Budget 2021: Green industrial revolution plans laid out
As part of Boris Johnson’s green industrial revolution plans, Chancellor Rishi Sunak revealed a net zero innovation fund amongst other green initiatives.
Under the Prime Minister’s ten point plan for a “green industrial revolution”, the government plans to invest:
- £15bn in green bonds to help finance the transition to net-zero
- £20m to a UK-wide competition to develop floating offshore wind demonstrators
- £68m competition to deliver long-duration energy storage prototypes
- £4m for a biomass feedstocks programme
- £15bn of green gilt issuance
- £27m in the Aberdeen Energy Transition Zone
- £5m in the Global Underwater Hub (Scotland)
- £4.8m to support the development of a demonstration hydrogen hub (Angelsey).
- Up to £30m for the Global Centre for Rail Excellence (Wales).
In line with the commitment to double spending on energy innovation, the government announced support for the development of new solutions to cut carbon emissions and accelerate near-to-market low-carbon energy innovations.
Amongst the green initiatives laid out in today’s Budget are plans to generate enough electricity from offshore wind to power every home by 2030 and a first sovereign green savings bond for retail investors.
A new port infrastructure will be built to support the next generation of offshore wind projects in Teesside and Humberside.
The £68m to fund a UK-wide competition will deliver long-duration energy storage prototypes that reduce the cost of net zero by storing excess low carbon energy over longer periods.
A biomass feedstocks programme will aim to increase the production of green energy crops and forest products that can be used for energy.
Plans for a £15bn green gilt issuance in the coming financial year will help finance critical projects “tackle climate change and other environmental challenges, fund infrastructure investment and create green jobs across the UK”.
“The announcement of a National Infrastructure Bank is welcome but the sad reality is that climate change and net-zero were barely mentioned in today’s Budget, ” commented BEIS Committee chair Darren Jones. “Major policies such as the Green Homes Grant seem to have been cancelled altogether.”
Global Centre for Rail Excellence
The government will match fund up to £30m, subject to business case, towards the construction of a rolling stock and infrastructure testing complex in Wales.
“Alongside contributions from the Welsh Government and the private sector, this would create a world class train testing facility on a former coalmining site,” claims the Budget 2021 Red Book.
The Global Centre for Rail Excellence would support innovation in the UK’s rail industry and included the testing of “cutting-edge, green technology”.
UK Infrastructure Bank
The UK Infrastructure Bank will partner with the private sector and local government to increase infrastructure investment to help tackle climate change and promote economic growth across the UK.
The new UK Infrastructure Bank will provide financing support to private sector and local authority infrastructure projects across the UK, to help meet government objectives on climate change and regional economic growth.
According to the Red Book, the bank will:
- Be able to deploy £12bn of equity and debt capital and be able to issue up to £10bn of guarantees
- Offer a range of financing tools including debt, hybrid products, equity and guarantees to support private infrastructure projects
- From the summer, offer loans to local authorities at a rate of gilts + 60 basis points for strategic infrastructure projects
- Establish an advisory function to help with the development and delivery of projects
The institution will begin operating in an interim form later in spring 2021. Full details are listed in the ‘UK Infrastructure Bank Policy Design’ document.
Energy and environment tax
Aggregates Levy – The Aggregates Levy rate will be frozen for 2021-22 but plans are to return to index-linking in future.
Carbon Price Support – Carbon Price Support rates will remain frozen at £18 per tonne of carbon dioxide in 2022-23.
Red diesel – The government will publish a summary of responses to last year’s consultation on banning red diesels and rebated biofuels which confirms further exceptions to those using red diesel to power vessels for commercial purposes, including fishing and water freight, travelling funfairs and circuses, amateur sports clubs as well as golf courses, and non-commercial power generation.
Green retail National Savings and Investment (NS&I) product
A green retail savings product through NS&I will be offered this summer and will be closely linked to the UK’s sovereign green bond framework.
The government will issue its first sovereign green bond (green gilt) in the summer, with a further issuance to follow later in 2021 as the UK looks to build out a ‘green curve’. Green gilt issuance for the financial year will total a minimum of £15bn.
The green gilt framework, to be published in June, will detail types of expenditures financed to help meet the government’s green objectives. Contributions of green gilt spending towards social benefits will be reported.
“The Budget appears to signal a rejection by the Chancellor of the Prime Minister’s Ten Point Plan for a Green Industrial Revolution,” said Jones. “In the year of the UK’s COP26 Presidency, this does not deliver the domestic leadership necessary to make the climate summit a success nor does it signal the required ambition on decarbonisation and green jobs needed in the decades ahead.”