Phew! Carbon tax scrapped for combined heat and power plants

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Businesses and hospitals which get energy from a combined heat and power plant (CHP) won’t have to pay a tax on the carbon they emit from using fossil fuels.

The change was announced by Chancellor George Osborne in the Budget yesterday as part of a £7 billion package for major energy users.

Industrial and large energy users from AstraZeneca, British Sugar, Boots Utilities and GlaxoSmithKline use CHP at sites across the UK.

Many plumped for CHP – which can cut energy use by 30% – because it meant they would be exempt from tax under the Climate Change Levy.

But this exemption was removed in 2013 while other energy taxes were added, a double blow the industry body CHPA claims led to energy tax costs rising three times as quickly as less efficient gas power plants.

In a reversal of the 2013 change, yesterday Mr Osborne said: “I am exempting from the carbon price floor the electricity from Combined Heat and Power plants which hundreds of manufacturers use.”

CHPA Director Tim Rotheray said this would make sure energy efficiency stayed a priority for businesses: “Industrial energy efficiency makes savings of £165 million every year which is the equivalent of nearly 6,000 manufacturing jobs.

“This announcement will help some of the UK’s most energy efficient industrial sites continue to grow, invest and protect jobs in key manufacturing sectors.”

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