Monday, 28 May 2012

New consultation on CRC energy tax

The Department for Energy and Climate Change (DECC) has decided that a simplified Carbon Reduction Commitment (CRC) will be the best way of incentivising participants to implement energy efficiency in their organisations.

The proposals in the consultation, which closes on 18 June 2012, are aimed at amending the existing scheme rather than replacing it with a carbon based tax. However, many commentators see the proposals as part of a “softening up” process that will eventually result in an “alternative environment tax” if the changes proposed do not result in significant administrative savings for participants. RPC is liaising with the UK Green Building Council on a cross-industry response to the consultation.

Some of the proposed changes include:

  • No auctioning of allowances in Phase 2. Instead there will be a two stage fixed price sale, at the beginning and end of a period. The retrospective sale of allowances at the end of a period will be at a higher price to the forecast sale at the beginning of a period.
  • Better fit with business structures. CRC will be changed to apply to the “natural business units” of organisations rather than the “highest parent company” structure currently in place.
  • Reporting burdens will be reduced: there will be four rather than 29 fuels to report on, rules on metering and electricity will be simplified, there will be no footprint reports and the requirements on the storage of past information will be relaxed.
  • Less overlap. Removal of the obligation on installations that participate in the EU Emissions Trading System scheme or have Climate Change Agreements to purchase CRC allowances.  

However, the consultation will mean there will be no change to:  

  • The landlord and tenant rule. DECC remains of the view that landlords are better placed to influence the use of energy and cost effective improvements than tenants.
  • League tables. Since there has only been one league table published, DECC will wait and see how effective the reputational driver of poor performance in the league table will be in improving energy efficiency.

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