The government has confirmed that the Carbon Reduction Commitment (CRC) is to be scrapped following the 2018/19 compliance year. The move was expected under the review of business energy taxes.
Treasury acknowledged the CRC had been “complex, bureaucratic and costly” for participants. It said the new landscape would see businesses “only charged one energy tax administered by suppliers” rather than being required to forecast energy use, buy and surrender allowances.
To recoup the CRC money, the Chancellor has said that the Climate Change Levy (CCL) will rise by 2019 and that charges will change to incentivise businesses to use less gas. That will affect business energy bills and represents further bad news for the renewable energy industry.
The CCL is essentially a carbon tax. Up until last August, businesses were taxed for using fossil-generated power with exemptions for those using renewable power. However, the Chancellor removed that exemption in his 2015 Budget statement, with Treasury stating the move would save £3.9bn by 2020.
Treasury said today it would change charges for different fuel types under the CCL, moving to a ratio of 2.5:1 (electricity:gas) from April 2019. It wants a ratio of 1:1 (electricity:gas) rates by 2025 to incentivise reductions in the use of gas.
The government said it will keep existing Climate Change Agreement (CCA) scheme eligibility criteria in place until at least 2023 with the discount rate increasing from 2019. Treasury stated that a DECC-led target review would begin this year to “ensure agreements deliver on their energy efficiency goals”.
Carbon Price Support (CPS) rate will remain at £18 t/CO2 from 2016-17 to 2019-20 with a long-term plan for carbon prices expected in the Autumn Statement.
See the full budget document here.