CRC – the End of the Road? (No)

March 8, 2012

I thought the LibDems had a green agenda but suddenly we hear that Vince Cable wants the Treasury to scrap the Carbon Reduction Commitment in the budget. Maybe Chris Huhne’s departure means the green balance has shifted. Apparently, CRC is now just a tax that will add to the burden of business in these difficult times and must be removed in case it threatens growth. The only way businesses can avoid or reduce their CRC levy is by re-engineering their processes or just by being more careful so they improve efficiency and cut their carbon footprints.

What’s wrong with that? That’s what the CRC was supposed to encourage. Originally it was a carrot and stick system. Sadly the government has withdrawn the carrot, but if they take the stick away nothing will happen. The objective of the stick is to cut the nation’s CO2 emissions, because the scientific consensus is that man-made CO2 is causing climate change with increasingly dire consequences for the world and all its population. The target is an 80% reduction by 2050, but even in spite of the recession the nation’s emissions are still going up.

So what do we do? Both Mr Cable and the CBI believe that the CRC should be scrapped and the tax recovered by raising the Climate Change Levy – a surcharge on energy bills paid by all except domestic users. That will spread the pain more widely than the 2,700 CRC participants (why is the press talking about 20,000 affected companies?) but surely the tax take will be the same and the pressure on business will be the same as well. Or are they looking to extend range of CCL exemptions which some organisations enjoy?

What will happen in the budget? Not much. The first phase of the CRC scheme still has a couple of years to run and after some five years’ preparation – and considerable investment and effort by the participants – there is no way that the scheme will be dropped before the end of the phase. The key issues for the budget are the price of carbon allowances and whether the Chancellor will set a price for the next three years, allowing participants to plan, or just confirm the £12/tonne already announced for this year.

Phase 2 is another matter. The press is talking about consultation on simplifying the CRC scheme. Will that be the second or the third consultation on simplification? What we have been promised, and what has yet to appear, is consultation on legislation for Phase 2. Like all things CRC, the promised date goes out and out. Hurry up – the qualifying year for phase 2 starts on 6thApril!

Maybe the delay is a hint that there won’t be a phase 2. If that happens it will be a disaster. A waste of public money. A much bigger waste of private money. A big hole in the plans of the “greenest” government to meet its own carbon reduction targets.