Posted by admin | Posted in News & developments | Posted on 24-10-2010
LONDON, United Kingdom — British companies are now waking up to the government’s decision to keep revenue raised by the Carbon Reduction Commitment (CRC) scheme, rather than recycle it to participating businesses.
Through the scheme, Parliament expects to raise around £3.5 billion (around US$5.5 billion). However, this means that CRC will effectively act as a carbon tax rather than a true carbon market.
John Alker, director of policy and communications at the UK Green Business Council, echoed the sentiment of many British businesses over the recent decision.
“The announcement that government is keeping the money from Carbon Reduction Commitment allowance sales has come out of the blue,” he said. “It may make the scheme simpler but this is something you’ve got to consult with industry on before plunging into.”
According to Climate Minister Greg Barker, the scheme was the consequence of a ” catastrophic” deficit inherited from the Labour government.
Barker admitted that the move increases costs for businesses, but argued that through the CRC, “progressive businesses that act to improve energy efficiency will be able to minimise their exposure”.
Meanwhile, Harry Manisty, environmental tax specialist at PwC, said businesses would effectively view the change as an additional tax, which may cause carbon price discrepancies with the EU emissions trading scheme.
“Discrepancies between [the CRC] price of carbon and the price paid for carbon emissions covered by the EU Emissions Trading Scheme are likely to emerge, undermining the search for a consistent carbon price signal throughout the UK economy,” he warned.
Carbon policy specialist Henry Le Fleming also added that the scheme would steeply drive up costs for registered companies. However, it would be simpler to administer and would more effectively convey the message that businesses had to get serious about energy efficiency.
“The positive aspect of this change is that it provides a strong and clear incentive for companies covered by the scheme to invest in energy efficiency.”