Will Changes In UK Renewable Energy Incentives Affect Wood Pellet Demand?

Hard on the heels of a Eurostat report that listed the United Kingdom as in danger of not meeting its renewable energy targets by 2020, the UK government announced it would stop issuing Climate Change Levy Exemption Certificates (LEC) beginning August 1, 2015. Alasdair Cameron, senior economics campaigner with Friends of the Earth, likened the […]

Hard on the heels of a Eurostat report that listed the United Kingdom as in danger of not meeting its renewable energy targets by 2020, the UK government announced it would stop issuing Climate Change Levy Exemption Certificates (LEC) beginning August 1, 2015.

Alasdair Cameron, senior economics campaigner with Friends of the Earth, likened the reversal to “making apple juice pay an alcohol tax,” as it will require electricity generators to pay a climate change tax on renewable electricity that significantly reduces climate change impacts.

Until the July 8, 2015 announcement, the U.K. Department of Energy and Climate Change (DECC) has had three policies in place to incent electricity generators to replace high carbon energy sources with lower carbon, renewable sources. These policies include the Climate Change Levy (CCL), which consists of two taxes—the main rate and the Carbon Pricing Support (CPS) mechanism rate—and the Renewables Obligation support mechanism (RO), a subsidy. Both the CCL and the CPS are taxes assessed against generators for the use of fossil fuels in electricity generation.

In 2001, in an effort to encourage the use of renewable sources of electricity as well as discourage the use of fossil fuels, DECC began issuing tradable Levy Exemption Certificates (LEC), which provided generators with exemptions from the CCL main tax (not the CPS) for renewable electricity they supplied to end users. The announcement that LECs would no longer be issued came as a surprise to the industry, which had been expecting the government to announce either a review of the levy or the gradual winding down of the exemption. The government’s mid-game rule change, which comes with one month’s notice, leaves generators with little time to compensate for the revenue loss.

From Forest2Market: http://blog.forest2market.com/uk-renewable-energy-incentives-wood-pellet-demand

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