2014 budget sparks green investment fears in UK

George Osborne, the UK’s Chancellor of the Exchequer, announced the 2014 budget yesterday amid reports that one climate policy has been abandoned, high emitting industries have not been targeted, and the UK's low carbon agenda is lacking government support.

In a speech that made no reference to climate change or the green economy, Osborne's main environmental announcements addressed plans to maximise the exploitation of North Sea oil and gas reserves and cut industrial energy costs by exempting carbon intensive firms from environmental taxes and green levies.

Osborne's most important announcement came in the confirmation that industry had been successful in lobbying for increased support in coping with the impact of carbon taxes and clean energy subsidy schemes on energy bills.

The Chancellor said: "We need to cut our energy costs. We're going to do this by investing in new sources of energy: new nuclear power, renewables, and a shale gas revolution... But above all we are going to have a £7 billion package to cut energy bills for British manufacturers."

The Chancellor delivered a widely expected freeze on the UK's top up carbon tax – the carbon price floor - which will be frozen at £18 per tonne of carbon dioxide from 2016/17 until the end of the decade, instead of rising to around £30. Osborne said he hoped the move would cut industry energy costs, and help the UK's manufacturing sector.

Environmental organisations have claimed that the freeze could give a lifeline to old fossil fuel powered plants that would otherwise be forced to close but, more significantly, scrapping the plan just a year after it was introduced shows a distinct lack of support for the low carbon agenda.

Dr Nina Skorupska, chief executive at the Renewable Energy Association, voiced concerns about the impact of the changes and said: "By freezing the Carbon Price Floor, the Chancellor is rowing back on his own policy and once again moving the goalposts for investors in green energy. Government must explain in black and white how investment in renewables is protected from the freeze, or risk undermining the investment required to replace aging coal power stations with technologies that can keep the lights on without damaging the climate."

The Budget featured a host of smaller green announcements, with confirmation of a new prospectus on the future of Garden Cities. In response to the serious flooding experienced in large parts of the UK this winter, Osborne announced £140 million of new funding to go towards flood repairs and maintaining existing flood defences.

The annual two per cent increase in company car tax was also extended to 2018/19 and an increased discount for ultra-low emission vehicles was announced, as well as the establishment of a new centre for training for graphene - a technology that is expected to have a big impact on clean tech.

Government sources have defended the budget, arguing that the changes to the carbon price floor will not undermine decarbonisation efforts.