Business could be hit by new green taxUnited Kingdom
Harry Wallop, Consumer Affairs Editor
Thousands of Britain's businesses could be hit by a new green tax to help raise money for the Treasury, a leading advisory body to the Government has warned.
Within three years about 4,000 large businesses could have to pay tens of thousands of pounds in extra tax, depending on how much electricity they use.
This is one of the options outlined by the Committee on Climate Change (CCC), which has been given the task of simplifying the "very complex" carbon reduction commitment, which is due to come into force at the end of this month.
The scheme involves Britain's biggest companies and all public sector organisations, if they consume more than 6,000 megawatt hours (MWh) of energy a year – meaning a power bill of about £500,000 – must register its energy use by the end of this month. From April 2011, firms will need to buy permits for each tonne of carbon dioxide emitted. For those using 6,000MWh, that could mean £38,000.
The scheme is intended to create a financial incentive to cut energy use, and those organisations that record the biggest reductions will get bonuses, funded by penalties imposed on those with the worst record.
However, the CCC has warned the scheme will become far more complex from April 2013 when the Government will put a cap on how many permits each company can buy and firms can auction their permits on the open market.
David Kennedy, the chief executive of the CCC, in charge of advising the Government on reducing carbon emissions, said he and his expert analysts had "struggled to understand" many aspects of how the scheme worked, so many companies would do so too.
The CCC said the scheme needed to be simplified. The most radical option would be to scrap the idea of "revenue recycling" whereby the bad companies fund the good companies' bonuses.
"Why not drop revenue recycling? You would end up with, in effect, a carbon tax. We're not recommending that, but the Treasury could consider that. It would be attractive from a fiscal point of view," he said.
Business groups said they would be alarmed if the incentive scheme turned into a straight tax on companies that used lots of energy. Gareth Stace at EEF, the manufacturers' group, said: "We would absolutely concerned if it became a double tax."
A spokesman for the Department for the Energy and Climate Change said: “We have not yet made any decisions in regards to changes to the scheme but we have made clear that we do want to simplify its bureaucracy. Government proposals on simplification will be published in due course.”
The Treasury said any decisions about change to taxes would be made in this autumn's pre-Budget report.
With just over a week to go before the deadline to register, nearly 1,000 companies have failed to do so and face the prospect of being fined £5,000 fine, and £500 for each day after that, up to a maximum of £45,000.
avid Symons, at WSP, an environmental consultancy said: "The Committee is right to look at how the scheme can be simplified for the next phase. However, the biggest challenge currently facing CRC is in making sure that those organisations that are already obligated actually do register with the Environment Agency by the end of September. Our forecasts show that, with just one week to go, as much as 35% of these organisations will miss the registration deadline.
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