Tax changes could spell increased costs
Something that seemingly passed under the radar in March’s budget was the news that the Treasury plans to replace the Carbon Reduction Commitment Energy Efficiency Scheme (CRCEES) and indicated changes to the Climate Change Levy (CCL) from 31st March 2019.
Peter Leggett, Energy & Carbon Consultant at IMServ believes the potential changes could come as a shock to organisations as any new scheme is likely to encompass all fuels, as well as incorporating smaller sized businesses, hospitals, colleges and public sector buildings who may have previously been outside CRCEES.
Leggett explained, “Over the last decade there have been various schemes that have been introduced to encourage the uptake of energy efficiency and low carbon reporting. What has defined most of the schemes has been their complexity. Some businesses have had to comply with CRCEES reporting and buying allowances - report emissions through Mandatory Green House Gas Reporting; maintain compliance within schemes such as ISO14001/50001 or Carbon Trust Standard; as well as considering new audit and report requirements under ESOS. It’s all been very time consuming, often repeating with a different slant of results and so, at times, confusing.
“The implication is that use of the CCL framework, which operates on a pence per kilowatt hour rating, has the potential to simplify revenue to the government yet at the same time draw more sites, organisations and potentially more fuel types into the fold. Under CRCEES Phase 2, businesses didn’t need to buy emissions for LPG, small gas or oil use, just for large electricity and gas consumptions. Pre-empting the direction of the consultation slightly, I suspect this is likely to change once CRCEES Phase 2 closes on 31st March 2019.
“Many businesses that come under CRCEES are getting figures together for the end of the year and ensuring that they have sufficient budget to pay for allowances. However, for those organisations that were not participants in CRC they may not have yet realised the potential change and impact of increased CCL rates.
“If we take a ‘like for like’ conversion using the ‘buy to comply’ rate for March 2019 indicated by DECC (£18.30 per TCO2e) the revenue equivalent would have to add 1 pence onto CCL electricity kWh (about 0.3 pence to gas CCL).”
Peter continued, “In this respect, if as I suspect CCL rates would change for all energy users, then by example, if an organisation was currently outside CRCEES consuming 2,000,000kWh such rate increase could add £20,000 to the utility costs - proportionally this could be a four to seven percent increase.”
Across the board the government is still consulting on reforms to reduce the administrative and compliance burden on businesses and simplify energy efficiency reporting, and Leggett believes removal of CRCEES will go some way to achieving this aim. When the opportunity arises, business should add its voice to such consultations. Regardless of change and outcomes, there are still areas that organisations can look at to ensure that when any new system is introduced they are ready.