Companies face higher emissions levyUnited Kingdom
Fiona Harvey, Sylvia Pfeiffer and Jim Pickard
Thousands of businesses will be subjected to a new £1bn-a-year carbon tax, in a change hidden in the fine print of the spending review.
Businesses reacted furiously to the levy, which is likely to bring the Treasury £715m ($1.13bn) in 2011-12 – rising to £1bn in 2014-15.
The regulations cover 4,000 to 5,000 businesses, including most high street chains, supermarkets such as Tesco and Sainsbury, banks and other commercial sector companies, as well as some public-sector bodies.
“There is no way to disguise that this will be a new charge on businesses,” said Greg Barker, minister for energy and climate change. “It is needed to plug the gap in the public finances.”
The tax is a revision of the carbon reduction commitment regulations. Under the original rules, which came into force at the end of September, all companies have to pay for their emissions, but the revenues ares recycled – the payments from the most inefficient are awarded as a bonus to the most efficient, giving companies an incentive to cut their energy use. This recycling of revenues will now be dropped.
Richard Lambert, director-general of the CBI employers’ group, led business attacks on the change.
He said: “Businesses will be very let down by the government’s unexpected announcement that it will remove the cash-back incentive. A scheme that was meant to change behaviour by encouraging energy efficiency has now become another stealth tax.”
Mr Barker said the incentive was still there, pointing out: “Progressive companies can minimise their costs by focusing on energy efficiency.”
Companies will have to pay £12 per tonne of carbon dioxide they emit, according to the Treasury, rising to £14 from 2013. Henry le Fleming, carbon specialist at PwC, said that for a company with a £1m electricity bill, this would equate to a tax of £76,000 initially, rising to £114,000 in 2014.
Many thousands more businesses may face the tax at a later date because, under the regulations, a further 15,000 to 20,000 organisations must submit information on their energy use.
While these companies do not yet have to pay for their carbon, with the information the government has gathered it would be easy to extend the charge to them in future.
Property companies fear they will be hardest hit by the tax, which will affect their rental estates.
However, James Cameron, founder of Climate Change Capital, an investment management group with a property portfolio, said it was an opportunity for job creation. “Retro-fitting existing buildings is going to become a massive industry, creating a lot of employment in this country,” he said.
Additional reporting by Dan Thomas
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