§ Mrs. BrintonTo ask the Chancellor of the Exchequer what response he will make to the letter addressed to him by the Royal Commission on Environmental Pollution in relation to the compatibility of maintaining coal burn in electricity generation with the stated aim of the climate change levy. [88741]
§ Ms HewittThe climate change levy is expected to save around 1.5 million tonnes of carbon a year by 2010, thereby making a significant contribution to meeting both the legally binding target for reducing greenhouse emissions 83W set under Kyoto Protocol, and the Government's domestic goal of a 20 per cent. cut in carbon dioxide emissions by 2020.
The final rates of the climate change levy will not be set until the Finance Bill 2000. It is proposed to set them on an "energy" basis with one rate applying to all electricity. This is entirely consistent with the Government's Review of Energy Sources for Power Generation, which identified distortions in the generation market as a potential threat to the security and diversity of energy supplies and announced a programme of reform to ensure fair competition between fuels.
It also reflects the fact that under current electricity trading arrangements it is only possible to determine the carbon content of electricity as a broad average with a downstream tax. Thus, the extent of switching between fuels is likely to be limited with a tax set to reflect the carbon content. Given that the carbon content of electricity is changing all the time, a tax structured on an energy basis also has the advantage of simplicity.
We are liaising closely with DTI colleagues on how electricity trading arrangements might change in the future. We have also consulted on the specific issue of whether it might be possible to offer tax relief to new forms of renewable sources of electricity like wind power. The consultation document issued by Customs and Excise on Budget day asked for views on whether—and if so, how—this could be done.