LARGE PIC EU Investigates UK Government £75m Loan to Drax Group. Pic: Drax at sunset
Drax Group power plant.

The new Tory budget announced on 8 July commits the UK to endorsing a climate deal in Paris in December, but it is unclear how the government will meet its climate pledges, say environmental groups.

"The government will push for a global climate deal later this year that keeps the goal of limiting global warming to two degrees firmly within reach," Chancellor George Osborne wrote in the budget document.

"Broadly speaking, on the one hand the chancellor has been more generous from the last coalition budget," said Dustin Benton, head of energy and resources at environmental policy think tank Green Alliance.

He called it "good news that the government is committed to making Paris work". But he pointed out the document "doesn't say much about the numbers".

Benton said: "If we're right that the financial constraint on the Department of Energy & Climate Change (DECC) increases, that further reduces the amount of money that would be able to fund new projects." He added the real commitment to fighting climate change will be revealed in the amount of cash budgeted for the department in the autumn statement.

In a report on the effects of potential cuts to the department released earlier in July, Green Alliance said that without more spending, "the department will struggle to achieve its mission and the UK is much less likely to have secure, clean and affordable energy".

The fact Osborne announced that Ministry of Defence spending is now protected from cuts, along with several other departments, and set to rise, does not bode well for fighting climate change said Benton.

The report based on pre-election Conservative pledges calculates that the DECC will have £3.5bn to play with that is not already allotted from its £19.8bn (€27.6bn, $30.4bn) budget from 2015 to 2020.

Billions need to be invested

A study by Imperial College London in late June found Britain needs to invest somewhere between £22bn to £31bn by 2030 in a technology known as CCS that stores carbon emissions underground or it will fail to meet its carbon emission targets.

Under the current budget, the Green Alliance writes, just £900m will be set aside to invest in the technology between now and 2020.

The budget also said the government is committed to the controversial extraction of shale gas through fracking as part of the UK's energy mix. The UK will set up a state-owned investment fund for communities that allow shale gas projects to ahead.

Offshore oil projects in the North Sea will get an investment and the number of projects allowed there will also increase.

At the same time, the budget removed the Climate Change Levy exemption for renewable electricity sources. This was to ensure taxpayers' money would not benefit any renewable electricity generated outside of the UK, the document said.

The changes set to take effect on 1 August will cost renewable energy producers £450m, according advocacy group RenewableUK. By 2020, the move would take £1bn out of the industry.

On the day of the budget, the UK's Drax power station, which is in the midst of making a move from burning coal to wood chips, lost more than 35% of the value of its shares.

Green party MP Caroline Lucas called the budget a "serious blow for the fight against climate change".

"Nibbling away at the way the tax treatment doesn't give a lot hope," said Benton. On the other hand, "it's the first year they've sharpened the incentives to buy electric vehicles".