CRC to be reviewed: Budget 2015

8th July 2015

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Schemes to improve business energy efficiency are to be reviewed to find ways of simplifying and improving them, chancellor George Osborne announced in his budget today.

The review will consider the carbon reduction commitment energy efficiency scheme (CRC) and the climate change levy, and how they interact with other business energy efficiency policies and regulations. A consultation will be launched in the autumn, Osborne said.

“The government aims to develop a simple, fair and more efficient energy environment for business that minimises administrative burdens and improves incentives for business to invest and grow,” the budget document states.

IEMA’s policy and practice lead Nick Blyth said: “The majority of IEMA members do believe there is a need for the government to rationalise the number of energy and carbon schemes affecting the very largest organisations and we look forward to the autumn consultation.”

Manufacturers trade body EEF said that energy efficiency policies urgently need revisiting so that costs are reduced, at the same time as improving emissions reduction.

“Fifteen years of layering and tinkering with policy has left us with a vast patchwork of expensive, inefficient and incoherent policy drivers for decarbonisation,” EEF director of policy Paul Raynes said.

A promise made by the coalition government to increase environmental taxes has been scrapped, according to the budget document, which states: “Such a target does not always reflect the success of government policy in achieving environmental outcomes.”

Blyth called this a backward step, adding: “We have concern over the government’s commitment to the green economy.”

Osborne said the government will continue to promote low-carbon investment and will push for a global climate deal later this year that keeps global warming to within two degrees.

But Jonathan Grant, director of sustainability and climate change at PwC said that there was not much in the budget to support low-carbon investment. The scale of shifts in energy and transport infrastructure required to achieve the two degree target cannot be underestimated, he said.

“We didn't hear much that was bold or brave to support the scale of change in infrastructure that two degrees implies,” he said.

The budget also contained plans to remove an exemption from the climage change levy (CCL) for users of renewable electricity. Osborne said this was to prevent taxpayers’ money benefitting from renewable electricity generated overseas.

Mark Hurley, head of environment at WSP | Parsons Brinckerhoff UK, said: “This again shows that this could be a long parliament for green campaigners. The levy will raise around £2.3 billion next year and the autumn’s review of business energy efficiency provides a great opportunity to use this revenue to promote energy efficiency – exactly what CCL was originally set up to do back in 2001.”

Professor Sam Fankhauser, deputy director at the ESRC centre for climate change economics and policy at the London School of Economics and Political Science, said that the change compromised the effectiveness of the CCL, which is designed to reflect the fact that the price of products and services does not reflect the costs of climate change.

“This change will increase the costs for businesses that are supplied with electricity from renewable sources but will leave electricity from fossil fuel sources untouched,” he said.

The government should combine the CCL, the CRC and climate change agreements, he said.

Osborne also announced reform of vehicle excise duty (VED), which links the amount drivers pay to the carbon emissions produced by their vehicle. The chancellor claimed the current banding system is unsustainable, since it would mean that by 2017, 75% of new cars would be exempt from the tax in the first year of ownership.

From 2017, new bands will be put in place. These will be reviewed periodically to ensure VED continues to incentivise the cleanest cars, he said.

The chancellor also said that the money raised from VED would be ring-fenced to pay for new roads from 2020. “From the end of this decade, every single penny raised in VED in England will go into that fund to pay for the sustained investment our roads so badly need…productivity means building more roads,” he said.

Fuel duty will continue to be frozen at 57.95p a litre, he added.

Jason Torrance, Sustrans policy director said: “VED is a tax on pollution: those cars which create the most greenhouse gases are taxed most heavily. Siphoning that revenue into a new roads fund will inevitably lead to further pollution and undermines its original purpose.”


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