DECC Hopes To Slash Cost Of CRC Carbon Tax By 60 Percent

The CRC carbon tax, which the IT industry fears will increase data centre costs, is to be simplified once again, according to proposals published yesterday which are open to consultation till June.

The CRC was put under notice by the Chancellor in his budget speech as too expensive. The Department’s proposals hope to save the tax by cutting the administrative cost by around two-thirds.

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The CRC imposes a tax on energy use, and rates organisations in a league table of efficiency, as a way to push companies to reduce their greenhouse emissions. Criticised for its complexity, simplification of the CRC has been on the cards for some time and last week’s budget started speculation the tax might be abolished.

The tax is intended to save the UK 21 million tonnes of CO2  which is about four percent of the UK’s total 2010 emissions (590Mt). Since its creation by the Labour government as the Carbon Reduction Commitment, it has been progressively simplified to become a green tax.

“The Carbon Reduction Commitment is cumbersome, bureaucratic and imposes unnecessary costs on business,” said the Chancellor George Osborne in his budget speech. If it cannot be simplified it would be abolished, Osborne said.

The latest proposals do not include the option to abolish the CRC, but in fact propose 46 highly detailed changes to what is still a very complex scheme. The suggestions reduce the number of different fuels covered by the scheme, and remove the overlap with the Europeam Emissions Trading Scheme (ETS). If organisations fall under ETS, they will be excused from making CRC payments.

Alongside this, organisations will have to do less reporting and keep their records for a shorter time, while the information in the league table will separated from the CRC legislation, and placed in government hands.

“We have listened to businesses’ concerns about the CRC and have set out proposals to radically cut down on ‘red tape’ to save businesses money,” said energy minister Edward Dvey in a statement. ‘The benefits of the scheme are clear though. It will deliver substantial carbon savings helping us to meet carbon budgets and it encourages businesses to take action to improve their energy efficiency.”

The CRC as it stands would add about five percent to the cost of carbon, according to Ben Wielgus, lead advisor to KPMG on the CRC. A recent report from KPMG found the scheme would cost each participant £33,000 for the first year, and about £8000 per year thereafter. Therefore, the first four years would see total costs hit £172 million for the nearly 3000 organisations affected.

The government’s release claims its simplified CRC would cost the country £330 million over the period till 2030 – so a saving of around 64 percent of the total cost over the next 18 years.

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