CRC energy efficiency scheme lets big polluters evade the taxmanUnited Kingdom
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.
More uncertainty is not helpful when we desperately need private-sector investment in green behavioural change and technology. The business community has been asking loud and clear for promises that low-carbon investment will be secure and that future changes to regulation won't scupper their returns, so this lack of government consistency isn't sending the supportive signals they're looking for.
While it is likely to provide an increased incentive to medium-size businesses to reduce their carbon emissions, it comes at a difficult time for many participants. Although the payment phase has been pushed back by a year to 2012, every participant will now have to find often upwards of millions of pounds each year to meet the Treasury's estimation of £1bn in tax revenues in 2014-15 (an implied price of £15 per tonne of carbon).
There is also the issue of punishing preparedness. Many organisations have invested in activities such as the Carbon Trust Standard certification and other Early Action Measures, the benefits of which will be severely diluted by this revision of the CRC. While the reputational value of performing well in the CRC League Table remains unchanged, the fact that this has been decoupled from a financial gain has completely altered the investment equation. And past investment now has a delayed pay-back period, and in some cases none at all.
Finally, and perhaps most unjustly, big polluters get off tax-free. Literally. The European Union emissions trading scheme (ETS), which captures large emitters such as power station and heavy industry, remains a cap-and-trade scheme that is subject to significant criticism. For a start, the cap is now ineffectually high as a result of the recession and a weak political commitment to reduce emissions by only 20% compared with 1990 levels by 2020. A commitment to reduce emissions by at least 30% has been shown to be necessary to price carbon sufficiently high to encourage low-carbon investment, so until this happens, companies in the EU ETS are under little pressure to change their ways.
Secondly, EU ETS participants receive free emission allowances, often in excess of what they require. These free allowances convert into a massive windfall profit when they are sold on the carbon market. The fact that a tax is being applied to only small- to medium-volume emitters is not only grossly unfair, but also supports the argument that a tax on all emitters would be a more efficient and effective form achieving emissions reductions.
We wouldn't be surprised to see the CRC now extended to smaller organisations not previously included in the CRC. Many thousands reported on their emissions as part of the Information Disclosure requirements of the legislation, so the Environment Agency knows where to find them. Given that revenue generation seems to now be the focus of the CRC legislation, finding new contributors to the Treasury's pot might be a temptation too great for the coalition to refuse.
• James Ramsay is the commercial director and head of CRC at Carbon Clear
El contenido de las noticias que se presentan en esta sección es responsabilidad directa de las agencias emisoras de noticias y no necesariamente reflejan la posición del Gobierno de México en este u otros temas relacionados.
- Detrás de Cámaras
- Galería de Medios
- Notas de prensa
Page 'Breadcrumb' Navigation:
Site 'Main' Navigation: