Government Scraps CCL Exemption for Renewable Energy

Government Scraps CCL Exemption for Renewable Energy

  • 10 Jul 0

With effect from midnight on 31 July 2015, electricity generated from renewable sources will no longer be eligible for the CCL exemption for RSE when supplied under a renewable source contract. The only exemption will be for electricity that is generated before 1 August 2015 for which the suppliers hold Levy Exemption Certificates for. The suppliers will be able to continue to allocate this to renewable source contracts for a transitional period commencing on 1 August 2015. Such supplies can be exempted from CCL. The length of this transition period will be discussed with regulators and affected businesses over the summer and autumn.

 Renewable electricity has been exempt from the CCL since its introduction in 2001. The tax is not paid on renewable electricity supplied to businesses and the public sector under renewable source contracts. Since the exemption was introduced, more effective policies have been put in place to support renewable electricity generation. These target support directly at renewable generators, whilst the CCL exemption seeks to support renewable generation indirectly through stimulating demand. In 2015-16 alone the support for low carbon generators will be around £4.3 billion.

 The government has expressed its commitment to meeting its climate change objectives in a cost effective way. Without action the exemption would cost £3.9 billion over the current Parliament and one third of this value would go to supporting renewable electricity generated overseas. This electricity would not contribute to the UK’s climate change or renewable energy targets. There is evidence that some of the suppliers receiving the exemption are already in receipt of subsidies in their own country. This does not represent good value for money.

 In addition the value of the exemption going to support UK renewable generators is likely be negligible by the early 2020s, when the supply of renewable electricity will exceed CCL eligible business demand for it. As a result it is hard for generators to factor the exemption into their long term investment plans. Removing the exemption will stabilise CCL revenues, contributing to fiscal consolidation. It will maintain the price signal necessary to incentivise energy efficiency. It will also bring a significant simplification to CCL.

 Legislation will be introduced in Summer Finance Bill 2015 to amend the current Finance Act 2000 so that any RSE generated on or after 1 August 2015 is no longer eligible.

 


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