Carbon Reduction Commitment to be abolished

The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme is to be abolished following the 2018-9 compliance year, and the Climate Change Levy (CCL) is to be increased from 2019 to recover revenue lost from abolishing the CRC. Both moves were announced in the spring government Budget.

Abolition of the CRC, a mandatory carbon emissions reporting and pricing scheme, is all about streamlining the business energy tax landscape. Businesses will eventually be charged only one energy tax by suppliers, rather than the current system where CRC participants are required to forecast energy use, buy and surrender allowances.

CCL rates for different fuel types will be rebalanced to reflect data on the changing fuel mix used in electricity generation, moving to a ratio of 2.5:1 (electricity:gas) from April 2019. In the longer term, the government intends to rebalance the rates further, reaching a ratio of 1:1 rates by 2025. The aim is to incentivise reductions in the use of gas, in support of the UK’s climate change targets, according to Treasury Budget 2016 notes.

The government also aims to keep existing Climate Change Agreement (CCA) scheme eligibility criteria in place until at least 2023, to ensure that energy-intensive industries remain protected. Last, due to the continued low price of carbon in the EU Emissions Trading System (EU ETS), the government is to maintain the cap on the Carbon Price Support (CPS) at £18 t/CO2, uprating this with inflation in 2020-21.