What’s The CBI’s Game With CRC?

David Cameron promised that this government would be “the greenest ever”. The only people feeling green now must be those who believed him.

Investment in this country’s renewable energy industry has fallen by 70 percent in one year, thanks to this government’s cretinous mishandling of feed-in tariffs. If the administration can mess things up that badly, it is anyone’s guess how stupid its response will be to the current consultation over the CRC energy tax.

Shall we turn the clock back?

Originally proposed by the Labour government, the Carbon Reduction Commitment  became the CRC scheme and, last October, was drastically altered.

It’s been explained over and over, but CRC was originally “revenue neutral” with all money put into the scheme eventually shared back out amongst participants, according to a league table of who had reduced their carbon usage most. Last year the paybacks were eliminated, and the decision made that all money will go to the treasury.

The announcement was cocked up of course, slipping out with no warning after companies had signed up and budgeted for a revenue-neutral scheme in which they might make a profit.

But overall, the business community decided it could live with it, and the green business lobby pointed out that a simple green tax was what they had wanted all along – and something they never dreamt of getting from a Conservative-led government.

The government opened a consultation this year, on whether CRC should be further simplified. After all there are several different carbon taxes in the process of arriving, which will affect different sets of businesses, and impose different carbon prices.

The consultation led to suggestions that CRC would be merged into other taxes.

Enter the CBI

But then the CBI lumbered into the debate. The lobbying group of chief executives – fondly referred to as the “bosses union” in the old class war days of my youth – has made an intervention which seems to understand the situation even less (if possible) than the government, making a set of self-contradictory demands.

The current version of the scheme “offers little incentive for businesses to reduce their emissions,” says the CBI.

Then it complains that the change to the scheme effectively raised the cost of carbon by a factor of ten, from £1.20 to £12, “potentially increasing electricity bills by seven percent”.

Now, correct me if I am wrong, but I would have thought that higher electricity bills would be an incentive to reduce energy use and therefore emissions. The CBI might complain that it would prefer a nice juicy carrot instead of the stick of higher energy costs, but it’s rubbish to say there is “little incentive” to reduce emissions.

And then there is the complexity issue. The CBI attempts to argue that the current tax is overly complex, and then says the essential way to fix it would be to reinstate the original idea of giving money back to the participants. “Reinstating the revenue recycling incentive is the only credible option for maintaining the CRC.”

Excuse me, but these are contradictory ideas. Revenue recycling was always going to be complex and arbitrary, and even supporters of the original scheme had their doubts about it.

Taking revenue recycling out was one step towards simplifying the CRC – the CBI wants it back because it wants money, not because it wants simplicity.

The real agenda

It’s possible the CBI’s game is more subtle. There is absolutely no chance that revenue recycling will be put back into the scheme, and the CBI should be aware of that.

Its message is actually “put revenue recycling back or scrap the tax” and given the impossibility of the former, the CBI may actually be dressing up a simple plea for the latter.

I reckon what the CBI wants is really to just have the tax scrapped – if possible completely. It can probably muster a deal of outrage from its members that anyone should pay more for energy in times of economic difficulty.

In the end, it looks more likely that the CRC will be merged with other taxes. And the CBI’s fantastical intervention may be designed to make that more likely.