Businesses lose out via £1bn-a-year green 'stealth tax'

Changes to the Carbon Reduction Commitment scheme could cost up to 5,000 businesses a hefty sum. And they're not impressed.

by Emma Haslett
Last Updated: 06 Nov 2012
Although the general business reaction to the Spending Review has been largely positive, one little titbit buried in the small print really has raised the hackles: news of a change to the Carbon Reduction Commitment scheme, which provides companies with financial incentives for cutting down on their gas and electricity bills. The scheme was supposed to be revenue-neutral - so it would raise money from a levy on the biggest consumers, and give it back to the companies who cut their bills the most. But now the Chancellor is planning to pocket the proceeds instead. Bad news for the 5,000 firms involved - and for the green lobby, who argue that companies will have even less incentive to cut emissions. Finally, something businesses and environmentalists can agree on...

Introduced in April this year, the CRC forces companies with gas and electricity bills of over £500,000 a year to buy ‘allowances’ of £12 per tonne of carbon dioxide they emit. They can then trade these allowances – and any money raised by the Government as a result of the scheme would be directed back into the businesses who managed to save the most via refunds at the end of the year. But now the Coalition says instead of recycling those proceeds back into the scheme, all the money it raises will go straight into the public coffers, on the grounds that, well, we're skint. Once it comes into force in April 2012, the scheme will raise about £1bn a year for the Treasury; minister Greg Barker argues that while the climate change is a pressing issue at the moment, the deficit is even more pressing.

The eggheads at PricewaterhouseCoopers (or PricewaterhouseCooper, if you're Alan Johnson) have already been doing some calculations: they found that for businesses with an average gas and electricity bill of £1m, losing those incentives will cost an extra £76,000 a year, rising to £114,000 per year by 2015. British Retail Consortium director general Stephen Robertson has already branded the decision ‘appalling’, adding that it will turn a hitherto commendable energy efficiency scheme into a ‘tax raising pool’. That's a difficult one to argue with, and rather undermines the Government's business-tax-cutting credentials.

Energy minister Stephen Hendry says part of the reason the change has been made is to avoid bureaucracy: ‘We’re trying to respond to concerns that the scheme is too complicated,’ he insisted – although since businesses will now have to go back over their books to make allowances for the new rules, barely six months since the scheme was introduced, it definitely won’t make their lives easier in the short term. And even if it helps in the long run, we suspect most would rather have had that £114,000...

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