Budget places axe over CRC

21st March 2012

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In announcing the 2012 Budget George Osborne has given the strongest indication yet that the Carbon Reduction Commitment Energy Efficiency (CRC) scheme may be scrapped

In his speech to parliament, the chancellor confirmed that, while the government was working to simplify what he described as a “cumbersome, bureaucratic” scheme, if administration costs could not be significantly reduced, he would replace it with another environmental tax.

However, the alternatives won’t be discussed until the autumn, while CRC participant organisations will have to buy allowances under the scheme from April, costing £12 per tonne of carbon dioxide. And, although the chancellor confirmed the carbon floor price at £9.55 per tonne of CO2 in 2014–2015, he has not outlined the potential costs of CRC allowance beyond March 2013.

IEMA reacted to the announcement by calling on the government to make an urgent decision on the long-term future of the CRC to help organisations to plan for the future.

“Businesses will welcome the opportunity to simplify the CRC, but government must ensure that the scheme or any replacement continues to deliver significant carbon reductions,” said Martin Baxter, IEMA’s executive director of policy.

“We urgently need a long-term, consistent policy framework to provide organisations with the confidence to invest in low-carbon and energy-efficient improvements and we're disappointed that the government has not taken a longer-term approach to the CRC carbon price.”

The Budget also revealed more information on the application of the carbon price floor to take effect from 1 April 2013, including the exemption of coal slurry from the tax, along with fossil fuels used in “good quality” combined heat and power plants (subject to EU approval) and electricity suppliers generating less than 2MW.

Other announcements in the budget include:
• an 80% reduction in climate change levy rates for certain metal recycling processes from 1 April 2012
• a 12.5% increase in landfill tax from 1 April 2013 – taking the price of landfilling waste up to £72 per tonne

A two-year extension to a tax-relief scheme aimed at encouraging firms to buy low-emission cars was also unveiled. Osborne confirmed that “first-year allowances” will now be available until 31 March 2015, however, from April 2013 the eligibility threshold will be lowered, meaning that the relief will be available on cars that produce less than 95g of CO2 per km (down from 110g/km) and it will no longer be available for leased cars.

In addition, the government will lower the emissions thresholds for the main capital allowance rates for business cars from 160g/km to 130g/km, while zero and ultra-low carbon vehicles will, from April 2015, be subject to company car tax rates of 13%, rising to 15% in 2016-17.

Alongside changes to taxes designed to encourage organisations to operate more sustainably, the chancellor outlined the government’s commitments to supporting a low-carbon energy mix. While arguing that he supported renewable energy, Osborne stated that he remained “alert to the costs we are asking families and businesses to bear” and outlined £3 billion of subsidies to the oil and gas sector.

“Environmentally sustainable has to be fiscally sustainable too,” he said. “Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years.

“I want to that ensure we extract the greatest possible amount of oil and gas from our reserves in the North Sea.”

The move has provoked strong criticism from environmental campaigning groups with Greenpeace’s executive director, John Sauven, labelling the Budget a “polluters’ charter”.

“This was a bad day for the environment. Support for British manufacturing, green jobs and greening the economy should have been the cornerstone of Osborne's budget,” he said.

“There was scant support for the cutting-edge clean tech industries that are spearheading economic recovery in other countries.”

Meanwhile, Friends of the Earth executive director Andy Atkins lambasted the chancellor’s announcement that the overhauled national planning policy framework, to be published on Tuesday 27 March, will create “growth-friendly” planning policy and protect the natural environment.

“Trashing planning rules will do nothing to develop a fair and resilient economy – we need the right kind of development in the right place, with investment in clean energy and warm, affordable homes,” he said.

In his speech, the chancellor confirmed government planned on undertaking major infrastructure projects over the coming decade, including more roads and, potentially, greater airport capacity in the south east.


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