HC Deb 24 June 1999 vol 333 cc461-2W
33. Mr. Swayne

To ask the Chancellor of the Exchequer if he will make a statement on the proposed climate change levy. [87091]

Ms Hewitt

The climate change levy will make a very significant contribution to meeting the Government's legally binding target for reducing greenhouse gas emissions set under the Kyoto Protocol, and their domestic goal of a 20 per cent. cut in carbon dioxide emissions by 2010. The levy will encourage energy efficiency in business and is expected to save around 1.5 million tonnes of carbon a year by 2010.

The design of the levy reflects closely the recommendations made by Lord Marshall. It will entail no increase in the overall burden of tax on business as revenues will be fully recycled via a 0.5 percentage point cut in the main rate of employer National Insurance Contributions. Business will also benefit from an additional £50 million for schemes aimed at promoting energy efficiency and support for renewable sources of energy, like solar and wind power.

The Government recognise the need for special consideration to be given to the position of energy intensive industries given their energy usage and exposure to international competition. Consequently, the Government intend to set significantly lower rates of tax for those energy intensive sectors that agree targets for improving their energy efficiency and these detailed negotiations are now underway.

The Government also want to work with business on the detailed design and administration issues relating to the levy and have just completed a consultation covering these issues.

Mr. Martyn Jones

To ask the Chancellor of the Exchequer for what reasons the climate change levy is to be imposed on combined heat and power schemes. [87681]

Ms Hewitt

It is the intention that climate change levy should be charged on industrial and commercial use of electricity. The levy will be charged at the point of supply to the final consumer which means that the input to generation will be exempt.

Combined Heat and Power (CHP) schemes are a form of electricity generation. The Customs and Excise consultation document asked for views on whether they should be treated as conventional generators, by relieving their input fuels and applying the levy to their outputs, or afforded special treatment whereby their input fuels are subject to the levy and the electricity they produced relieved. Officials are currently analysing responses to this exercise.