It has been announced in today’s Budget that the CRC Energy Efficiency Scheme (CRC) will be abolished from 2019 and the Climate Change Levy (CCL) will be raised to compensate.
The announcement comes following a consultation last year on reforming the business energy efficiency tax landscape, run by HM Treasury and the Department of Energy and Climate Change (DECC).
CRC
CRC is a mandatory carbon emissions reporting and pricing scheme that came into force on 1 April 2010. It applies to large public and private sector organisations in the UK that use more than 6,000MWh per year of electricity and have at least one half-hourly meter settled on the half-hourly electricity market.
CRC is aimed at private and public organisations that are not energy-intensive, such as large retailers, hotel chains, large offices, private equity funds and local authorities. Energy-intensive industries are instead covered by the EU Emissions Trading Scheme (EU ETS) and Climate Change Agreements (CCAs).
Participants in the CRC scheme are required to annually measure and report on their electricity and gas supplies and buy allowances from the Environment Agency (or the secondary market) for the amount of carbon dioxide emitted.
CCL
CCL is a carbon tax on non-domestic consumers of certain energy supplies that was introduced in April 2001. CCL is charged on “taxable commodities” supplied for lighting, heating and power to business customers in the industrial, commercial, agricultural and public service sectors. “Taxable commodities” include natural gas, electricity, petroleum and hydrocarbon gas in a liquid state, coal, lignite and coke.
The charge is levied by energy suppliers who then pass the sums onto HM Revenue & Customs (HMRC).
New scheme
CRC is being abolished with effect from the end of the 2018/19 compliance year, and the main rates of CCL are being increased from 1 April 2019 in order to “cover the cost of CRC abolition in a fiscally-neutral reform.”
The government announced in the Summer Budget last year that it was reviewing the business energy efficiency tax landscape and considering approaches to simplify and improve the effectiveness of the regime. During the government review, stakeholders argued that the overlapping policies were complex and administratively burdensome, limiting the effectiveness of policy levers. Under the current system, businesses are required to report similar information through a number of different schemes. The framework includes CRC and CCL taxes, CRC reporting requirements, ESOS and mandatory greenhouse gas reporting, as well as reporting requirements for certain tax exemptions.
The government consultation launched last autumn then set out approaches to improve the effectiveness of the policy framework, including simplifying reporting and taxes to reduce administrative burdens and targeting policy levers at cost-effective energy efficiency potential identified in business sectors and heat use.
The revised arrangements announced today should help streamline carbon reporting and carbon taxes for users. This should free up businesses’ resources, allowing them to focus on delivering energy savings, rather than administration.
