Report suggests need for certainty on business carbon reduction legislation

  • 17 May 2012, 16:00
  • Ros Donald

Changes made by the UK Treasury to a scheme to reduce businesses' emissions and encourage carbon recording amount to a "stealth tax" which is reducing organisations' motivation to cut carbon, according to new research.

The report also raises concerns that these measures could be ditched altogether, which the authors say would have serious negative implications for the government's perceived commitment to cutting carbon and potentially putting a price on carbon in the future.

Environmental behaviour change organisation Global Action Plan presented its report to the UK Parliament's Committee on Energy and Climate Change (ECC) today. It says the Carbon Reduction Commitment (CRC) - originally designed to financially reward the large business and local government bodies which reduced their emissions most effectively, and penalise those who did not - has "effectively been turned into a tax".

The CRC is a scheme under which large businesses (but not the heaviest polluters) record their carbon emissions. A yearly league table announces the best and worst performers, and those who fail to meet targets must pay a levy. The idea was that this money would be repaid to the best performers - but according to Global Action Plan, the competitive element of the CRC "was dropped when the Treasury announced that it was keeping all the income generated by the CRC rather than re-distributing it" - a change that was introduced in September 2010 as part of the newly-elected government's comprehensive spending review.

The researchers interviewed over 100 businesses who take part in the scheme, of which the majority said the move away from redistribution has "had a detrimental impact on encouraging them to save carbon," according to Global Action Plan's release.

The UK's Department for Energy and Climate Change (DECC) has been reviewing the CRC since March this year after the Treasury said the mechanism either had to be simplified or replaced with a tax.

According to the businesses interviewed for the report, the biggest problem with the CRC is the administrative burden it places on companies - 69 per cent of respondents to the survey said the current system was too cumbersome. Some said the amount spent on complying actually diverted money away from other sustainability projects.

But Trewin Restorick, Global Action Plan's CEO, told us that with the proposed review coming only a year into the policy's life has meant businesses could take future initiatives to encourage carbon cutting less seriously:

"Our research suggests it's too early to be reviewing the CRC's efficiency - we project the upfront costs of putting in new systems to cope with the measures will decrease dramatically in the near future. It's bound to be more expensive in the first year.

"Businesses may not agree with the policy but they want consistency. If the government keeps reviewing policies just after businesses have put in the necessary systems and investment it'll be impossible for them to create any sort of long-term strategy in the future."

Restorick adds that it will become increasingly difficult for corporate social responsibility and facilities teams to persuade skeptical colleagues to get behind green measures if there is no certainty about the direction of government policy. This was visible in the exodus of investment from the renewables sector after the uncertainty about solar feed-in tariffs last year, he says.

Global Action Plan says that despite the Treasury changes to the scheme, the CRC has been successful in getting businesses to cut their carbon emissions. 40 per cent of those interviewed had never reported their emissions before, with 67 per cent of the respondents saying the CRC had improved their energy measurements.

The organisation suggests in the report that an improved CRC should be the basis for compulsory reporting on carbon emissions. Speaking to the ECC committee today, Restorick also advocated reducing the administrative burden of the current scheme.

Later comments in the hearing highlighted continuing confusion about climate change legislation amongst politicians as well as the public. One MP asked how the burden of CRC taxation might affect small businesses - which, as it was pointed out, aren't included in the scheme. Lack of clarity on green measures has also been clear in coverage and comments about the Green Deal - the government's scheme to help businesses and homes improve building energy efficiency.

Business Green's James Murray warned the committee that if the CRC were replaced without clear indicators of the level of emissions cuts expected now and in the future, the door would be open to lobbying from business against pricing CO2 - effectively turning the clock back to the introduction of the CRC five years ago. For more information on Business Green's research on the CRC, read its white paper here. 

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