Taxation: Environment Protection

Treasury written question – answered on 24th April 2013.

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Photo of Tim Yeo Tim Yeo Chair, Energy and Climate Change Committee, Chair, Energy and Climate Change Committee

To ask the Chancellor of the Exchequer what assessment he has made of the effect of the Carbon Price Floor on the competitiveness of UK business.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

The carbon price floor establishes a minimum carbon price, which sends an early and credible signal to drive investment in low-carbon electricity generation and support the UK's long-term energy security.

For most businesses, direct energy costs are a relatively small proportion of total costs. In 2011, purchases of energy and water accounted for less than 3% of total costs for UK manufacturing. In 2013 the carbon price floor will add around 2% to the average business electricity bill. However over the longer term, consumers stand to benefit from cleaner, cheaper and more reliable sources of low-carbon energy as a result of the Government's policies.

The Government recognise the cumulative impact of energy and climate change polices on the most energy intensive industries. Autumn statement 2011 announced a package of measures, worth £250 million over the spending review, to help these businesses adjust to the low-carbon transformation while remaining competitive. The Budget announced that energy-intensive industries will continue to receive support in 2015-16.

Energy-intensives will also benefit from relief from the costs of electricity market reform, subject to state aid; an exemption from the climate change levy (CCL) for metallurgical and mineralogical processes; and an increase in CCL relief to 90% on electricity for most energy-intensive businesses who are part of Climate Change Agreements UK businesses will also benefit from a further reduction in corporation tax to 20% by 2015 and the introduction of a £2,000 per year employment allowance for businesses and charities from April 2014 to reduce their employment and NICs bill.

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