The chancellor has announced a freeze in electricity duty but from April 2022, gas duty will increase.
The government is under pressure to reduce the country’s carbon emissions and raise money for public spending.
“So as another step towards equalising the rates and encouraging energy efficiency, from April 2022 I’m freezing the levy on electricity and raising it on gas,” Rishi Sunak said.
“James Watson, head of energy at law firm Osborne Clarke, backed the move.
“Together with the offset announceents around woodland and peat bogs and carbon caputure and storage, this provides at least a start in decarbonising the UK economy, he said.
“Encouraging the electrification of heat will help to discourage gas heating.”
However, he added the chancellor could have gone further by announcing incentives for clean heating technology and research for hydrogen as gas will be in use after 2050.
The increase in gas duty has drawn some disappointment however.
“The targeting of environmental bogeymen, like increasing the gas levy and tax on plastic packaging, is not the right approach to the environmental concerns – we need a broader approach,” said Matthew Lesh, head of research at the Adam Smith Institute.
Limited red diesel reprieve
Rishi Sunak also announced subsidies for red diesel for ‘most sectors’ will be removed.
“This is the right thing to do but I recognise it is a change for industry,” he said.
However, some sectors including agriculture and rail will keep the subsidy.
The chancellor called the subsidy a “£2.4bn tax break for pollution which has hindered the development of cleaner alternatives”, which creates ten per cent of emissions in cities.
The changes will not come into force however for two years.
The chancellor also announced he will double energy research and development funding for energy to £1bn.
He also confirmed government funding for carbon capture schemes.