Government consults on plan announced in Budget to raise levy on gas suppliers in England, Scotland and Wales to fund biomethane plants
Plans to levy a carbon tax on UK gas suppliers in order to fund the construction of biomethane 'green gas' production plants that can decarbonise home heating have been launched for consultation by the government today.
The so-called 'Green Gas Levy', first announced as part of the Budget earlier this year, would be applied to gas suppliers in Scotland, Wales and England in a bid to accelerate the decarbonisation of heating, one of the UK's most challenging sources of carbon emissions.
Funds collected through the levy would then be channelled into the government's Green Gas Support Scheme, which is set to provide subsidies for renewable biomethane plants when it replaces the non-domestic renewable heat incentive (RHI) in March next year.
As well as contributing to a reduction in the nation's carbon emissions, the construction of new biomethane plants can create jobs and spur investment in rural areas, according to the government, which is seeking views on how best to design and implement the initiative.
Energy and Clean Growth Minister Kwasi Kwarteng touted the levy as an crucial mechanism to support UK's legally-binding 2050 net zero emissions target.
"Reaching net zero means reducing emissions across our entire energy system, including the way we heat our homes and businesses," Kwarteng said. "This new funding will support an ambitious scheme to decarbonise the gas grid that will prevent millions of tonnes of carbon dioxide from entering the atmosphere - another step towards reaching net zero by 2050 at minimal cost to UK bill payers."
The new rule will see consumer gas bills rise by around 11p per month, the Department for Business, Energy and Industrial Strategy (BEIS) estimates.
Industry groups broadly commended the government's decision to progress its plans for the levy. Charlotte Morton, chief executive of the Anaerobic Digestion and Bioresources Association, estimated the biomethane industry could deliver a six per cent reduction in the UK's greenhouse gas emissions by 2030.
"As biomethane is already compatible with our current gas grid, it is also a particularly cost-effective way to decarbonise the UK's heating infrastructure," she said. "We welcome this consultation and the commitment shown by BEIS to integrate biomethane into the government's net zero."
David Smith, chief executive of the Energy Networks Association - the trade body for the UK's gas network firms - also gave the green gas levy plans a cautious welcome. "Biomethane has a vital role to play in helping deliver the world's first zero carbon gas grid here in the UK, working in close partnership with hydrogen," he said. "Proposals for a higher and broader level of support are welcome, but they need to be more ambitious and also take into account how biomethane will fit into the wider system."
While the Green Gas Support Scheme is currently targeted at biomethane produced from anaerobic digestion (AD) of biomass feedstocks and injected into the gas grid, support could be expanded to other low carbon gases, such as hydrogen, once they become commercially viable, according to the government.
The launch of the consultation comes as a major report from gas company Cadent today argued that the government must set a target date for large-scale hydrogen plants in order to stimulate demand for the fuel. The report, which was produced by Frontier Economics and is part of the ENA's Gas Goes Green programme to deliver the world's first zero carbon gas grid, also calls on the government to allow more hydrogen blending in the gas grid.
The report notes that if network companies were allowed to blend a 20 per cent mix of hydrogen in the gas grid, the UK could save around six million tonnes of CO2 emissions every year, the equivalent of taking 2.5 million cars off the road. At present, companies are able to blend up to just 0.1 per cent.