Spending Review: Support for fracking and green energy, DECC budget slashed

  The UK Government has pledged to back both the fracking and renewable energy industry. Chancellor George Osborne made the announcement today as part of the Spending Review, which sets […]

By Priyanka Shrestha
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The UK Government has pledged to back both the fracking and renewable energy industry.

Chancellor George Osborne made the announcement today as part of the Spending Review, which sets out his plans for the next four years.

He said the goal is to invest in the long term economic infrastructure of the UK “and there is no more important infrastructure than energy”.

Mr Osborne added the government will support the creation of the shale gas industry and ensure communities benefit from a Shale Wealth Fund, which could be worth up to £1 billion.

On departmental cuts, he confirmed Defra will see a 15% day-to-day budget reduction while DECC will see a 22% cut.

Energy research and renewables

He also pledged to double spending on energy research, with a “major commitment” to small modular nuclear reactors.

It follows Energy Secretary Amber Rudd’s announcement that research and development in the industry has been neglected in favour of the mass deployment of renewable technologies.

However Mr Osborne said support for renewables and low carbon electricity will “more than double” – but added the government believes “going green should not cost the earth”.

Image: Thinkstock
Image: Thinkstock

Energy Efficiency

The Chancellor also announced a new “cheaper” domestic energy efficiency initiative will be introduced which will replace the Energy Company Obligation (ECO) scheme.

That will help reduce an average of £30 a year on energy bills for 24 million householders.

Other plans include “reforming” the Renewable Heat Initiative (RHI) to save £700 million and exempting the energy intensive industry from the cost of green taxes.

“We’re going to permanently exempt our Energy Intensive Industries like steel and chemicals from the cost of environmental tariffs so we keep their bills down, keep them competitive and keep them here,” Mr Osborne said.

ULEVs and climate change

Investment to tackle climate change will also be doubled and the development and sale of Ultra-Low Emission Vehicles (ULEVs) “will continue to be supported”, he said.

However he added: “In light of the slower than expected introduction of more rigorous EU emissions testing, we will delay the removal of the diesel supplement from company cars until 2021.”

The Chancellor went on: “We support the international efforts to tackle climate change and to show our commitment to the Paris talks next week, we are increasing our support for climate finance by 50% over the next five years.”

He also said if Scotland had voted for independence, it would have seen “catastrophic cuts” amid falling oil prices and revenues from the North Sea forecast to be down 94%.

He also confirmed community energy projects will be excluded from a list of tax relief schemes “to ensure that they remain well targeted at higher risk companies”.

Community Energy England has threatened to take legal action against the Treasury following the “unexpected” announcement initially made last month.