Manufacturers met with HM Treasury this week to again express concerns that allowance revenues from the CRC Energy Efficiency Scheme, projected to be up to £1 billion a year, will be used to support the public finances rather than recycled to CRC participants. We said in the strongest terms that it sent a worrying signal about how the government intends to engage with the private sector going forward.
We called on Treasury to significantly improve engagement in the run up to the forthcoming major consultation on reform of the Climate Change Levy (CCL) and proposals for a carbon tax, which are due to be published mid November.
A key message to Treasury was that any new carbon tax must be seen in the totality of the many costs pressures on business and should not be seen in isolation.
The changes to CRC present government with a choice at a pivotal moment, as if we see a proposal to introduce an ‘upstream’ carbon tax, levied on the electricity generators, regardless of the price of the EU carbon price, then we may end up with triple taxation on the same tonne of carbon. There will be the CCL levied on the end user, the CRC paid by the end user and then the up stream carbon tax, levied on the electricity generator, with full pass through to the end user.
Government now has the chance to get it right and action its rhetoric of certainty, simplicity and transparency in order to accelerate the move to a low carbon economy, by sending the right signal to the market.
If an upstream carbon tax is to be introduced, then surely now is an ideal time to consider rolling up the CRC carbon tax into this new tax, without increasing the financial burden on manufacturers and to virtually scrap the CRC and take a fresh look again at mandatory reporting to sit alongside this broader carbon tax.
Government must stop tinkering around the edges in a piecemeal fashion and look more strategically, as we are in danger of increasing complexity, not reducing it.