Treasury’s Climate Change Levy threat to Scottish Energy Strategy & decarbonisation objectives

Wednesday 1st November 2017

Ahead of the Budget on 22nd November, UKLPG is calling on the Chancellor to reconsider the Climate Change Levy (CCL) proposals which threaten Scotland’s climate change and energy strategy by stifling rural decarbonisation efforts.

  • Scotland Farm

There are tens of thousands of businesses operating in off-gas grid Scotland and across the UK that require efficient, cost effective and reliable fuel to keep their businesses running and remaining competitive. 

LPG (liquefied petroleum gas) and renewable bioLPG offer a low cost, low carbon and efficient solution to meet these rural businesses' energy needs. These businesses operate in a range of key industry sectors including farming, hospitality and leisure, and the location of their enterprise is intrinsic to their function.  

For many years the LPG industry has been helping rural businesses to decarbonise and transition away from the most polluting fuels including coal and oil, towards the use of cleaner, efficient LPG fuelled gas systems and appliances. However HMT's proposed changes to the CCL rates from 2019 now stand to jeopardise this progress. 

The new CCL rates proposed by HMT would see the carbon tax on LPG increase by 73% in 2019 and then dramatically up to 2025 by as much as 605% based on the 2016 base rate.  

The policy, which has the aim of incentivising businesses to decarbonise and move towards cleaner fuels is fundamentally flawed in its current form for successful off-grid application. This is because CCL is not applied to all off-grid fuels which leaves a loophole, or even an incentive to switch to a fuel which is not captured by the tax. 

Kerosene, the most common alternative fuel for this market which is 15% more carbon intensive than LPG, sits outside of the CCL. 

At the SNP conference last month Nicola Sturgeon announced that the Scottish Government would be publishing its Energy Strategy this December which would lead the way to a cleaner and affordable energy mix for both domestic users and commercial enterprises. 

It its current form, the proposed revision of the CCL rates in both 2019 and up to 2025 would certainly stifle Scotland's decarbonisation efforts in key rural industry sectors such as agriculture, hospitality and leisure, and in a worst case scenario it could even reverse progress. 

As it stands businesses in Scotland and across the UK will be faced with two equally undesirable options, either accept a carbon tax increase of as much as 605% on your current CCL bill, or switch to a more polluting fuel to escape the levy. 

UKLPG have actively engaged with the Scottish Government throughout the consultation phase of their future energy and climate change strategy and have again this week contacted Energy Minister Paul Wheelhouse's office to raise concerns about the threat that the CCL rate revision poses to rural decarbonisation. 

Angus Brendan MacNeil MP SNP environment and rural affairs spokesperson and former Chair of the Energy and Climate Change Select Committee commented "off-grid businesses are an integral part of Scotland's economy and are at the heart of our communities. We need to ensure that our tax regimes are sufficient to allow them to prosper whilst also encouraging them to make steps towards clean energy usage. I am deeply concerned that this policy in this form does not facilitate that".

The trade association for the LPG and bioLPG industry in the UK