Budget: Green bank and carbon levy not enough to tackle climate change

Plans set out in the budget make a mockery of promises to be 'the greenest government ever' while putting up fuel bills, environmental groups have complained.

George Osborne, the Chancellor, set the Carbon Floor Price at £16 per tonne from 2013, rising to £30 by 2020.

The levy is paid by energy companies to discourage carbon intensive power stations like coal or oil and encourage investment in wind and nuclear.

However it will ultimately be paid by the consumer, adding £120 to bills every year over the next eight years, according to analysts, in the latest green tax on fuel.

Dr Doug Parr, Policy director of Greenpeace, said the levy will benefit low carbon technology like nuclear instead of boosting renewables like wind and solar.

“The carbon floor price will put up bills, deliver a windfall profit for existing nuclear power stations and yet it won’t drive investment into clean energy and improved efficiency. It’s not so much a green tax as a stealth tax and it’s exactly the sort of measure that gives green levies a bad name,” he said.

Overall environmentalists were unhappy with Mr Osborne’s budget, although investors welcomed plans to boost funding for renewable projects.

The Green Investment Bank, which is key to providing money for big renewable energy projects, will get £3 billion in public funding. This will enable the bank to raise a further £15 billion of private sector investment during the life of this Parliament

However it will not be able to borrow until 2015, subject to overall targets on debt reduction being met.

Chris Huhne, the Energy and Climate Change Secretary, insisted both the Carbon Floor Price and the Green Investment Bank are significant signals that the Government is taking green growth seriously and will be providing funding in the long term.

But Andy Atkins, Executive Direct of Friends of the Earth, said the bank needs borrowing powers immediately in order to raise much more money for urgent projects.

"The Green Investment Bank should have been a vehicle to drive the UK's economic recovery, but by delaying the bank's borrowing powers the Treasury has sneaked round the back of the motor and siphoned off the fuel – just as the rest of Government is firing up the ignition," he said.

"In the global race to develop green industry, the Treasury seems determined to make the UK lose."

There was also disappointment at plans to water down plans to make all homes carbon neutral by 2016. In an effort to cut red tape “zero carbon” homes will not include the electricity used for plug-in appliances.

Green transport campaigners said the fall in fuel duty leaves motorists vulnerable to oil price rises in the long term because it fails to encourage investment in electric cars.

Wildlife groups are disappointed that the Government has refused to tax peat compost, which is blamed for destroying habitat and driving climate change.

Countryside campaigners are concerned that changes to the planning rules will make England “like Legoland” within 10 years by making development easier.