UK Autumn Budget 2024: Energy Sector Insights
The UK’s Autumn Budget 2024, announced on October 30, outlines crucial investments and policy changes that will impact the energy sector. With Chancellor Rachel Reeves aiming to make Britain a “clean energy superpower,” the budget lays the foundation for a more sustainable energy future.
Here’s a brief summary of the key changes in the energy sector;
Investment in Clean Energy and Green Technologies
The government’s commitment to clean energy is evident in several key initiatives. The Great British Energy company, a publicly owned energy provider established in July 2024, has received an additional £125 million for 2025-2026, building on the initial £8.3 billion capitalisation. This funding is designed to accelerate the development of renewable energy infrastructure and position the UK as a global leader in green technologies.
Moreover, £3.9 billion will be allocated to carbon capture projects between 2025-2026. This funding will support the UK's decarbonisation efforts, including the first round of green hydrogen production contracts. Additionally, £163 million will continue to fund the Industrial Energy Transformation Fund, which helps high-emission businesses reduce their carbon footprint.
To increase energy efficiency in homes, the government has allocated £3.4 billion to the Warm Homes Plan, a key element of its £13.2 billion strategy to improve household energy efficiency. These efforts aim to reduce energy consumption and help businesses prepare for stricter environmental regulations.
Decarbonisation in Oil and Gas
The oil and gas industry is also a major focus of the budget. The government is increasing the Energy Profits Levy (EPL) on oil and gas companies by 3%, bringing the rate to 38%, effective from November 1. This will fund green energy projects and support the UK’s transition to a low-carbon economy. The total tax burden on oil and gas operations will now be 78%, one of the highest in the world.
Incentives for decarbonisation include a 66% decarbonisation allowance for companies investing in sustainable technologies. Additionally, the government will offer tax relief for contributions to carbon capture usage and storage (CCUS) decommissioning funds, encouraging the sector to repurpose infrastructure for carbon capture.
Supporting Electric Vehicles (EVs)
Following Labour’s election manifesto which referred to a phase out of new cars with internal combustion engines by 2030, Reeves clarified this point and announced funding and incentives for the EV industry.
This 2030 date was clarified to be 2035 for zero-emissions vehicles, with new hybrids remaining available for purchase from 2030.
Amongst a number of incentives for EVs, Reeves announced an increase in the gap in excise duty paid in the first year by electric vehicles against non-electric, an annual 2% increase in benefit-in-kind tax rates for electric company cars to 2030 and a further year’s extension of “green” first year allowances for pre-tax business deductions on expenditure for zero-emissions cars or charging points.
The government also pledged £200m in investment in 2025-2026 to accelerate the EV charging point rollout and £120m to support the purchase of electric vans under the plug-in vehicle grant scheme.
Non-electric vehicle owners also saw some benefits in the form of the continued fuel duty freeze with the 5p cut continuing for another year.
Addressing Carbon Leakage
The budget also addresses carbon leakage, which occurs when companies shift production to countries with weaker emissions regulations. The government is introducing the Carbon Border Adjustment Mechanism (CBAM), set to be implemented by 2027. This mechanism will impose a carbon fee on imports from high-emission industries such as aluminium, steel, and cement, ensuring that imported goods are priced to reflect the UK’s carbon standards.
The CBAM will apply to products exceeding a £50,000 threshold in emissions, covering the majority of imported emissions while exempting small businesses. This measure aims to level the playing field for UK businesses and further reduce global emissions.
Conclusion
The Autumn Budget 2024 signals a strong commitment to the UK’s green energy transition. With substantial investments in clean energy, carbon capture technology, and electric vehicle infrastructure, the government is driving the UK towards a sustainable future. The focus on energy efficiency, decarbonisation, and EV adoption offers new avenues for growth, while stricter regulations will also require businesses to adapt.
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