Green stealth tax bombshell stuns business

BUSINESS leaders were left stunned by what they called a green “stealth tax” following news by the government on Wednesday that it would keep the revenue raised from the Carbon Reduction Commitment (CRC) rather than recycle cash raised back into scheme.

Richard Lambert, director-general of the Confederation of British Industry (CBI), attacked the proposals saying: “Businesses that have just signed up to the flagship CRC energy efficiency scheme will be very let down by the government’s unexpected announcement that it will remove the cash-back incentive.”

And Stephen Robertson, director general of the British Retail Consortium, added: “This is a stealth tax on business which not only goes back on the commitments given in developing the scheme but removes a major source of incentives to reduce carbon emissions.”

PricewaterhouseCoopers (PwC) calculated the government would raise around £3.5bn by 2015 by making the change to the scheme

Henry Le Fleming, carbon reporting specialist at PwC, said the change would “substantially increase compliance costs for businesses.”

“If companies do not take steps to reduce their CRC carbon emissions, the bottom line is they will face increasing costs to buy the permits to comply with the scheme,” he added.

PwC said for a company with a £1m energy bill the cost of acquiring permits at £12 per permit in 2012 is likely to be in the region of £76,000.

The change could also have implications for the Climate Change Levy (CCL). The government had proposed to reform the CCL from a tax on energy, to a tax linked to the carbon content of fuels, but now may face pressure to abandon these plans to avoid double taxation of carbon for CRC participants, PwC added.

WHAT THE CRC was meant to be

The Carbon Reduction Commitment (CRC) was supposed to be a scheme that would encourage businesses to reduce their carbon emissions. It would charge a levy of £12 per tonne of carbon produced by businesses that used over £500,000 worth of energy per year. Under the scheme, which is mandatory and comes into effect in April 2012, businesses would have been ranked in a league table showing how green they were. Those that reduced their carbon emissions would receive a rebate from the government on the £12 per tonne levy. Those that didn’t would pay the levy in full. Yet in one fell swoop a scheme that was only introduced in April this year has been radically altered. The removal of the rebate means there is no incentive to businesses to become more energy efficient and simply amounts to a £1bn a year tax on energy consumption. What has angered the Confederation of British Industry (CBI) is the lack of consultation over the proposals and the fact the chancellor’s speech made no mention of the change on Wednesday.