As part of the 2016 Budget, the then chancellor George Osborne announced the abolishment of the Carbon Reduction Commitment. Whilst, at present, the scheme is still active, organisations should take the opportunity to consider their energy strategy and ensure that they are ready for coming legislative changes.
What does the abolishment of CRC mean for businesses?
The scheme will close after the 2018/19 compliance year, which means participating organisations will no longer need to purchase CRC allowances to cover their emissions.
However, with the increases in Climate Change Levy (CCL) coming into force from 2019, organisations will have to consider these additional charges within their energy bills.
The CCL increases are planned to make up for the revenue losses created by the CRC closure. Overall, the changes are intended to be fiscally neutral. However, the impact on your organisation will depend on your specific circumstance, such as whether you were required to participate in CRC and your overall energy usage.
Here are four considerations for organisations to scrutinise as part of their forward planning:
#1 Costs will increase for organisations not in CRC
As CCL rate increases are across the board, organisations that are not currently required to participate in CRC will most likely see an increase in their bills. The most effective step to mitigate this increase is to implement energy efficiency measures and reduce overall consumption. Organisations should also consider additional opportunities such as Climate Change Agreement’s (also known as CCA’s), on-site generation opportunities etc.
#2 Budget for the transition period
As the CRC scheme will continue until fiscal year 2018/19, organisations will need to budget for both their CRC allowance, to cover the emissions from their UK operations, and the increase in CCL from 1st April 2019.
#3 Re-deployment of internal and consultancy resources
From April 2020, companies will no longer need to make CRC payments and will therefore benefit from reducing associated costs, as well as the resource and management required for participation in the scheme.
#4 CCL discounts will be increased for Climate Change Agreement (CCA) participants
The government is committed to ensuring energy intensive users are protected from the impact of the rising CCL rates and therefore intend to increase the discount available to CCA participants.
“The abolishment of the CRC scheme means that many businesses will be hit with an increase in their CCL levy from 2019. It’s imperitive that businesses speak to their energy consultant to ensure they understand the impact and look to review their energy strategy going forward.”
Get in touch today to arrange a review of your current requirements and assess the impact that changing costs may have on your budgets.