Industry NewsThe Carbon Reduction Commitment Energy Efficiency Scheme (CRC) has been radically altered. The thousands of businesses that would have had to pay for carbon credits in 2011, will not have to purchase allowances until April 2012. However, some of the key financial benefits of the scheme have also been removed. The changes were announced as part of the Government's Spending Review.
The CRC officially went live in April 2010, and businesses had until the end of September to sign up to the mandatory scheme. It affects all businesses with a half-hourly meter and an annual electricity usage of over 6,000 MWh. It was estimated that 4,000-5,000 businesses would have to sign up to the scheme. The CRC would cap their emissions, and require them to buy credits to cover their carbon outputs. As of mid-October, 2,779 companies had signed up, suggesting that some businesses are still not complying. Failure to sign up means the company faces a ?5,000 fine with an additional ?500/day until they are registered.
The first year would have seen companies recording their emissions as a base year, and then being required to pay a set ?12/tonne in April 2011 for estimated emission for the year ahead. Now, this purchasing will not occur until April 2012. Moreover, the Treasury has announced that revenue raised by the scheme will now not be recycled among participants. Instead, it will be put into public finances. This amounts to around ?1 billion per annum.
The announcements came as part of the Government's far-reaching Spending Review, which aims to dramatically reduce the nation's debt over the next five years. For energy policy, the main announcements apart from the CRC were that Feed-in Tariffs (FiTs) would not be altered until the formal review in 2013, and that ?1 billion had been set aside to support the first commercially-viable Carbon Capture and Storage (CCS) project. There had been concerns that the levels of the FiTs would be cut, reducing the effectiveness of the support for renewable. For CCS, some had suggested that more direct support would be provided to develop four CCS schemes, not just the first. Furthermore, there was speculation that more would be discussed on the future of the regulator, Ofgem, as well as the operation of the Renewables Obligation. Neither was significantly covered.
While some of the CRC changes had been rumoured, the Environment Agency (EA) – the body administering the scheme – appears to have been unaware of the situation before the Spending Review announcement. Speaking to the EA after the Spending Review, EIC was told that further details will be provided once the EA has talked to the Treasury on this issue. At the time of writing, the EA has still not given an update. This means it is presently unclear what will occur between now and April 2012.
The changes to the CRC have been almost universally attacked. Richard Lambert, Director-General of the CBI employers' group, commented, "Businesses will be very let down by the Government?s unexpected announcement that it will remove the cash-back incentive. A scheme that was meant to change behaviour by encouraging energy efficiency has now become another stealth tax."