Environmental Levies

Environmental Levies

JANUARY 14, 2022

By Paul Homewood


With energy prices being in the news, I thought it time to update the Environmental Levies table, as published by the OBR in October 2021. These levies, apart from the gas levy, are all subsidies for renewable energy – all paid direct except for capacity market payments, which are paid to generators to provide standby for intermittent renewables; as such they are still regarded as part pf the cost of renewables, and therefore an indirect subsidy.

All the Environmental Levies are added to energy bills.

A few points to note:

  • Contracts for Difference payments are dependent on market power prices. As CfDs are guaranteed prices for renewable operators, the lower the market price, the greater the subsidy. Currently market prices are higher than the OBR assumed, so the subsidy is smaller.

However this is of no benefit to energy consumers, who are still faced with paying the same inflated price. A choice of being scalded or burnt!

  • There are two memo items – RHI are subsidies paid for renewable heat, but these are paid out of general taxation
  • The other memo item is the Climate Levy, some of which ends up in electricity bills.

The OBR expect subsidies to carry on increasing to £14.1 billion by 2026/27, plus £3.4 billion for RHI and CCL.

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