UK Secretary of State for Energy and Climate Change Chris Huhne is defending the decision to pass on the revenue from the Carbon Reduction Commitment (CRC) scheme to the Treasury – instead of recycling it back to participants.
The plans, which were hidden away in the detail of the Spending Review announcement on Wednesday, have come as a surprise to businesses.
Huhne says the move is a necessary part of his department’s contribution to public finances and will support – but not exclusively – the Government’s spending on the environment.
The CRC scheme, which came into force last April, requires large-scale energy consumers to monitor and report their energy usage.
The plan had been for organisations to purchase carbon allowances to cover their emissions. Those that improved their energy efficiency would be rewarded with a bonus as well as the return of their original investment.
Now, however, the Treasury will keep the revenues raised from selling CRC allowances, which is expected to raise around £1 billion a year from 2014-15 onwards.
“The withdrawal of recycling payments will come as a blow to businesses, which had understood to date that CRC would be Treasury neutral,” says Elizabeth Shepherd, partner at law firm Eversheds.
The business sector is labelling the move a ‘stealth tax’, but energy company npower is urging companies not to lose sight of the fact that the scheme is designed to encourage behaviour that will ultimately bring benefits.
“Collation of accurate emissions data and introduction of energy efficiency measures allow businesses to fully understand their energy cost base and reduce this cost base by reducing their energy consumption,” says Dave Lewis, head of business energy services.