The Rising Cost Of The Climate Change Act
By Paul Homewood
Lest anybody has forgotten just how much the Climate Change Act is costing us, this was the official projection published by the Office for Budget Responsibility last July:
|2.7 Environmental levies|
|Carbon reduction commitment||0.6||0.8||0.7||0.6||0.6||0.6||0.5|
|Warm homes discount1||0.0||0.3||0.3||0.3||0.3||0.3||0.4|
|Contracts for difference||0.0||0.1||0.3||0.6||1.1||2.3||3.1|
|1 The ONS have yet to include Warm Homes Discount and Feed-in Tariffs in their outturn numbers.||
|Note: This is consistent with the ‘Environmental levies’ line in Table 4.5 of the July 2015 Economic and fiscal outlook.|
The costs are in nominal terms, ie not real prices. The OBR assumes CPI inflation of about 10% between now and 2020, so, at today’s prices, the figure of £13.6bn becomes about £12.4bn.
It was this forecast which forced Amber Rudd to make cutbacks in the subsidy regime last year, but it is difficult to see that she has done more than trim a bit of fat off the edges.
In the meantime, oil and gas prices have dropped further, meaning that subsidies are likely to be even higher than above.
The OBR will have to update their assessments after next month’s budget, so it will be interesting to see what they come up with.
Remember as well that these Environmental Levies don’t include all the costs involved, such as the Climate Change Levy, which will cost £2.0bn by 2020/21, or the Energy Company Obligations and Smart Meters, estimated by DECC at £1.7bn a year.