British Government Gives Tax Boost for Saving Energy

The British government may provide an incentive for renewable energy if the technology can prove that provides cost-effective displacement of carbon dioxide.

LONDON, England, 2001-04-05 <> As of April 1, companies in Britain can take advantage of the Enhanced Capital Allowance Scheme (ECA) announced in the budget of November 1999. The scheme is part of the government’s support for business investment in low carbon technologies under the climate change levy package, which includes a 100 percent first year ECA scheme, and a £50 million fund for energy efficiency and renewables. Eligible technologies include combined heat and power (cogeneration), refrigeration, motors, boilers, pipe insulation, lighting, variable speed drives and thermal screens. Firms can obtain a 100 percent capital cost allowance in the year of purchase, and the scheme is expected to support investment in the initial eight technologies of £1 billion a year by 2010. The list of eligible technologies will be reviewed every year, and other technologies may be added in the future if they can show that they provide cost-effective carbon savings, including renewables, says Lord Whitty, Parliamentary Under Secretary of State at the Department of the Environment, Transport & the Regions (DETR). “The enhanced capital allowance scheme is an important part of the UK’s climate change programme,” says Whitty. “One of the barriers business face in investing in low carbon technologies are the capital costs.” “This is an innovative measure that will help the U.K. meet her Kyoto and domestic targets for reducing carbon and other greenhouse gases, as well as allowing business to offset the costs of the Climate Change Levy,” he adds. “By encouraging the use of energy-saving technologies, we are taking the U.K. towards our ultimate goal of a low carbon economy.” Investments in combined heat and power must be certified under the government’s CHP Quality Assurance scheme. Most of the other technologies can qualify only if the equipment has been approved under the criteria. The Energy Technology List will be administered by the Carbon Trust, which will also monitor performance of the scheme. In the longer term, the Trust will look at linking its R&D to the ECA scheme to ensure that new technologies can use the scheme to increase market penetration and that there are new products available as technologies become standard. The Trust will bring together a full range of market transformation measures to accelerate the take-up of low carbon technologies in Britain. The tax loss from the accelerated allowance will cost the Exchequer £70 million this year, and £130 million next. The ECA scheme follows a number of representations from business proposing that the government should introduce tax incentives to encourage firms to make energy saving investments. “Other technologies can be added subject to satisfactory methods of certification and subject to cost-effectiveness criteria and controls on Exchequer cost,” say official documents. The ECA has been approved by the European Commission.

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