The cost of environmental levies on energy bills to support the UK’s low carbon transition is expected to rise to £12.6 billion by 2020.
That’s an increase from £6.9 billion in 2016/17 and could rise to £13.5 billion in 2021/22, according to latest figures from the Office of Budget Responsibility (OBR).
It expects household energy bills to “rise faster than previously assumed” in the near term.
Environmental taxes include levy-funded spending policies such as the Renewables Obligation (RO), Contracts for Difference (CfD), Feed-in Tariffs (FiTs), Capacity Market and Warm Home Discount.
The OBR’s report states the increase mainly reflects the build-up in the CfD scheme – which is designed to boost renewable energy – and the development of the Capacity Market scheme which focuses on security of supply.
The forecast for the recent supplementary capacity auction has however been reduced by around £1 billion as a result of a lower clearing price.
It is expected to add £0.3 billion to electricity bills in 2017/18 and £0.2 billion in 2018/19.
The carbon reduction commitment (CRC) scheme – which will close following the 2018/19 compliance year, meaning businesses will report under the CRC for the last time by the end of July 2019 – is also projected to add £0.5 billion to bills.
A total of six businesses were fined more than £41,000 this year for breaching their carbon reduction commitments.
Last week Chancellor Philip Hammond pledged support for North Sea oil and gas as well as funding for innovative research and development as part of the Spring Budget.