CRC switch branded a 'green tax'

A surprise Spending Review announcement that the Treasury will keep receipts from the Carbon Reduction Scheme (CRC) has angered business leaders.

The CRC requires organisations that use more than 6,000 Megawatt hours (MWh) of electricity a year to register and provide annual information on their energy use, and to pay for allowances to produce emissions beyond a base level.

Chancellor George Osborne said the CRC Energy Efficiency scheme is to be simplified to lessen the impact on business. The introduction of the scheme's allowance sales regime has been delayed a year until 2012. But when the revenues come on stream, they are expected to exceed £1bn a year by 2014-15. This money raised from the country's 6,000 heaviest electricity users will now be kept by the Treasury rather than paid back to businesses that meet their energy efficiency targets.

According to government costings, the change will raise £3.46bn in revenue from private and public sector organisations between 2011 and 2015. Costs will rise to £1.02bn a year in 2014-15.

The delay in introducing allowance sales extends the timeframe for budgeting purposes and may bring a welcome deferral of cash outflow. But the decision prompted accusations that Osborne was imposing a new tax on businesses by the back door.

The temptation to hold onto the money was probably irresistible, commented Deloitte partner Cindy Cahill. “In its current form, the CRC was revenue neutral to the Exchequer. Given the state of the nation’s finances, it is perhaps unsurprising that the existing framework has been adapted to boost public finances,” she said.

Edward Craft, a partner with City law firm Wedlake Bell commented: “The CRC is now nothing more than a green tax introduced through the back door, but with the hugely expensive data collection and reporting requirements of a carbon trading scheme,” said “Businesses face the worst of both worlds: they will have to administer an extremely bureaucratic scheme but won’t receive the promised benefits for reducing energy consumption.

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