Future of CRC remains uncertain

5th December 2012


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No decision will be made on the future of the Carbon Reduction Commitment Energy Efficiency (CRC) scheme until 2016, the chancellor has confirmed

In his autumn statement, George Osborne announced that the CRC performance league table would be scrapped in a bid to simplify the scheme, but that a decision on the future of the entire scheme would not be made until after the next general election.

Osborne said there would be a full review of the CRC in 2016 and pledged that he would remove the controversial tax element of the scheme as soon as possible.

“The review will consider whether the CRC remains the appropriate policy to meet industrial energy-efficiency and carbon-reduction objectives, and will consider alternative approaches that could achieve the same objectives” confirmed the Treasury.

“The tax element of the CRC introduced at Spending Review 2010 will be a high priority for removal when the public finances allow.”
The government’s simplification plans will save participants a cumulative £75 million between 2012/13 and 2014/15, according to the Treasury.

The lack of a firm decision on the future of the CRC was criticised by Martin Baxter, policy director at IEMA. “The chancellor’s statement on the CRC fails the business test for long-term policy certainty.

“We urgently need a consistent policy framework to provide companies with the confidence to invest in low-carbon and energy-efficient improvements. A review in 2016 undermines this.”

Gareth Stace, head of climate and environment at the manufacturers’ body, the EEF, described the simplification plans, including removing the performance league table, as a good move, but said: “Ultimately this hugely inefficient and unpopular tax needs to go.”
The chancellor has also confirmed that up to 37GW of new gas-fired generating capacity could be built in the UK by 2030.

Launching the government’s gas strategy alongside his autumn statement, Osborne confirmed that the promised 2014 review of the fourth carbon budget – covering the period 2023–27 – would revise targets upwards if the cap on emissions imposed by the EU emissions trading scheme (ETS) is not tightened.

“We will review our progress in early 2014 and if, at that point, our domestic commitments place us on a different trajectory from the one agreed by our partners in the EU under the ETS, we will revise up our budget as appropriate to align it with the actual EU trajectory,” the strategy states.

Several scenarios are outlined in the strategy, but there is an expectation in government that at least 26GW of new gas-fired capacity will be built by 2030. The development of gas on such as scale is compatible with existing carbon budgets and the 2050 goal of reducing greenhouse-gas emissions by 80% against 1990 levels, according to the strategy.

David Kennedy, chief executive at the committee on climate change, is critical of the government’s position, however, particularly if investment in gas undermines support for low-carbon generation.

“A new dash for gas, with very limited investment in low-carbon technologies through the 2020s would not be economically sensible, and would entail unnecessary costs and price increases. Neither would it be compatible with meeting carbon budgets and the 2050 target.”
In a further move to support the expansion of gas in the energy mix, the chancellor announced the launch of a consultation on new tax incentives for shale gas and the creation of an office for unconventional gas (OUG). Osborne said the OUG would ensure regulation of shale gas operations is “safe but simple”.


Autumn statement roundup

EIA consultation

The autumn statement also included a pledge from the chancellor to consult on updated guidance on conducting environmental impact assessments (EIAs). This will be completed ahead of the 2013 budget. A further consultation on raising the screening thresholds set out in the Town and Country Planning (EIA) Regulations 2011 will be issued in 2013.

Regulators

From April 2013, the Environment Agency will join the Food Standards Agency and the Marine Management Organisation in the first phase of a new system requiring regulators to quantify and consult with industry on the scale of new impacts each regulator has on businesses, confirmed Osborne. The scheme will cover both increases and decreases in the costs imposed on businesses by regulators.

Flood defence

The chancellor is making a further £120 million available over the current spending review period (2011/12 to 2014/15) to build new flood defences. The Treasury says half of the money will be awarded to bids from growth schemes, such as those being developed in Sheffield, Ipswich, Leeds, Exeter and Derby, with the remainder used to accelerate schemes already set out in the Environment Agency flood defence programmes.

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