Climate Change Levy (Hansard, 12 May 1999)

§ Mr. Nicholas Winterton
To ask the Secretary of State for the Environment, Transport and the Regions what proportion of the proposed climate change levy he plans to redirect to develop energy efficiency measures with particular emphasis on small to medium sized enterprises; and what plans he has to extend the option for negotiating tradeable permits. [83704]

§ Mr. Meale
In his Budget Statement on 9 March 1999,Official Report, columns 173–190, the Chancellor announced as part of the climate change levy £50 million per annum package to fund schemes aimed at promoting energy efficiency directly including energy efficiency audits/advice, mechanisms to promote low carbon technologies, and additional support for renewable sources of energy. Further details will be set out in the draft UK climate change programme later this year.
The Government recognise that SMEs are a key part of the economy with special needs. They have already therefore designed specific schemes and programmes to help them save energy and money and, importantly from our point of view, do their bit to reduce greenhouse gas emissions. My Department's Energy Efficiency Best Practice programme provides independent advice and information on energy efficiency and support for RD&D projects. Non-domestic energy users including SMEs are an important target audience for the programme. The Department also funds grant schemes specifically for SMEs delivered through the Energy Saving Trust. The experience gained from the Energy Efficiency Best practice programme will provide a good basis for developing further energy efficiency schemes as part of the £50 million per annum package.
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On tradeable carbon permits, the Government fully recognise the potential benefits of a carbon emissions trading scheme, particularly in allowing business to deliver greenhouse gas reductions in a cost effective way, and in preparing business and the City for the international emissions trading scheme to be established under the Kyoto Protocol. We also see carbon emissions trading as potentially having a complementary role alongside the climate change levy. We are therefore taking forward the recommendation made by Lord Marshall in his report on "Economic Instruments and the Business Use of Energy", by working with the CBI and ACBE (the Government's Advisory Committee on Business and the Environment) to develop a pilot trading scheme.

§ Mr. Nicholas Winterton
To ask the Secretary of State for the Environment, Transport and the Regions if he will list the long-term objectives of the proposed climate change levy; and what assessment he has made of the effect the climate change levy will have on non-intensive energy users. [83705]

§ Mr. Meale
The climate change levy is intended to make a significant contribution to meeting our greenhouse gas targets-an estimated 1.5 million tonnes of carbon per annum. It is one of a number of measures being developed as part of a substantial package to help the UK achieve its climate change objectives and enable the Government to continue to play a leading role in international efforts to tackle climate change.
The climate change levy has been designed to be revenue neutral across the business economy as a whole. Non-intensive energy users will be expected to pay the full rate of climate change levy but, like all sectors of business, they will receive a reduction of 0.5 percentage points in their National Insurance Contributions. In line with the recommendations made by Lord Marshall in his report on "Economic Instruments and the Business Use of Energy", the Government intend to retain an incentive for all users to save energy at the margin. Firms which are non-intensive users of energy but which are labour intensive will tend to be net gainers from the budget package. The accompanying cut in employer National Insurance contributions will encourage employment opportunities, while the additional support for energy efficiency measures will help stimulate the development of new technologies.
The latest forecasts from the Meteorological Office's Hadley Centre estimate that average temperatures will rise by up to 3.5 per cent. by the end of the next century. As part of the international effort to tackle climate change, the UK has signed up to a legally binding target of 12.5 per cent. reduction in greenhouse gas emissions on 1990 levels by 2008–12. The Government propose to go further than this and have set a domestic goal of a 20 per cent. reduction in emissions of carbon dioxide—the most significant greenhouse gas—by 2010.