Will the Government CRC Scheme be Scrapped?

The CRC stealth tax may quietly go away… or may hit more companies.

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.

Government Greed Or Efficient Management?


Rather than scrapping the tax altogether, the government may choose to either combine it with other business taxation or, according to reports, change the scope of the charge. This change may mean that some companies currently gearing up for CRC accounting may be released while others are drawn in.

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.”