Wednesday 30 March 2011

Viewpoint

Now that businesses are getting used to the fact that the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme is a business tax, what effect is it going to have on them? At least 5,000 organisations will have to pay up to 10% extra on their annual energy bills.

Previously this was not such a big issue because, under the original scheme with money being recycled, organisations that made the effort to reduce their CO2 could be financially rewarded. However by changing it to a "green tax", the reward has been abandoned along with many organisations incentive to become leaders in the scheme.

The Environment Agency cannot provide any further information on what changes will be implemented to the scheme as it is up for government review, but businesses effected by the legislation will need to know sooner rather than later the details involved so they can meet both the administrative burden of adhering to the requirements of the scheme and the financial burden of purchasing allowances at £12 per t/CO2

The government is aiming to claw back £83 billion over the next four years and turning the CRC scheme into a business tax will add £3.5 billion to the cause. By turning the CRC into a tax they have effectively created a two tier system between CRC participants and European Union Emissions Trading Scheme (EUETS) participants.

Larger organisations that fall under the EUETS scheme have got off completely tax free. It has remained a cap and trade scheme and has been the subject of significant criticism as comparatively smaller organisations affected by the CRC are now subject to extra taxation.

Despite organisations no longer receiving rewards through the CRC scheme for their efforts, the savings achievable through investing in energy saving equipment speak for themselves. Once the initial investment has been made, the savings are continuous and the level of CRC taxation will diminish as CO2 levels reduce.

The government needs to do more to help organisations affected by the new tax. Loans from organisations such as the Carbon Trust are generally not available to participants in the CRC. Hopefully the creation of the Green Investment Bank, CRC participants will be able to access the funding needed to implement a CO2 reduction programme whilst reaping the cost reduction benefits associated with energy saving technology.