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CRC scheme to be scrapped

The Treasury announced that the much debated CRC scheme is to be abolished from the end of the 2018-19 compliance year.

In advance of the Budget on 19 March the Treasury announced that the much debated CRC scheme is to be abolished from the end of the 2018-19 compliance year. This was confirmed by George Osborne in his Budget speech.

The CRC scheme introduced over 5 years ago has come in for a lot of criticism due to its complexity – the use of performance league tables, the purchase, sale and banking of allowances, the approach to group structures, the way the scheme dealt with landlord and tenant relationships, the list goes on.

Despite a simplification process that did away with the league table and simplified the sale and purchase of allowances, the scheme has still been a step too far for many businesses that are not geared up to comply with what remains a complex regime.

For a number of years many commentators have been calling for the amalgamation of all of the different carbon and energy related regulations onto a single simplified scheme.

The announcement from the treasury follows a consultation in 2015 that sort the views from the business community as to what changes were necessary to reduce the amount of red tape in this area.

The Government will consult later this year on what the replacement scheme should look like. For now we know two things:

  • The new scheme will be based around the Energy Saving Opportunities Scheme (ESOS) which is derived from the Energy Efficiency Directive and took effect before Christmas. Because ESOS is derived from EU law, it is something over which the UK Government has very little discretion. As a result the new regime will be built around ESOS; and
  • The climate change levy (CCL) will also have a key role to play. The levy is charged on energy consumed by different businesses sectors. Businesses can reduce the amount of the levy by joining with sector associations and entering into climate change agreements (CCAs) that commit businesses to energy efficiency targets if they are to benefit from a reduction in the levy.

Many people will remember the painful process of having to account for CRC compliance. We would encourage everyone to participate in the consultation process later this year to ensure that the regime introduced to replace the CRC scheme is more business friendly. We will keep you up to date with further developments in this area.