The CRC Energy Efficiency Scheme will be abolished in March 2019, replaced with a rise in the Climate Change Levy.
The move was announced in the March 2016 Budget, following a lengthy consultation with businesses and organisations from September 2015.
The CRC Energy Efficiency Scheme is a mandatory carbon emissions and pricing mechanism, viewed by government as effectively an energy tax. It is in the second phase, covering the five-year from 2014-19 and applies to large private and public sector organisations that are not energy-intensive.
Currently, state funded schools in England from April 2013 are also exempt while energy users like banks, water companies, supermarkets, hotels, local authorities as well as central government departments are included.
Until abolition, organisations that meet the qualification criteria are required to monitor energy use annually and buy allowances for every tonne of carbon they emit, advised under the Environment Agency’s reporting system.
Allowances are purchased annually for a fixed-price or traded on the secondary market. Final date for reporting procedures is the end of July 2019 and organisations should surrender one allowance for every tonne of CO2 emitted in the year 2018-19 by end October 2019.
Organisations should have already registered – qualification information is here.
There are two buying options for allowances, either at the forecast price at the start of each year or at higher “compliance sale” price at the end of the year.
Climate Change Levy
From 2019, the main rates of the Climate Change Levy (CCL) will be increased to cover the revenue reduction from the CRC changes.
Main rates: for electricity from April 1st 2016 is 0.559 pence per kilowatt hour, gas 0.195 pence per kilowatt hour, petrol etc. 1.251 pence per kilogram, any other taxable commodity
1.526 pence per kilogram. Full details here.
The CCL covers most energy users outside the domestic arena with the main aim of encouraging energy efficiency to reduce costs and carbon emissions, although energy-intensive businesses are largely exempt as are non-commercial charities.
The main rate of CCL tax is paid by industrial, commercial, agricultural and public services sectors and covers electricity, gas and solid fuels.
Electricity from nuclear is taxed as is electricity generated from new renewables and approved co-generation schemes.
Energy-intensive businesses can qualify for a 90% reduction for electricity and a 65% reduction for gas, liquefied petroleum gas (LPG), coal and other solid fuel. They need to sign a climate change agreement (CCA) with the Environment Agency to qualify for exemption. Details here
More information: Government CRC guidance.
Government’s response to the consultation on Reforming the Business Energy Efficiency Tax Landscape.