What now for the UK Carbon Reduction Commitment Scheme?

Phil Wilcock
Feb 01, 2011

One of my tasks for this week has been to attempt to unravel just what is happening regarding the UK Carbon Reduction Commitment (CRC) scheme. Now this scheme was tricky enough to get to grips with from the offset, but now the picture seems to be getting darker and darker…

After much reading and analysis however, I can report that actually no-one really knows what on earth is going on with this. Is it a stealth tax? Efficient Carbon management? or will it just fade away like a nasty scar?

Well here’s where we are right now. The first signs of change came back in October 2010 when the government decided to change the fundamentals. Under the original terms of CRC , It was stated that funds raised from the purchase of CO2 allowances would be plowed back into the scheme. This idea was meant to reward those companies that cut their energy usage the most. This was known as ‘revenue recycling’.

Now that the government has decided that it need the cash however, it expects to raise £1 billion a year from the scheme by 2014-15 – money which will be used to support the public finances rather than recycled to participants. Hence the ‘stealth tax’ jibes.

Next up, the Energy Minister Chris Huhne announced that the government will delay the implementation of the scheme, so that the first sale of permits to cover energy use will not take place next year, but in 2012. Eligible companies will not have to register for the second phase of the scheme, due to start in April 2011, until 2013. Perhaps he thinks that we’ll have forgotten about it by then?

The UK’s Daily Telegraph newspaper certainly seems to think that the scheme is doomed. In their subtly titled article ‘Environmental Stealth Tax May be Scrapped’, they claim to have heard that that the CRC could be merged with other taxes in a number of “discussion papers” for the 5,000 companies due to be affected.

This news is creating great uncertainty and confusion in the business world. Energy consultants have been busy briefing their clients on what potential changes might mean. “One of the options proposed is effectively abolishing the Carbon Reduction Commitment and saying should we merge its provisions with the Climate Change Levy [an existing tax on business energy usage] and mandatory carbon reporting,” said Dave Symons, a director at WSP Environment and Energy. “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.”

Whatever happens to the CRC, scrapped, delayed or revised, I think that it’s safe to say that some form of mandatory Carbon Reporting is still coming for larger companies. Click Green reports that we still have a situation where most companies cannot or will not measure their carbon footprint, and this is worrying. In fact carbon reporting is becoming so high profile that recently 50 companies and NGOs wrote to Caroline Spelman, Secretary of State, Department for Environment, Food and Rural Affairs (DEFRA), supporting mandatory carbon reporting and there are some heavy hitters in there. We are fast approaching a time where a businesses attitude to sustainability and serious carbon reduction will sort the men from the boys, and I know where which side of the fence I’d like to be on when it arrives!

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