UK chancellor George Osborne has announced a £7bn package in the 2014 budget to cut down energy costs for British manufacturers and households by 2019.
Around 80% of energy manufacturers, based in the north of England, Scotland and Wales, will particularly benefit from the package.
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The government will suspend the carbon tax charged on the major CO2 emitters, like power producers and heavy manufacturers, at £18 a tonne for ten years from 2016-2017.
Suspension of carbon tax would save around £4bn by 2018-19 and £15 off a typical household energy bill in the same year.
The government said it is vital to reform and strengthen the EU Emissions Trading System, including through agreement of an EU climate and energy package for 2030.
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The government will review the CPF trajectory for the 2020s, including whether a continued cap on the Carbon Price Support rate might be necessary, once the direction of reform of the EU Emissions Trading System is clearer.
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By GlobalDataIn his speech, Osborne said UK needs to cut its energy costs.
"We’re going to do this by investing in new sources of energy: new nuclear power, renewables and a shale gas revolution," Osborne said.
RenewableUK, the trade association for wind and tidal energy industries, expressed disappointment at the chancellor’s announcement on freezing a tax on carbon emissions created by fossil fuels.
RenewableUK director of policy Dr Gordon Edge said, "Although it was good to see the Chancellor specifically naming renewables as a key part of the plan to cut our energy costs, the freeze in the Carbon Price Support level will chill the mood of some investors in clean energy projects."
"By freezing the CPS there will inevitably be a squeeze on the pot of money set aside to support renewables – the Levy Control Framework," Edge added.
"This will limit the government’s room for manoeuvre as it strives to meet its 2020 renewable energy target."
CBI director-general John Cridland commented, "The budget will put wind in the sails of business investment, especially for manufacturers.
"This was a make or break budget coming at a critical time in the recovery and the Chancellor has focussed his firepower on areas that have the potential to lock in growth."
"The CBI has pushed hard for this significant and much-needed energy package that will help keep manufacturing jobs in the UK, while underpinning vital investment in new energy," Cridland added.
"Our energy intensive industries are crucial to building a low-carbon economy and it’s right the Government is taking action to mitigate the cost for these firms."
Renewable Energy Association chief executive Nina Skorupska said, "By freezing the Carbon Price Floor, the Chancellor is rowing back on his own policy and once again moving the goalposts for investors in green energy.
"The government must explain in black and white how investment in renewables is protected from the freeze, or risk undermining the investment required to replace ageing coal power stations with technologies that can keep the lights on without damaging the climate."
Image: UK Chancellor George Osborne. Photo: courtesy of the UK Goverment.
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