Environmental Levies–March 2023

From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

https://obr.uk/efo/economic-and-fiscal-outlook-march-2023/

The OBR have now published their fiscal outlook, following the new budget. Below is the section for Environmental Levies, AKA renewable subsidies.

As usual, I have included FITs, CCL and ETS as Memo items, as the latter two are included in other tables, whilst FITs are no longer classified as Env Levies:

The expenditure on RHI is funded from general taxation. but the other levies however largely impact energy bills.

The ETS, for instance, applies to energy intensive industries, the power generation sector and aviation, so some of the cost is passed onto industry; but a large part is passed onto electricity generators.

Worse still, as the ETS adds to the cost of gas power generators, this has the effect of increasing wholesale power prices across the board, not just for gas –  a multiplier effect, in other words.

The OBR think that CfDs will return money to energy users this year, but currently that is not the case, as wholesale power prices are lower than CfD strike prices at the moment In any event, it is a choice of being burned or scalded; we either pay higher electricity prices, or lower ones with subsidies added on!

We can of course ignore the rosy forecasts for CfDs in the later years. These assume that lots of offshore wind capacity will come on stream at the ridiculously low prices tendered. As we know, there is not a cat in hell’s chance of this.