New carbon 'tax' will push electricity costs 3% higher
Carbon floor price support will effectively act as a third carbon tax when it's introduced in April next year claims environmental consultant WSP Environment & Energy.
It says the new measure will raise £695m in 2013, will push electricity prices 3% higher and should be used as an opportunity to scrap the carbon reduction commitment (CRC) scheme.
WSP director David Symons said businesses seem 'barely aware' that the carbon floor price will increase electricity prices yet again.
"If the magnitude of the projected revenue was more widely known, there would be an overwhelming campaign for CRC to be scrapped," he said.
The firm claims carbon floor price support will join the Climate Change Levy and CRC as a three-tier tax, increasing electricity costs for businesses by around 15% in total in 2013-14. It estimates that by 2015-16 the 'new tax' will be raising £1.3bn a year for Treasury.
While acknowledging that carbon floor price support is designed to bring greater investment certainty to the renewables industry, it says the agreed price level is much higher than necessary due to current trading prices being so low.
As result, the Treasury will get a "windfall sum" from next year, sufficient to more than offset any revenue lost by abolishing CRC in the autumn.
Commenting in its own carbon tax white paper, WSP says the proposed amendments to CRC amount to "tinkering" rather than the radical approach called for by George Osborne.
"It's unlikely the proposed changes will significantly reduce the administrative burden of CRC," the paper stated. "In some cases we can see that the changes will actually have the reverse effect."
Instead, WSP argues that replacing CRC with an alternative scheme should provide a clear signal to business about the importance of saving energy, adding that a more fundamental review of CRC is needed.
Its plan includes substituting CRC revenue for the windfall revenue arising from carbon price support, pegging the climate change levy to the equivalent of the carbon floor price and using the newly announced move for UK quoted companies to report their carbon emissions as a fairer way to see what's happening than is revealed by the CRC league table.