Kwarteng: Generation levy should fund low carbon schemes

Kwasi Kwarteng has urged the government to use its generation windfall tax to fund decarbonisation projects.

In his first significant Parliamentary intervention since being sacked as chancellor of the exchequer last autumn, Kwarteng called for money collected via the windfall tax to be directly used to offer incentives for schemes which help achieve net zero targets.

The former energy secretary made the plea at a debate on the 2050 net zero target in Parliament’s Westminster Hall this week. It is only the second time he has spoken in the House of Commons after becoming the second shortest serving chancellor in history.

Kwarteng said that he fully understands the political need for the energy windfall taxes and the electricity generator levy (EGL), which was introduced by his successor Jeremy Hunt, but called on ministers to be wary about how they are implemented.

The government was widely criticised by the energy sector for not extending capital investment allowances, which oil and gas companies can use to seek relief from their own windfall profits tax, when the EGL was introduced earlier this year for low carbon nuclear and renewable generation.

The EGL is set a rate of 45% of the revenues that low carbon plants receive for power sold above £75 per MWh.

Kwarteng said: “We should not be discouraging investment in key technologies. The government should examine the capital allowance regime and ensure there is more incentive to invest in decarbonisation technologies, not less.”

Kwarteng who was minister of state for energy before being promoted to secretary of state, also expressed strong support for hydrogen in home heating.

He said that hydrogen is one of the “quickest and easiest ways” to decarbonise domestic heating by providing a substitute for natural gas, adding that the government should accelerate its deployment.

The ex-chancellor also called for greater engagement from the government on moves to create an offshore electricity network to reduce the need for onshore grid connections in places like Norfolk.

Responding on the governments’ behalf, energy minister Graham Stuart said the government’s recently established strategic Net Zero Council, which he is co-chairing alongside Co-op Group CEO Shirine Khoury-Haq, will be holding its next meeting at No 10 Downing Street.