2.103 of the spending review document notes that this will now be funded through DECC’s expenditure instead:

The Renewable Heat Incentive, funded from AME, will be introduced from 2011-12.

Point 2.101 confirms that a HMRC consultation on the CCL will be issued in November 2010.