UK budget offers incentives for green energy, oil
LONDON (Reuters) - Britain unveiled 1.4 billion pounds ($2.04 billion) of initiatives to encourage investment in green energy on Wednesday and also gave tax breaks to help squeeze the remaining oil from the declining North Sea.
Chancellor of the Exchequer (finance minister) Alistair Darling confirmed a 2020 target for Britain to curb greenhouse gas emissions by 34 percent compared to 1990 levels, making it the first country to bind itself to a framework for emissions reductions which also includes a 2050 target.
Darling used his annual budget to encourage energy efficiency, wind farms, projects that will bury carbon dioxide in reservoirs underground and low-carbon manufacturing.
"Green technology will be one of the great growth sectors of the world economy over the next few years," he told parliament in his budget address, saying such technologies could create hundreds of thousands of British jobs.
The measures to encourage carbon capture and storage underground (CCS), which has not been tested at a commercial scale, send an encouraging signal to potential investors in the technology, Jim Fitzgerald, a director at Ernst & Young said.
The new support for wind energy should help the UK wind power industry, which is struggling to develop new offshore projects, Robin Cohen, a Partner in Deloitte's Economic Consulting Practice said.
But environmental groups said the measures did not go far enough. "The Government has merely applied a sticking plaster to a low-carbon industry on life support," Andy Atkins, Executive Director of Friends of the Earth, said.
SLOWING NORTH SEA DECLINE
Darling announced a number of measures aimed at slowing the decline in oil production in the North Sea.
Industry executives say oil exploration in the mature oil province has slowed sharply after oil prices fell from a high above $147 a barrel last summer to around $50 now.
The government is worried that high costs of production may prompt companies to end operations in the North Sea while millions of barrels of oil remain in the ground.
Under the new measures, hard or expensive to exploit new fields will receive tax breaks. These will be worth up to 15 million pounds per field, Derrick Parkes, energy tax partner at KPMG, said.
Gains on the sale of North Sea assets will be exempt from capital gains tax where the profits are reinvested in the North Sea, a Treasury spokesman said.
Analysts said it was too early to say which companies might benefit most from the measures.
"Today's announcement by the Chancellor will assist... companies to continue their activities in this high cost region and to maintain exploration," said Steve Jenkins, Chairman of Oil and Gas Independents' Association, which represents smaller North Sea players.
The government will also offer tax breaks to encourage companies to reuse North Sea infrastructure for carbon capture and storage and wind power projects.
"Coal, oil and gas will continue to be a major source of energy for the foreseeable future. Clean technologies such as carbon capture and storage are vital to ensure we can produce power from these sources without damaging the environment," Darling said.
Green measures included:
* 375 million pounds for energy and resource efficiency in business, public buildings and households, including 10 million for waste infrastructure
* 405 million pounds to support development of low-carbon and advanced green manufacturing sector in the UK
* Funding for at least two and up to four CCS pilot plants, from previous plans to support just one, to test pre-combustion as well as post-combustion processes as previously planned
* 60 million pounds to fund engineering and design studies for carbon capture and storage
* 70 million pounds to support decentralized small-scale and community low-carbon energy
* 525 million pounds funding for offshore wind over the next two years under the Renewables Obligation scheme
* Combined heat and power (CHP) exemption from climate change levy from 2013-23, implying 2.5 billion pounds investment, potentially adding 3 gigawatts of new power by 2015
(Additional reporting by Daniel Fineren, David Milliken and Nina Chestney; writing by Tom Bergin; editing by Sue Thomas and James Jukwey)