The CRC Energy Efficiency Scheme, formerly known as the Carbon Reduction Commitment, may be radically overhauled or even scrapped, according to a report in the Daily Telegraph.
Details of the “stealth” tax featured in last October’s Comprehensive Spending Review and is due to hit over 5,000 businesses that have energy bills of more than £500,000 next year. It was hoped that the “green tax” would raise the Treasury over £1 billion per year by 2014/15.
Whatever the changes may bring, it will anger many businesses that have invested time and money into the preparations for the scheme. It may also affect companies like SAP and CA that have been developing carbon accounting software packages.
There was a furore in October when the government announced that the CRC award scheme, which originally would reward carbon-efficient operations, would instead be a tax added to the already-stretched economy. The money levied against high energy users would now go into the government’s public purse rather than into the wallets of the best-performing energy-savers.
Richard Lambert, director general of the CBI, said, “Businesses that have just signed up [on September 30] to the flagship Carbon Reduction Commitment energy efficiency scheme will be very let down by the government’s unexpected announcement that it will remove the cash-back incentive. A scheme that was meant to change behaviour by encouraging energy efficiency has now become another stealth tax.”
Last Friday, consultancy WSP Environment & Energy announced that five discussion documents, for feedback by March 11, had been received seeking further refinement of liability for the CRC tax.
“The most significant option is to completely recast CRC and merge its provisions with climate change levy and mandatory carbon reporting – which UK government will be consulting on separately in February,” WSP reported. “The other less radical suggestion is that organisations with Climate Change Agreements (CCA) don’t report the energy used/emissions from supplies that are covered by their CCA. This significantly reduces the administrative burden.”
The only good news is that next April’s registration for the second phase of CRC will now be delayed until 2013. This has been a relief for the many companies that failed to meet the September deadline for the first phase last year.
The Telegraph reported Dave Symons, a director at WSP, as saying, “One of the options proposed is effectively abolishing the Carbon Reduction Commitment and saying ‘should we merge its provisions with the climate change levy and mandatory carbon reporting?’. We can see the logic for that. But it’s quite a substantial change. Merging the scheme with another tax could even create additional revenue for the Treasury because it could extend the scope.”
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Never trust politicians. Denis Healy, who was Chancellor of the Exchequer, Foreign Secretary and Defence Secretary, said that. It always seemed idealistic and optimistic to believe that the Treasury would allow a government-controlled body to collect large sums of money from businesses in the UK and then give away all the money they’d collected. And so it has proved. The Carbon Reduction Commitment is no longer “revenue-neutral to the Treasury” and has become the “Carbon Reduction Tax”. More precisely known as “Tax”.
Once it becomes just a tax, most of the other things associated with it fall away into irrelevance. The League tables become a PR exercise and the public will interpret a higher place in the tables as being “more green”, rather than“more improvement”. The extra cost and administrative complexity involved in the computations serve no purpose, and the tax may just as well be combined into the Climate Change Levy (also more precisely known as “Tax”). And so ends the Carbon Reduction Commitment scheme.
All this does disguise a real problem, though. In the medium future, the UK will face a shortfall of around 20GW of electricity generating capacity starting in 2015 and running on until 2020 when new nuclear capacity comes on stream. The possibility of rolling brown-outs or black-outs is entirely real. And the government needs to do something to encourage people to reduce consumption. A tax on large electricity users, forcing them to reduce usage of an expensive and scarce commodity is an obvious thing to do. The new tax and the end of the CRC should be seen in that context.