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Tax Yields: Sustainable Development

Volume 475: debated on Tuesday 6 May 2008

To ask the Chancellor of the Exchequer what forecast he has made of the revenue which will accrue to his Department as a result of the (a) Carbon Emissions Reduction Target, (b) Renewables Obligation, (c) European Union Emissions Trading Scheme and (d) Renewable Transport Fuel Obligation in 2008. (201490)

No revenue is generated for the Treasury by the Carbon Emissions Reduction Target (CERT). The purpose of CERT is to help electricity and gas consumers in the household sector to reduce the carbon impact (footprint) of their home by using energy more efficiently, reducing consumption and using energy from renewable sources. Specifically, CERT is an obligation on energy suppliers to achieve an overall target of 154 MtCO2 lifetime reduction in carbon emissions, equivalent to annual net savings of 4.2 MtCO2 by 2010, and will stimulate about £2.8 billion of investment by energy suppliers in promoting carbon reduction measures. Suppliers must direct at least 40 per cent. of carbon savings to a priority group of low-income and elderly consumers, contributing to the alleviation of fuel poverty. Overall around £1.5 billion is expected to be directed at the priority group.

There are no revenues generated from the Renewables Obligation (RO). The RO places an obligation on UK suppliers of electricity to source an increasing proportion of their electricity from renewable sources. Suppliers can comply with their obligation either by presenting ROCs or by paying a buyout amount. Any revenue generated by these buyouts is redistributed to suppliers depending on the number of ROCs they present against their obligation.

In Phase II of the EU Emissions Trading Scheme, which runs from 2008 to 2012, Government will auction 7 per cent. of allowances. This equates to approximately 85 million allowances, plus those allowances from installations that close during Phase II and any unused surplus from the New Entrant Reserve (NER). The total amount cannot exceed 10 per cent. of the number allocated during Phase II according to the terms of the EU ETS Directive 2003/87/EC. The amount of revenue will be influenced by the market price of carbon at the time of the auctions.

The Renewable Transport Fuel Obligation does not generate revenue. It places a legal obligation on transport fuel suppliers to supply a specified proportion of their road fuel supplies to their customers in the UK from renewable energy sources. Suppliers demonstrate their compliance through a certification system using ‘Renewable Transport Fuel Certificates’ (RTFCs). Suppliers can choose to ‘buy out’ of their obligation, with moneys collected through this going into a ‘buy out fund’. The fund will be recycled among obligated companies in proportion to actual fulfilment of the Obligation through the redemption of certificates.