Thursday 30 June 2011

Editorial

So the CRC has been 'streamlined' by DECC. The major changes are a reduction in the number of fuels covered by the legislation, a move to fixed price allowances, overall simplification of the entry criteria and reducing an overlap with other schemes such as the EUETS. See our related story CRC changes announced for full details of today's announcement.

Is it a surprise this has happened? Is it an example of Government listening or back tracking? What does it really mean for businesses going forward?

Ever since its inception by the Labour government the Carbon Reduction Commitment Energy Efficiency Scheme, or CRC has been through more transformations than Dr Who. Initally it was designed to encourage energy saving by rewarding those companies that performed well with praise and cash. Eventually it became a complicated tax and now its a 'simpler' tax. Confused? You're not the only one.

Its aim was to help the UK meet its targets to cut CO2 emissions by 80% by 2050 by getting anyone that used more than 6000 MWh of electricity to monitor how much they were using, buy CO2 allowances (at £12 a tonne) according to use and then be ranked in a league table. The most efficient at the top the least at the bottom. Those that performed well would then get financial benefit. Its criticism from the outset was its complexity and the fact it pitted public sector organisations against the corporate sector.

The worry was under-resourced councils would find they couldn't put in the right monitoring or efficiency systems and would end up being financially penalised while big corporate beasts with better monitoring would get the kickbacks. As for smaller companies that just qualified for the scheme, the main complaint we heard was the sheer burden of bureaucracy needed to keep tabs of CO2 usage and a league table system that would not be fair in the way it compared emitters.

The deadline for submitting to the scheme was then set at Sept 30th with the threat of serious fines for those who failed to comply, hundreds didn't but there were no fines. And then just as things were being understood in October the Chancellor's spending review turned the CRC into a tax. Everyone knew it was a tax but the government continued to call it an efficiency scheme.

Last week we had some direct honesty from Charles Hendry, speaking at the npower debate he told a business audience it was a tax and hinted that simplification was on its way and today Greg Barker has announced proposals to change things. But these changes won't happen till 2014 and only after yet another consultation with businesses next year.

So is this an example of Government listening or fudging? Depends who you talk to. What's clear is this scheme is unpopular cumbersome and still a minefield of complexity despite today's planned changes. We've heard from many business leaders that instead of changing things or tinkering and re-consulting the best thing would be to admit the CRC is defunct scrap it and replace it with a simple carbon tax.

If Government really says its listening perhaps they should do just that.