Big business to call for increase in green incentives

A coalition of business groups and blue chip firms are putting the finishing touches to a major new report that will call on the government to significantly increase the number of green incentives and low carbon tax breaks on offer to UK firms.

According to reports in The Sunday Times, the loose coalition will criticise the government's much-vaunted Low Carbon Transition Plan, arguing that without more generous incentives and improved tax breaks for clean technology spending, the private sector will struggle to deliver the investment required to ensure the government's renewable energy and carbon emissions targets are met.

The report is also expected to call for the government to intervene to provide a reliable price on carbon emissions that will make it easier for firms to justify long-term investments in low-carbon infrastructure.

Gareth Elliott of the British Chambers of Commerce, which is a member of the coalition, told The Sunday Times that the government's current green tax and subsidy regime would risk UK clean tech firms migrating overseas.

He added that the government's planned introduction of a generous subsidy for people buying electric vehicles offered a prime example of how even where incentives are promised, the benefits to UK firms are not being maximised.

"The subsidy doesn't come into effect until 2014 and doesn't cover commercial vehicles," he said. "This kills off most of the industry until 2014 and also means British manufacturers that produce cars for the commercial market won't benefit."

His comments were echoed by Walter Todd, vice president of operations for PepsiCo, which has also signed up to the coalition. He told the paper that without a clear price on carbon and more generous tax breaks, investments that made sense from an environmental perspective would continue to be shunned by many businesses.

"Current calculations mean that the payback to business for certain types of green technologies can be up to 35 years," he said. "No business can meet its shareholder obligations and do the right thing for the environment, so this is a good example of where government incentives – in this case incentives that help shorten the payback time – would go a long way towards helping businesses justify these sorts of projects."

The government maintains that it already offers a generous array of green incentives, and as part of the new transition plan it committed to further increase financial support for renewable energy developments, introduce feed-in tariffs for small-scale low-carbon energy systems, and expand low-and no-interest green loans for homes and businesses. In addition, the transition plan includes a raft of new grants and loans for marine and wind energy, as well as developers of smart grid technologies.

A spokeswoman for the Department of Energy and Climate Change (Decc) dismissed calls for the government to intervene to stabilise the price of carbon provided through the EU's emissions trading scheme, arguing that changes to be introduced during the third phase of the scheme from 2013 would help to stabilise prices.

She also rejected the suggestion that the government's green incentive regime was short-changing businesses. "Our low carbon transition plan, with its active interventions to ensure we grab maximum market share for firms in the UK, has been welcomed by many in industry," she said. "In total, there's more than £60bn going into low carbon in the three years to 2011, and that's a significant green stimulus during difficult economic times."

However, the new report is expected to crystallise long-standing criticism of the government's incentive regime, which many firms have argued compares badly with those on offer in Europe and the US.

Solarcentury founder Jeremy Leggett said last week that the UK-based firm would be focusing its expansion plans on Europe, primarily as a result of more g enerous support for the solar energy sector.