Green campaigners dismayed by Budget

There will be tax breaks for fracking, the process which releases shale gas

The chancellor’s promise to deliver tax breaks for shale gas and the oil industry has angered environmentalists.

George Osborne promised a package of measures to promote early investment in shale gas.

He hopes for a shale gas boom - but environmentalists point out that shale gas is unlikely to bring down energy bills in the UK.

They warn reliance on gas for future energy will make it impossible for the UK to hit targets on climate change.

The chancellor said there would be a "generous" new tax regime for investment in shale gas, alongside new planning guidance, and specific proposals to allow local communities to benefit.

He said: "I want Britain to tap into new sources of low cost energy like shale gas.

“Shale gas is part of the future. And we will make it happen.”

Mr Osborne also said the government was "spending more on new roads than in a generation".

He says he has already lost £6bn from his coffers by withholding the fuel duty escalator for two years. Now he has withheld September’s projected rise, too.

Carbon dioxide plans

The move was welcomed by motoring groups. But David Powell, from Friends of the Earth, said: “The driving force behind rising petrol prices is the soaring cost of oil – the sensible long-term plan is to protect motorists from rising fuel prices by weaning our transport system off its oil dependency.”

Mr Osborne has gone some way to help improve the efficiency of car engines by promising extra incentives to ultra-low emission vehicles.

He has also pledged support for the next stage of two new projects to capture and store the carbon dioxide from power stations. The preferred bidders for the trial are in Aberdeen and Yorkshire.

This technology potentially offers a way to burn fossil fuels while meeting carbon targets, but it has been haphazardly supported by governments and is running years behind schedule.

The backing for carbon capture and storage (CCS) was applauded by Jeff Chapman, from the Carbon capture association CCSA, who said: "This decision represents a watershed for CCS in the UK and in Europe.

"These projects are both extremely exciting proposals and will deliver tremendous benefits for the UK, in terms of infrastructure investment, jobs and market value to the UK economy. They will form the basis of the first regional CCS clusters in the UK."

The CCS move was supported by greens, but they complained that there was little else to cheer the “green economy” which had been growing much faster than the economy overall.

Andrew Raingold, from the Aldersgate Group of green economy firms, said: "Rather than tax breaks for shale gas, the UK needs a clear regulatory framework that will drive investment and export opportunities for low carbon technologies."

Instead, the government exempted some energy-intensive firms from the Climate Change Levy - a measure designed to force industries to use energy more frugally. The chancellor has accepted that some heavy industries are threatened by high energy prices.

Gareth Stace from the industry group EEF said: "These are welcome exemptions which will bring UK firms in sectors such as ceramics and steel into line with the same tax regime applicable to many of their EU competitors."

Renewable energy

Green MP Caroline Lucas bemoaned the lack of any mention of renewable energy in the Budget.

There was annoyance, too at the disparity between the chancellor’s new plan to offer government nil-interest loans to help home-buyers and its existing plans to insulate homes through the government’s Green Deal.

Home-buyers will be able to borrow the cash without interest for five years, even if their house purchase does not involve home improvements - which create jobs. Yet people using the Green Deal to insulate their homes have to borrow at about 7% - although home insulation is massively labour-intensive.

The chancellor did indicate that the government would come forward with a plan for zero-carbon homes by May. But insulating existing housing stock is top priority for energy experts.

Greenpeace executive director John Sauven said: “This was a 20th Century budget for a 21st Century economy.

"We got tax breaks for polluters and almost complete disinterest in the green economy, one of the only sectors that has consistently delivered jobs and growth in recent years.

“British businesses stand poised to become dominant forces in the global clean energy market, but they’re being undermined by a chancellor who seems increasingly ill-suited to the times we live in.”

Mary Creagh MP, Labour’s shadow environment secretary, said: “Today's budget and last year's Autumn Statement mean the government will cut an extra £92m from flood protection, our forests and National Parks over the next two years.

"At the same time, ministers are about to start a huge shake-up of the organisations that protect our natural environment. This is no way to prevent flooding and protect our woodlands, rivers and special wild places.”

Follow Roger on Twitter @rharrabin