Treasury suggests scrapping Carbon Reduction Commitment

The UK Government has opened a consultation that aims to boost investment in energy efficiency by streamlining carbon reporting and tax requirements for businesses.

Through the consultation, the Treasury is seeking responses from industry stakeholders on its proposals, which are underpinned by a move away from the current system of overlapping policies towards one where a business would face just one tax and one reporting scheme.

For example, the Treasury suggests replacing the carbon reduction commitment (CRC) and the Climate Change Levy (CCL) with a new energy consumption tax, based on the CCL. It also proposed the creation of a single reporting framework, designed “through the prism of the Energy Savings Opportunity Scheme (ESOS)”.

The Treasury is also asking for suggestions as to how it can incentivise energy efficiency and carbon reduction in a way that is simple for businesses to understand and comply with.

Productivity boost

The consultation was launched on 28 September and will conclude by 9 November, with the Government expected to publish its full response in the 2016 Budget.

“Encouraging business energy efficiency will play an important role in supporting our environmental objectives,” said Exchequer Secretary to the Treasury, Damian Hinds. “It will help the UK decarbonise cost effectively and ensure security of energy supplies, but it also has the additional benefits of boosting business productivity, and supporting growth and competitiveness.

“This consultation sets out proposals to reform the landscape in order to deliver a simpler and more stable environment for business.”

Currently, some businesses have to comply with two carbon tax programmes – the CRC and CCL – as well as three carbon reporting requirements – the CRC, ESOS, and mandatory carbon reporting. The consultation announcement has been welcomed by green groups, including the UK Green Building Council (UKGBC) which claims a simplified policy landscape would drive investment in green technologies.

New incentives

UKGBC senior policy advisor Richard Griffiths said: “Moving to a position where organisations are faced with just one key reporting scheme should help to free up organisations’ resources and allow them to focus on delivering energy savings, rather than administration.

“Likewise, rationalising the tax regime could provide a clearer spur for action, and help to kick-start commercial retrofit activity after a few relatively flat years.”

Griffiths added that more needed to be done to reduce emissions from UK buildings. “To do that, we need new incentives that significantly strengthen the case for businesses to not only identify energy saving opportunities but put them into action, and so it’s encouraging to hear that Government is open to new ideas in this area, especially in the light of recent cuts to support for renewables,” he said.

However, others are worried that removing the CCL might penalise companies which invest in green energy. According to a new survey of 100 decision-makers in the manufacturing industry – released today by npower Business Solutions – 65% of manufacturers are “concerned” or “very concerned” about the impact of removing the CCL exemption on investment.

Quick decisions

Three quarters (74%) of those manufacturers that were surveyed did, however, agree that they were overburdened with bureaucracy in the energy regulatory framework; while 57% claimed that existing and planned policies “don’t reflect the needs of British businesses”.

Wayne Mitchell, director of markets & innovation for npower Business Solutions, said: “Some are speculating that the CRC scheme will be removed, with the CCL being used to address the shortfall in funding. We would support this measure in principle if costs were allocated fairly, however quick decision making on this is essential to ensure businesses have certainty.”

The current policy landscape has been criticised by businesses, industry bodies and green groups alike. In the past week, the Conservative Government has come under fire from renewable energy groups, the CBI and Al Gore for its ‘hypocritical’ green policies.

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