Select Committee on Trade and Industry Annxes to the Report

Climate Change Levy—£50 million Energy Efficiency Fund


  In line with the recommendation contained in Lord Marshall's report (Economic Instruments and the Business Use of Energy), part of the revenues of the climate change will be recycled back to business by way of a £50 million energy efficiency fund. In line with the Marshall report, the fund will channel revenue into schemes aimed at promoting energy efficiency and reducing greenhouse gas emissions. Specifically, the fund will be used to:

    —  provide energy efficiency advice and audits to small and medium sized enterprises;

    —  promote the development of "new" sources of renewable energy; and

    —  encourage the research, development and take up of low carbon technologies and energy saving measures through a "Carbon Trust".


  Funding options were considered against value for money criteria as well as information gathered through a consultation exercise on the use of the fund. As a result, the breadkdown of the fund for each of the next three years, announced as part of the 2000 Spending Review, is as follows:

DTIRenewable energy research and development (eg offshore wind energy)
£13.000 million
MAFFRenewable energy (energy crops) research and development
£4.000 million
Renewables sub total
£17.000 million
Renewable Efficiency and Low Carbon Technology
DETREnergy efficiency advice and audits for business and research into low carbon technologies*
£27.000 million
DA—ScotlandEnergy efficiency work**
£3.222 million
DA—WalesEnergy efficiency work**
£1.790 million
DA—N IrelandEnergy efficiency work**
£1.115 million
Energy Efficiency and Low Carbon Technologies sub total
£33.127 million
Total for Fund
£50.127 million

    *includes an allocation of £5 million over three years for the horticulture sector.

  **Barnett consequentials of other allocation.


  The Government believes that a Carbon Trust is the most effective way of delivering the energy efficiency programme and funding research into low carbon technology. The Government will be taking forward the establishment of the Trust—as a private company limited by guarantee—over the next few months. The devolved administrations can buy into the Carbon Trust if they view that as the most effective method of delivering their energy efficiency work.


  The £50 million energy efficiency fund will provide a significant boost for both business and the environment. It provides an additional £100 million to fund energy efficiency improvements in business and promote the development of low carbon technologies and £50 million to promote the development of new renewables, over the three years of the review. Business will also benefit from the introduction of Enhanced Capital Allowances—providing an added incentive for firms to invest in energy saving technologies.


The Committee would be assisted by information on the outcome of consideration to be given to moving processes from Part B to Part A2

  Operation of processes governed by Part A of the Pollution Prevention and Control (England and Wales) Regulations 2000 ("The PPC Regulations") remains the basis for eligibility for entry into climate change agreements. The PPC Regulations came into force on 1 August 2000 and Schedule 6 to the Finance Act 2000 will be amended to reflect the Regulations as they now stand. DETR's consultation on movement of some Part B processes to Part A(2) has concluded. The outcome of the consultation will be announced shortly.


The Committee would be assisted by information on the position of industrial gases

  Production of industrial gases is a relatively "clean" process and is not covered by Part A of the PPC Regulations. Consequently, stand alone air separation plant are not eligible to enter into climate change agreements with the Government. The sector has lobbied hard to change the eligibility criteria, but the Government was not convinced by the arguments put forward that stand alone plant should be eligible to join a climate change agreement. However, discussions are continuing on whether air separation plant serving an installation regulated under PPC Regulations, Part A, might form part of the facility for climate change agreement purposes. The industrial gases sector will not be affected by the review of Part B processes under the PPC Regulations.


The Committee would be assisted by information on the inclusion of recycling activities within the rebate scheme

  In line with the recommendations of the Marshall report, the Government believes that there should be some incentive for all users to save energy at the margin and that is why we have ruled out complete exemption for any sector.

  The Government took the view that where energy is used for electrolysis in the production of aluminium, fuel is being used as a feedstock rather than an energy source and it would therefore not be appropriate to include this within the scope of the levy. Similarly, where fuels are used as a feedstock in other sectors such as in the production of steel, it was appropriate for these also to be excluded from the levey. For administrative simplicity, where fuels are used jointly as a feedstock and energy source, these will also be excluded. The Government does not believe this treatment represents a significant disincentive to recycling.

  For the glass sector, the Government expects that the vast majority of recycling will be entitled to the rebates applicable to primary production.


An indication of any outcome of discussions with the UK High Technology Fund managers and investors on publicity for the Fund would be helpful, and an update on EU clearance of the Fund

  The UK High Technology Fund has received wide coverage in the international trade journals associated with the private equity industry. This is in addition to the work Westport Private Equity, the fund manager, has done publicising the Fund to over 200 UK pension funds, their advisers and managers. Recent publicity in the specialist legal press generated further leads and press enquiries for the fund manager. Dicussions with individual investors on publicity for the fund will continue until its final closing. It should be stressed, however, that some investors have expressed a wish to retain their anonymity and are entitled to do this under the terms of the agreement.

  The Government received State Aid clearance of the UK High Techology Fund from the European Commission in July.

BMW, Rover and Longbridge, Eighth Report 1999-2000, HC 383: Government Response, Eighth Special Report 1999-2000, HC 634

  1.  The Committee undertook this emergency inquiry following the 16 March 2000 decision of BMW to sell the Longbridge car plant. It was intended to explore various allegations made in connection with this decision, including that Ministers had or should have had foreknowledge of the plans, and that their or others' actions or inaction had contributed to the decision. After four sessions of oral evidence in late March and early April, the Committee reported on 11 April 2000.

  2.  The Government replied in June 2000 and noted that the Committee's report had brought to an end "considerable speculation" about the events surrounding BMW's decision. Almost half of the conclusions and recommendations were not directed at Government: of those so directed, several were accepted.

  3.  The Committee is currently engaged in an inquiry into UK vehicle manufacturing, which is picking up on a number of the points raised in this Report.

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