Government subsidises energy industry by £12.7 billion a year

The UK government gives the energy industry an estimated £12.7 billion in subsidies every year, according to a report by the Oxford Energy Associates.

The report, written by Dr William Blyth, estimates the UK assists the energy sector to the tune of roughly £12,707 million through producer and consumer subsidies.

The document was commissioned by the  Environmental Audit Committee (EAC) as MPs launched an inquiry into the subsidies the UK government gives to the energy industry.

Dr Blyth said that the renewable obligation certificate (ROC), at the current price of £42 per ROC, represents a subsidy of £2.4 billion to the industry for 2013/14.

He added that other subsidies for renewable generators, the Feed in Tariff and the levy exemption certificate, were worth £500 million in 2012 and £152 million (2010/11) respectively.

The levy control framework – which limits the value of payments that can be made via increases to consumer bills to pay for low carbon energy – is currently worth £2.35 billion, but this is set to increase to £7.6 billion by 2020.

Blyth also adds the enhanced capital allowances, which allows businesses to write off the total cost of certain energy saving equipment against their tax bill, costs the Treasury £100 million per year.

While Blyth said the figures should be used “with caution” because they are estimates, he adds “it is useful to see where the estimates of significant levels of subsidy lie”.