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Budget 2016: Changes to the UK Government Energy Efficiency Strategy

Significant changes to the Government’s energy efficiency strategy were announced in today’s budget (16 March 2016).  Key points are summarised below:

  • The Carbon Reduction Commitment (CRC) energy efficiency scheme will be scrapped at the end of the 2018-19 compliance year (the end of Phase 2). Obligated businesses will be required to surrender allowances for the final time in October 2019.
  • Lost revenue will be recovered through an increase in the Climate Change Levy (CCL).  This will come into effect from 1 April 2019.  This is designed to cover the cost of CRC abolition (although 2019 appears to be a bumper year for the Government – with increased CCL rates and a final CRC payment).
  • CCL rates and CRC allowance prices will increase in line with RPI annually until 2018-19.
  • The CCL discount for sectors with Climate Change Agreements will be increased to cover increases in CCL main rates.
  • The Government will retain existing eligibility criteria for Climate Change Agreement schemes until at least 2023.
  • The main rates of CCL for different fuel types will be rebalanced to reflect recent data on the fuel mix used in electricity generation. In the longer term, the Government intends to rebalance rates to deliver greater energy efficiency savings and reach a 1:1 ratio of gas and electricity rates by 2025.
  • Finally, the Government will consult later in 2016 on creation of a simplified energy and carbon reporting framework planned for introduction by April 2019.

Please contact Paul Sutcliffe at EVORA for more information (psutcliffe@evoraglobal.com)

Pre-Budget: Rethinking the Energy Efficiency Taxation Landscape

With the energy efficiency taxation review just around the corner, it is expected that the CRC Energy Efficiency Scheme will be scrapped or at least changed significantly.  Below, we make three key predictions:

What are the key predictions for the upcoming budget review?

  1. A simpler energy efficiency taxation landscape: A single new tax based on the climate change levy and a single reporting framework
  2. Scrapping of the CRC Scheme
  3. Further developments based on ESOS supported by an incentivisation scheme to drive the implementation of improvement measures.

Moving away from the older policy environment, the translation of theory to practice will present new opportunities to utilise ESOS to spur the uptake of energy efficiency measures. Following on from our reflections on ESOS, it makes sense for businesses to develop strategies to address energy regulations in a coordinated fashion and to reap the benefits of a combined approach. A good example of this is having a combined approach to ESOS and MEES, where meeting minimum energy efficiency requirement aligns with the broader achievement of reducing energy costs in the building.

Please stay in tune for the budget announcement on the 16th of March 2016 and our post-budget review.

Links:

Reforming the business energy efficiency tax landscape

http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2015/11/Consultation_reforming_the_business_energy_efficiency_tax_landscape1.pdf

http://uk.practicallaw.com/3-623-4911?source=rss#