Investments in green energy, tax reforms, and regulatory changes are among the most significant measures for the energy sector included in the UK’s 2024 Budget.
Among the key allocations, the Department for Energy Security and Net Zero will see a substantial budget increase, rising from £6.4 billion (approximately €7.71 billion) in 2023-24 to a projected £14.1 billion (approximately €16.99 billion) in 2025-26. To fund this expansion, the windfall tax on oil and gas companies has been increased through the Energy Profits Levy (EPL), which was introduced in May 2022 in response to record profits in the sector during the global energy crisis. From 1 November 2024, the EPL rate has been raised by three percentage points to 38%, bringing the total taxation on upstream oil and gas activities to 78%. The levy is set to expire on 31 March 2030, with the funds raised allocated to financing green energy projects across the UK, ensuring long-term stability and predictability in the fiscal regime for the hydrocarbons sector.
While the EPL imposes additional costs on businesses in the sector, the government has set a 66% “decarbonisation” rate. Additionally, levies on businesses related to decommissioning funds for Carbon Capture, Usage and Storage (CCUS) activities have been reduced. These financial reserves are intended to facilitate the safe conversion of oil and gas infrastructure into carbon capture facilities.
The government will continue funding its hydrogen and CCUS strategy, supporting 11 projects awarded contracts through the first round of the Hydrogen Production Business Model (HAR1), pending final confirmation. A total of £3.7 billion (approximately €4.46 billion) has been allocated for 2025-26, to be shared between these projects and existing CCUS initiatives. Over 25 years, a total of £21.7 billion (approximately €26.15 billion) in funding has been announced for the emerging carbon capture and hydrogen sectors, specifically for Eni’s HyNet Cluster and BP’s East Coast Cluster.
Among the major initiatives, Great British Energy—the new government-backed energy company based in Aberdeen—will receive a £125 million (approximately €150.70 million) package in 2025-26: £100 million (approximately €120.56 million) to develop clean energy projects and £25 million (approximately €30.14 million) to establish itself as a company.
For the nuclear sector, the government has confirmed that the results of the Small Modular Reactor (SMR) competition run by Great British Nuclear will be announced in the spring. Additionally, £2.7 billion (approximately €3.26 billion) has been allocated to continue the development of the Sizewell C nuclear power station until 2025-26. The UK has also confirmed plans to proceed with the Carbon Border Adjustment Mechanism (CBAM), which will come into effect in January 2027.
Finally, incentives and funding have been announced for the electric vehicle industry, including an increase in the excise duty gap between electric and non-electric vehicles in the first year. A total of £200 million (approximately €241.12 million) has been allocated for 2025-26 to accelerate the installation of charging points, while £120 million (approximately €144.67 million) will support the purchase of electric vans.
