So we learnt today from the CSR that government will shortly consult on the reform of the Climate Change Levy. We also learnt that “The CRC Energy Efficiency scheme will be simplified to reduce the burden on businesses, with the first allowance sales for 2011-12 emissions now taking place in 2012 rather than 2011”. This is good news, yes government has been saying for a couple of months now that it wants to make the CRC “More business friendly”.
So it is an understatement therefore that I am completely shocked that on CRC, the CSR also says “Revenues from allowance sales totalling £1 billion a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants.”
How does this measure – that is purely designed to increase revenue to the general Treasury coffers – reduce the burden on businesses and CRC more business friendly? To me it is a tax take to the tune of £1bn in business and very little else.
This government had made it clear that there should be a rebalancing of the economy, with the private sector playing a more central role, whilst reducing the influence of government. It has promised more certainty, more transparency and a more consultative approach.
This measure flies in the face of this brave new world and will damage the trust that government aims to build with manufacturers. Manufacturers have over the last couple of years, put in place significant and costly strategies to comply with the agreed rules of CRC and aim to work with the recycling of revenue regime. They have signed up to the Carbon Trust Standard, at a cost of £15,000 each. They have helped CEOs understand where their organisation will sit in terms of recycling payments and invested in capital equipment on a return on investment basis linked to the CRC rules.
The scheme has started and now government turns the rule book on its head and shatters any strategies organisations have in place. I know that for some manufacturing companies this policy change will cost them over £1m per year.
So what happened since this government said it wanted to achieve emissions reduction targets at least cost. Yes recently a Treasury minister really said this. Is the honeymoon over for believing that government really was going to improve this policy landscape?
I would be very interested in your views. Is this a much needed measure, or a significant mistake that will only serve to limit low carbon investments.