Big changes afoot for businesses reporting and reducing energy consumption

Following the July review of the CRC, this week HM Treasury launched a consultation seeking views and evidence on proposals to reform the business energy efficiency tax landscape and associated regulations, including the CRC Energy Efficiency Scheme and Climate Change Agreements, and energy and carbon reporting including links to the Energy Savings Opportunity Scheme. In short, a major shakeup of energy and carbon regulations is around the corner.

The current policy landscape has caused criticism from some businesses that they are required to report similar information through a number of different schemes, leading to unnecessary administrative costs that could have been better spent on implementing energy efficiency measures.

The consultation seeks responses to three key proposals, specifically:

  • To develop a single reporting framework, aimed at reducing compliance costs and likely to be designed “through the prism of the ESOS”;
  • Abolishing the CRC in favour of a single business energy consumption tax through the Climate Change Levy; and
  • Introducing new incentives to encourage energy efficiency which are funded through increases in the above tax.

The announcement that any future framework is likely to be based upon ESOS places further pressure on businesses to ensure they are compliant ahead of the 5th December deadline. The fact that this consultation is taking place, does not relieve any organisations from their ESOS obligations, and in fact incentivises compliance given that it is now very likely they will need to follow a similar system in future.

Many businesses will welcome the move to a single form of energy taxation, allowing them to free up resources and allowing greater emphasis on delivering energy savings. In the current climate of rolling back domestic energy efficiency and renewable energy schemes, it is yet to be seen whether the proposed changes could weaken the current policies, slowing the move to a low carbon economy.

The government, therefore, has a critical role to play in ensuring that any new incentives to encourage energy efficiency improvements are as effective as possible. By removing the administration of current reporting and replacing with a tax, the current senior level visibility and buy-in of investing in energy efficiency may well be reduced. However, introducing positive financial incentives to encourage energy efficiency, may well open up new opportunities to a larger number of businesses and encourage greater innovation beyond current solutions.

Energy and Climate Change Secretary Amber Rudd insists that: “We want to reduce the burden on business and make it easier for them to grasp the opportunities that clean growth represents.” It now falls to businesses to ensure that responses to the consultation propose measures that align with this statement, and that the opportunity is taken to strengthen the country’s carbon reduction commitments, not undermine them.

The consultation closes on 9th November 2015 and responses can be submitted at: https://econsultation.decc.gov.uk/decc-policy/business-energy-efficiency-tax-landscape/consult_view