It’s official, CRC is now a tax. The plan was for companies to buy carbon allowances in April 2011 and to receive the money back with a bonus or penalty in October 2011. Now there will be no sale before April 2012, and it’s not clear whether the allowances bought then will be for the preceding year or for the coming year. What is clear is that the government will not now be giving any of the money back!
We were originally looking at a short-term cash flow effect and then a worst-case penalty (for those at the very bottom of the league table) of about 0.5% of energy costs. Now we are looking at a straight cost of about 5%, based on the initial £12/tonne; much more if costs go to the predicted £40/tonne in the second phase. A lot can happen before 2012. The government caved in to protests about the original obligation to purchase allowances for two years in 2011. Will they cave in again? This indecision will seriously weaken the credibility of the scheme and is really annoying for those of us who have put in considerable effort to help our clients comply with the rules!
We’ll keep you posted.