The Chancellor showed a commitment to the Government’s net zero emissions target by investing £1bn in green transport solutions in a package of measures that also includes a freeze on the climate change levy for electricity. But when it comes to the global economy and climate change, we are not an island and the recent slash in oil prices could have a negative effect.
The Chancellor promised that investment in charging points would mean that no one should ever be more than 30 miles from a charger, making range anxiety a thing of the past. But this, and the tax cuts for clean energy, could be hampered by cheap petrol which may pose a risk to the demand for electric vehicles (EVs).
Cheap petrol is likely to make EVs less appealing to consumers, despite the 2020/21 tax breaks for employees opting for an EV, including in a salary sacrifice scheme . The shrinking automobile market has been much publicised over recent years. And now the potential supply chain disruptions from the coronavirus outbreak, plus lower consumer confidence due to falling stock markets, could make the decline in demand even worse.
The plunging price of oil is likely to put pressure on efforts to switch to cleaner energy. Fatih Birol, head of the International Energy Agency said of the plunging oil price, ‘It will definitely put downward pressure on the appetite for a cleaner energy transition.’ Put simply, cheaper oil and gas gives the consumer less of a financial impetus to conserve and use energy efficiently. At the other end of the supply chain, oil and gas companies may find it harder to fund investments in renewable energy projects due to falling profits as a result of the falling oil price.
So, Rishi Sunak not only had to work with the plans he inherited from Sajid Javid less than a month before Budget day, he then had to flex the budget in response to COVID-19. And if that wasn’t enough for the new Chancellor to deal with, a further spanner was thrown into the works with the historic fall in crude oil prices, which could make energy efficient measures less appealing.
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