The Prime Minister has pledged to make this the greenest Government ever. As part of the coalition agreement, the Government has already committed to reducing central Government's own emissions by 10% between mid-May 2010 and mid-May 2011.

The Government has indicated its commitment to moving to a low-carbon economy, noting that this will change the shape of industry, growth and jobs and will require £200 billion of investment by 2020 to provide secure low-carbon energy, reform of the energy market and action to attract additional private sector funding.

The measure

The June Budget 2010 announced the following measures to enable investment in low carbon infrastructure and technologies:

• Carbon price - plans to assess how the energy tax framework can provide the right incentives for investment, alongside wider market reforms. Proposals to reform the climate change levy in order to provide more certainty and support to the carbon price will be published in the Autumn and subject to consultation, relevant legislation will be introduced in Finance Bill 2011;
• Green Investment Bank - plans to develop detailed proposals on the creation of the previously announced Green Investment Bank, following the Spending Review in the Autumn. Options will be evaluated for effectiveness, fiscal affordability and transparency;
• Green Deal - plans to establish a Green Deal for households to help individuals invest in home energy efficiency improvements that can pay for themselves from the savings in energy bills, with legislation to be introduced in the Energy Security and Green Economy Bill 2010/11. The Government will also continue work to create green financial products to provide individuals with opportunities to invest in the infrastructure necessary to support the green economy; and
• Infrastructure - the establishment of Infrastructure UK to work with the Treasury to enable greater private sector investment in infrastructure;
• First-year allowances on zero-emission goods vehicles -A 100% first-year allowance (FYA) will be provided for business expenditure on new and unused zero-emission goods vehicles. This extends the previous announcement in Pre-Budget Report 2009 to provide a 100% FYA for electric vans only; and
• Landfill tax - The criteria for determining the lower rate of landfill tax are to be published which will apply to disposals of waste at landfill sites made on or after 1 April 2011. It has also been stated that HM Treasury must take these into account when listing the materials that qualify for the lower rate, which it should do later this year. This measure was originally announced in Budget March 2010 with an expected publication date of an Order by HM Treasury of 1 October 2010. It appears therefore that this is simply a deferral of the effective date of this measure.

The environmental impact of these measures will be assessed in more detail as specific proposals are developed.

The Government has also indicated a desire to make the tax system fairer in this area, including:

• Fair fuel stabiliser - the Chancellor has asked the Office for Budget Responsibility, over the summer, to assess of the effect of oil price fluctuations on the public finances and will then examine options for a fair fuel stabiliser;
• Remote rural areas - the Government is considering the case for introducing a fuel duty discount in remote rural areas, including possible pilot schemes in Scotland; and
• Air Passenger duty - the Government will explore changes to the aviation tax system, including switching from the current per-passenger duty to a per-plane duty, which may encourage fuller planes. Any major changes will be subject to public consultation.

 Some of the mainstream tax measures will also have an impact on the renewable energy industry:

• For developers and utilities, the changes in capital allowances (reductions in rates from 20% to 18% main rate pool assets, 10% to 8% for special rate assets such as long life assets for chargeable periods after 1 April 2012) may have some adverse impact on the economics of long term capital intensive projects such as offshore wind generation and transmission, but which may be balanced by the phased reduction of the main corporation tax rate from 28 currently to 24% by 1 April 2014; and
• Cleantech entrepreneurs will need to carefully consider the impact of the capital gains tax changes, including the rise for the new rate of 28% as well as the increase in the lifetime limit on gains qualifying for entrepreneurs' relief from £2m to £5m (the rate for these gains remains at 10%).
• The Government will consult business on a long term approach to the taxation of R&D based on the proposals contained in James Dyson's report, titled 'Ingenious Britain' issued in March 2010. This report states that R&D tax credits should be refocused on high tech companies, small businesses and new start-ups in order to stimulate a new wave of technology.

In addition, this Budget confirms some previous announcements made in the March 2010 Budget or earlier, including plans to:

• include nitrous oxide gases in the EU Emissions Trading System from 2011;
• reduce the discount from the climate change levy for industries participating in a climate change agreement from 80 to 65% in April 2011, and increase the climate change levy in line with inflation;
• increase the standard rate of landfill tax by £8 per tonne on 1 April 2011 until at least 2014, and introduce a floor so that that the rate will not fall below £80 per tonne until at least 2020;
• increase aggregates levy to £2.10 per tonne in 2011;
• introduce an enhanced capital allowance for zero-carbon goods vehicles from April 2010;
• introduce exceptional rates of vehicle excise duty for certain heavy goods vehicles from April 2011; and
• reform company car tax so that it continues to provide an incentive to purchase the lowest emitting vehicles on the market.

Who will be affected?

Measures to stabilise the carbon price will help to incentivise all low carbon energy generation including renewable and nuclear energy by enabling them to be more cost competitive. However, it may also increase the costs for carbon intensive generation, to the extent that the anticipated floor price comes into effect.

Many airlines have lobbied against the changes to air passenger duty as it risks penalising those who run planes which are less than full. It is welcomed that any major changes will be subject to consultation.

Individuals will also benefit from the introduction of the Green Deal to make investment in energy efficiency measures more affordable.

When?

The majority of these measures are subject to further work and consultation. In relation to the carbon price, it is hoped that relevant legislation will be introduced in Finance Bill 2011.

There is currently no date for the set up of the Green Investment Bank.

Legislation on the Green Deal for households is expected to be introduced in the Energy Security and Green Economy Bill 1010/11.