Budget 2016: your guide to the changes in environmental policy

Here’s a quick overview of the changes in environmental policy that the chancellor set out in the 2016 budget. Mandatory emissions reporting stays after a strong showing of support from companies and institutional investors, but the CRC is to be phased out. 

Mandatory Greenhouse Gas reporting stays
The requirement for listed companies to report their greenhouse gas emissions has been retained in the 2016 budget. The decision was welcomed by companies and investors including M&S, Aviva, BT, IEMA and the Aldersgate Group who publically supported the measure. Following a consultation, the Treasury stated: ‘It is important to maintain this reporting in order to provide data transparency for investors and establish London as a centre of global green finance.’

The CRC has been scrapped
The CRC energy efficiency scheme, the mandatory carbon emissions reporting and pricing scheme that applies to large public and private sector organisations in the UK will be abolished following the 2018/19 compliance year. 

This is good news for large energy-using companies who claimed that the scheme was burdensome and bureaucratic. Richard Warren, senior energy policy adviser at manufacturers’ organisation EEF, said: ‘Manufacturers will be enormously pleased to finally see the back of the CRC energy efficiency scheme, a vastly overcomplicated tax that has had a negligible effect on energy efficiency improvements in industry.’ From April 2019 there are no requirements to purchase allowances to cover emissions for energy supplied. Organisations will report under the CRC for the last time in July 2019, with a surrender of allowances for emissions from energy supplied in the 2018-19 compliance in October 2019.

Revenue lost from the CRC will be recovered by increasing the Climate Change Levy (CCL) rates from April 2019. This means tariffs will increase for all energy using companies and rates for CCL in April 2019 will encourage the reduction of gas use in support of the UK’s climate change targets.

Single framework for reporting CRC, EU ETS and CCA
A consultation will go ahead later this year on a single reporting framework which integrates the compliance and reporting requirements of the CCA, ESOS and the EU ETS. No firm details for this have been announced.

Deflated ambitions
Since the budget was finalised soon after the UK helped to negotiate and agree ambitious carbon reduction targets at COP 21, there is a general sentiment that the updated requirements lack ambition. This has been exacerbated by the announcement of tax breaks for the oil and gas sector. The chancellor plans to cut the supplementary charge on oil and gas from 20% to 10% and scrap the Petroleum Revenue Tax.

The announcement sends three clear signals to companies

  • There has been a clear signal from investors that carbon emissions remain important.
  • Whilst energy related costs will fall for CRC participants, the increased CLL will increase energy costs for others. This is likely to change the business case for energy efficiency across the board.
  • Energy and carbon reporting is set for a shake-up, but there is the potential for a more streamlined system.

What next?
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