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Archive for the ‘Fines and Penalties’ Category
Chris Huhne told a CBI climate change conference the government would try to ‘make the scheme work better – for you, and for us’. Photograph: Felix Clay for the Guardian
The government today announced it would delay the implementation of a scheme to encourage businesses and organisations to save energy, after controversially changing the programme last month into what critics described as a “green stealth tax”.
In last month’s comprehensive spending review the Treasury said it would be keeping revenues raised from the carbon reduction commitment (CRC) scheme, instead of recycling the money back to organisations taking part.
Large public and private sector organisations which use more than a certain amount of energy each year, including hospitals and London Fire Brigade, had to register by 30 September for the scheme, which will force them to buy credits for their emissions.
At the end of each year, the money raised from the sale of credits was due to be returned to participants, with those which had done most to cut their emissions being rewarded with extra cash and those which had done least being penalised.
Today Chris Huhne, energy and climate change secretary, said the decision to keep the money from the scheme, which will reach £1bn a year by 2014/2015, had been a difficult one, made in the context of pressure on public spending. The government has promised to simplify the programme and Huhne pledged to listen to organisations taking part to make it work better.
Plans by the UK government to take £1bn from the sale of carbon credits under the CRC Energy Efficiency Scheme have been described as a ‘one-dimensional tax on inefficiency’.
Rob Tanzer, technical support manager of Emerson Network Power’s Chloride Business, said, ‘The CRC Energy Efficiency Scheme was originally a self-supporting ‘carrot-and-stick’ scheme – but the carrot’s been taken away.’
He said, however, that in combination with rising energy costs, UK data centres and the high-tech industry still have huge incentives to cut energy costs by investing in increased efficiency.
‘Enhanced Capital Allowances permit investment in energy efficient equipment to be offset against tax – so business needs to make smarter use of the incentives that remain,’ said Tanzer.
The change to the CRC scheme was announced at the same time as the government committing £1bn to the Green Investment Bank and standing by the previous administration’s commitment to spend £60m on upgrading the countries port infrastructure.
What effect will the Government’s recently-announced Comprehensive Spending Review have on the HVAC sector? Industry experts gave H&V News readers their response.
David Frise, HVCA head of sustainability says that incentives for renewables and the radical transformation of Carbon Reduction Commitment energy efficiency scheme (CRC) are “just what many in the industry have been asking for”. The CRC is now, effectively, the carbon tax many have said was necessary to make energy a boardroom issue.
“This is one of those ‘be careful what you wish for’ moments,” said Mr Frise. “People have been pleading with the Government to simplify the CRC – well, it is certainly simpler now. A tax on consumption will push up the price of energy so creating the ultimate incentive to save it.”
He urged the industry to focus on the “big prize”, which is the boost these measures should give to the building refurbishment market. Although the CRC only effects 5,000 companies, information is being gleaned from as many as 20,000 organisations, creating an opportunity to expand the tax to these businesses at a later date. This could lead, he believes, to a huge potential market for energy efficiency upgrades.
The Department of Energy and Climate Change (DECC) has confirmed the £860m of funding previously set aside for the Renewable Heat Incentive (RHI) and Mr Frise says this will “shift renewable heat from a fringe industry firmly into the mainstream”.
Councils have condemned changes to the Carbon Reduction Commitment energy efficiency scheme announced in last week’s Comprehensive Spending Review, which could land them with tax bills of up to £1m a year.
The CRC system, which involves public sector bodies and large businesses, is to be redesigned so that the cost to participants of buying carbon allowances will go straight to the Treasury, generating £1bn a year. Previously the scheme was revenue neutral and the cash would have been redistributed among participants, with penalties and rewards depending on performance in cutting emissions.
According to estimates from the Local Government Information Unit, the change could cost unitary authorities £1m a year, and a metropolitan council £600,000 in 2012 – and the sums will go up annually.
Treasury forecasts show that the measure is expected to bring in £715m in the first year, when CRC participants will be charged £12 for every tonne of CO2 they emit. In 2013/14, the allowances will rise to £16 per tonne, bringing in £1.02bn.
According to the CSR document, revenues generated by the carbon scheme will be used ‘to support the public finances, including spending on the environment’. It is not yet clear whether the total number of allowances available in a year will be capped.
Russell Reefer, environment policy consultant at the Local Government Association, told Public Finance the move was a ‘disturbing U-turn’ that would make it harder for councils to invest in carbon-cutting measures.
He added that it would take money away from local authorities, at a time when Whitehall grants are projected to fall by 26% over four years.
‘The government is expecting £1bn a year to be used to support the public finances, but a significant proportion will actually come from the public sector,’ Reefer pointed out.
He added that the changes would give a greater incentive to reduce energy consumption, and welcomed pledges from the Department for Energy and Climate Change to simplify the system and remove unnecessary bureaucracy.
Ian Mulheirn, director of the Social Market Foundation, said the changes had reduced uncertainty in the cost of emissions – but had also removed the potential for high-fliers to make money.
It soon became apparent that the underlying theme of the day was for businesses to adopt a much more environmentally friendly way of working.
The timing of the day itself was topical, as it was also the deadline for businesses to register to the CRC Energy Efficiency Scheme (formerly the Carbon Reduction Commitment) to avoid financial penalties and potentially reputational damage.
The agenda was packed with speakers from different industry areas, all providing perspectives and facts that may not necessarily be considered in a day-to-day role. For example, Emma Strain from the London Development Agency informed the 100 strong audience that 80 per cent of the current buildings in London will still be in use in 50 years time. Therefore there is an obvious need to ensure the buildings have the most energy and cost efficient technology throughout.
Announced as part of the government’s Comprehensive Spending Review, the decision by the Treasury to retain the tax revenue collected under the Carbon Reduction Commitment scheme has been met with outcry.
Launched by the Department of Energy and Climate Change in April, the Carbon Reduction Commitment Energy Efficiency Scheme (CRCEES) is a mandatory energy efficiency scheme aimed at cutting the emissions of large public and private sector organisations that use more than 6,000 Megawatt hours (MWh) of electricity per year.
Qualifying organisations were required to register as participants by 20 September this year, risking fines of up to £45,000 for late registration.
The new tax may be an incentive to cut carbon, but it raises questions about the equity of taxing medium-size polluters
George Osborne’s spending review this week dealt a shocking blow to participants in a government carbon-cutting scheme for companies and organisations with medium-size energy use, known as the CRC energy efficiency scheme, by turning the scheme into a tax. These 3,000 or so organisations, including councils and NHS trusts reeling from other cuts, find themselves facing a tax on the carbon they emit, while many that invested in energy-efficiency measures encouraged by the legislation are penalised. And yet the biggest polluters will evade the taxman.
The new tax may be considered good news for the environment because it provides a simplified incentive to cut carbon, but it does raise questions about the equity of taxing small- to medium-size polluters. And if the government believes taxing emissions is the most efficient way of achieving carbon reductions – and not just lining the Treasury’s pockets – there are other questions that must be answered.
The CRC was introduced with the promise that it would be revenue-neutral, in that all CRC permit costs would be recycled to participants. So it’s a complete about-face by the government, one which damages its credibility and is likely to breed distrust of future climate change policy interventions.
Business groups lined up today to condemn a £1bn stealth tax on companies that have invested in a government scheme to drive down CO2 emissions.
The CBI and manufacturers’ group the EEF both attacked the announcement, buried in the comprehensive spending review, that the Treasury would not pay back money to firms obliged to take part in the Carbon Reduction Commitment (CRC) energy efficiency scheme.
Chris Huhne, energy and climate secretary. Photograph: Christopher Thomond
“Revenues… totalling £1bn a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants,” the spending review said.
Under the scheme, which was introduced earlier this year, companies made upfront payments to the Treasury on the understanding that they would get the money back by reducing emissions.
Steve Radley, EEF director of policy, said: “If the private sector is going to play a greater role in increasing investment and growth it needs clarity. By changing the rules six months after the game has started and landing business with an unsignalled £1bn tax rise, the government has sent an unwelcome signal.”
Richard Lambert, director general of the CBI, said: “This is not going to build trust. I have some cross members out there.”
Lambert said that the CBI had been told by the Department of Energy and Climate Change that the £1bn levy on business was the price demanded by the Treasury for the go-ahead for the carbon capture and storage demonstration facility – which has also been awarded £1bn.
Chris Huhne, the Lib Dem climate secretary, denied the change was a “stealth tax”, saying the old system was too complicated to work as an incentive for carbon reductions, and the money transferred to the Treasury could become part of the coalition’s promised increase in “green taxes” as a proportion of the overall tax take.”There was an awful lot of criticism from businesses of the amount of administration and compliance costs the CRC was imposing, with very litte effect on carbon reductions,” Huhne told the Guardian. One of the problems was that businesses did not know if they would qualify for repayments, so it was not acting as a motivation for investing in carbon reduction, he said.