Draft Climate Change Levy (Fuel Use and Recycling processes) (Amendment) Regulations 2014
The Committee consisted of the following Members:
† Byles, Dan (North Warwickshire) (Con)
† Clappison, Mr James (Hertsmere) (Con)
† Dakin, Nic (Scunthorpe) (Lab)
Denham, Mr John (Southampton, Itchen) (Lab)
† Ellis, Michael (Northampton North) (Con)
† Hemming, John (Birmingham, Yardley) (LD)
† Jones, Mr Marcus (Nuneaton) (Con)
Lammy, Mr David (Tottenham) (Lab)
† McDonnell, John (Hayes and Harlington) (Lab)
† McKinnell, Catherine (Newcastle upon Tyne North) (Lab)
† Morgan, Nicky (Economic Secretary to the Treasury)
† Morris, James (Halesowen and Rowley Regis) (Con)
† Mulholland, Greg (Leeds North West) (LD)
† Roy, Mr Frank (Motherwell and Wishaw) (Lab)
† Rudd, Amber (Hastings and Rye) (Con)
Smith, Mr Andrew (Oxford East) (Lab)
Wilson, Sammy (East Antrim) (DUP)
Georgina Holmes-Skelton, Committee Clerk
† attended the Committee
Second Delegated Legislation Committee
Monday 17 March 2014
[Mr Mike Weir in the Chair]
Draft Climate Change Levy (Fuel Use and Recycling Processes) (Amendment) Regulations 2014
4.30 pm
The Economic Secretary to the Treasury (Nicky Morgan): I beg to move,
That the Committee has considered the draft Climate Change Levy (Fuel Use and Recycling Processes) (Amendment) Regulations 2014.
It is a pleasure to serve under your chairmanship this afternoon, Mr Weir. The draft regulations amend the Climate Change Levy (Fuel Use and Recycling Processes) Regulations 2005 to introduce a new exemption from the climate change levy for coal and other solid fuels when used for their structural properties in gas-from-waste technology. I am pleased to have the opportunity to discuss the regulations today and will briefly provide the Committee with some background on why they have been proposed and what it is intended they will achieve.
Since the introduction of the climate change levy in 2001, taxable commodities used for purposes other than as fuel have been exempt from the levy. That exemption includes mixed uses, where the commodity is used partly as fuel and partly for other properties. There are currently 20 fuel mixed uses that benefit from the exemption. The levy is designed to encourage fuel efficiency, so it would not be appropriate to charge it on non-fuel or mixed uses.
Advanced gasification—the production of synthetic gas, or syngas, from municipal and industrial waste—is a developing area of technology. It makes use of non-recyclable waste material that would otherwise go to landfill or incineration. Syngas consists almost entirely of hydrogen. It can be burned in a combustion gas turbine to generate electricity, and can also be put to industrial uses, such as the manufacture of hydrogen cells that can, for example, be used to fuel public transport.
The new exemption will apply to advanced gasification technology where coal or coke is needed as a bedding agent to support the weight of the waste in the gasification chamber and to enable the residue or slag to be drained from the bottom of the chamber. Although the coal or coke is ultimately consumed during the process, the small contribution that that makes to the calorific value to the gas is incidental to the structural purpose. For that reason, its use as a bedding agent meets the definition of a mixed use for climate change levy purposes.
The intention to introduce an exemption for solid fuels when used for their structural properties in gas-from-waste technology was announced in the 2013 autumn statement, following consultation with those developing the technology.
The Government believe that introducing the exemption will support an innovative and environmentally friendly new technology. Although there is only one beneficiary at present, we expect that other businesses will follow. The exemption has therefore been drafted generically, so that all businesses that use solid fuels in that way can benefit. I should further draw to the Committee’s attention the fact that the initial projects will be developed in the north-east, and so will contribute to jobs and growth there. The exemption will be introduced from 1 April 2014, in time for the opening of the Tees valley renewable energy facility, which is due to come into operation later this year and will be the first plant in the UK to use the technology.Introducing the exemption is consistent with the treatment of other mixed fuel uses. Removing a significant barrier to the economic viability of advanced waste gasification technology should encourage further investment in an innovative and environmentally advantageous technology. In turn, that will help both to support growth and to create jobs in the UK. As such, I hope hon. Members will support the changes in the regulations.
4.33 pm
Catherine McKinnell (Newcastle upon Tyne North) (Lab): It is a pleasure to serve under your chairmanship, Mr Weir. The Opposition support the regulations, as they extend the existing mixed use exemption from the climate change levy to a new technology, thereby supporting extraction from waste and contributing to a reduction in the amount of waste sent to landfill. The tax information and impact note states that there will be no Exchequer impact or economic impact from the measure.
The Minister referred to the one beneficiary that the Government are aware of at present. In particular, she said that company was in the north-east, which obviously pricked my ears. I therefore want her to expand on that point a little. How many businesses do the Government anticipate could benefit from the exemption? Are they companies that already operate within the UK, or are the regulations likely to bring in additional investment? Have the Government made an assessment of how many jobs they might create? In areas such as the north-east, which I represent, we have a particular need for new, skilled private sector jobs, and it would be helpful to know what the potential benefits might be.
Recent press reports have suggested that in the Budget the Government might be looking to get rid of—I apologise for sounding rather crude—more “green crap”, to quote the Prime Minister; certainly, that is how he was quoted in the press. I wonder whether there is any concern that the climate change levy could fall within that category.
4.35 pm
Nicky Morgan: I shall be quick, Mr Weir, if that assists the Committee. Should I miss any points, I will write to the hon. Lady and Committee members.
The plant in the Tees valley is the only one that will be using this technology in the near future. However, as I said, the exemption has been drafted generically, and the Government hope and expect that other companies will benefit in future. Anything that Committee members can do to spread the message that the technology is available would be welcome.
On the benefits of the project, the facility will strengthen the local economy’s reputation as a skilled technology hub and help to generate green technology jobs and more than 700 construction jobs, while more than 50 other permanent positions are being created.
The hon. Lady will understand that I am limited in what I can say about my right hon. Friend the Chancellor’s Budget on Wednesday, but we are aware, through the
levy control framework, of the impact of various levies on businesses. I hope she understands if I leave my remarks there and ask her to wait for announcements on Wednesday.