CSR: George Osborne announces new carbon tax
Slipping beneath the CSR headlines is a new carbon tax on large companies and public sector organisations.
The CSR has introduced a fundamental change to the way the Carbon Reduction Energy Efficiency Scheme (CRCEES) will run. The CRCEES is basically a cap-and-trade scheme covering approximately 3000 large energy users in the public and private sector. Prior to today, all revenue raised by the annual sale or auction of allowances in the CRCEES, was set to be “recycled” back to scheme participants – a positive incentive to reduce emissions. The more you reduce emissions, the bigger the proportion of the overall revenue raised from the scheme gets handed back to you.
But this is all set to change with revenue raised being handed straight over to the Treasury and used to shore up the public finances. It’s expected to generate £715 million in 2010/11 rising to around £1billion once allowances are capped in April 2013. How much of this will be set aside for investment in environmental measures (if any) is anyone’s guess. No guarantees have been given.
The first introductory phase of the scheme runs from April 2010 to April 2013 with scheme participants reporting on their energy consumption. From April next year, participants were set to purchase allowances to cover their emissions at a rate of £12 per tonne with revenue being recycled back six months later. But now, under the CSR, this first emissions sale has been put back a year to 2012.
The Committee on Climate Change recently criticised the scheme’s revenue recycling process, pointing out the very real risk that funds from budget strapped councils, hospitals or schools, less able to invest in energy efficiency measures, could end up low in the league table and see their allowances recycled to higher ranking commercial companies. This is a fair point, and separate league tables and revenue recycling for private and public bodies was recommended by the committee.
So while the CSR has put an end to that dilemma, there remains the danger that employers will associate environmental regulation as all stick and no carrot. Further pressure on hard hit public and private sector service organisations provides even more of an excuse for employers to cite the scheme as a reason to cut jobs in order to save carbon.