Budget 2026 – Key Carbon & Energy Developments

The British Industrial Competitiveness Scheme (BICS) was given a prominent mention in this week’s Budget, underlining the significance of the savings on offer to eligible manufacturers.

Budget day also saw a raft of energy and carbon announcements affecting high energy users, including:

Carbon Price Support (CPS) removal

This will be removed from April 2028, taking £18/tCO2e off fossil-fired generation. The direct benefit is to CHP sites of 2MW or more. However, those falling below the threshold should benefit indirectly through lower wholesale power prices (as tied to fossil-fired generation).

Climate Change Levy Electricity Rate frozen from April 2028

The main rate on electricity will be frozen from 1 April 2028. With the CPS removal, this lowers electricity costs in real terms and strengthens the case for electrification.

Wider market reform

The Treasury’s 10-Year Plan – expected before the end of 2026 – will set out electricity market and levy reforms, which we expect to change pass-through costs in supply contracts.

Carbon Border Adjustment Mechanism (CBAM)

A consultation to expand the scope of CBAM to refinery products (e.g. petrol, diesel, jet fuel, gas oil, fuel oil, LPG, naphtha, bitumen) was announced on Budget Day.

Fuel duty

The government is also extending the freeze to fuel duty, helping businesses for which transport and fuel represent a significant operating cost.

Plastic Packaging Tax

This tax is set to rise in line with CPI, which will hit a number of industries, including food and drink manufacturers. There is an opportunity for affected businesses to look at their recycled content and packaging strategy as increasing efforts in this area to reduce plastic weight will lower their Plastic Packaging Tax and packaging Extended Producer Responsibility fees, while also reducing their Scope 3 emissions.

Gas Shipper Obligation scrapped

The planned levy on gas won’t go ahead, removing an expected future cost (a planned tax on companies shipping gas to pay for government’s hydrogen subsidies, which will now be funded with public money). Some gas suppliers might have been planning to increase costs to account for this new charge, but this will no longer go ahead.

Support for Ceramics and Chemicals Industries

A £350m Critical Chemicals Resilience Fund for the UK’s most strategically important chemical producers and a £120m Ceramics Industry Support Scheme were announced, with the aim of helping these industries to invest in energy efficiency and decarbonisation.

Further information on the Budget and supplementary documents can be seen on this UK Government link.

If you would like to discuss the implications of any of these changes on your energy future, email us at hello@envantage.co.uk today.

Categories

• Procurement

Tags

• buying enegry
• Electricity
• energy markets
• Energy prices
• Energy procurement
• procurement strategy

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