Consultation: Reforming Business Energy Taxes and Carbon Reporting


Following the Chancellor’s announcement in the summer budget that the government would look to streamline carbon legislation and associated taxes, the Treasury has issued its consultation, “Reforming the business energy efficiency tax landscape”.

The first aim of the reforms is to streamline business energy taxes. The Treasury proposes replacing the CRC energy efficiency scheme (CRC) and the Climate Change Levy (CCL) with a new energy consumption tax, based on CCL. Views are sought on this as an overall proposal, as well as what the balance of tax across different fuels should be. Careful consideration will also need to be given to the qualification criteria for a new level of tax and how qualification is assessed.

The second focus of the consultation is to create a single reporting framework in place of the range of schemes that currently need to be complied with. At the moment, listed companies are required to report their emissions as part of their Annual Reports, under mandatory greenhouse gas (GHG) reporting regulations. In addition, large companies must comply with the Energy Savings and Opportunities Scheme (ESOS), a mandatory energy management and auditing scheme. Organisations that qualify to participate in the CRC are required to measure and report their emissions annually. If the CRC is to be replaced by a tax, this would essentially remove that reporting requirement.

The government makes the recommendation that a new overarching reporting framework should be through the prism of ESOS, which, as an EU requirement, must remain in place. The intention is to build on ESOS by taking the most effective elements of other reporting structures and to create an all-encompassing solution. Views have been sought as to what data should be collected while still observing ESOS requirements. Suggestions are the inclusion of greenhouse gas emissions and renewables sources, as well as a requirement to show action against audit recommendations. Under the ESOS scheme as it stands, there is no obligation to act on these recommendations, although it is expected that companies would take action where there is a case to do so.

The third area under consultation is that of energy efficiency incentives. Enhanced Capital Allowances are currently available for specific energy efficiency and low carbon technologies.

Another energy efficiency scheme already in place is in the form of Climate Change Agreements (CCAs). CCAs are voluntary agreements available to particular industries in the UK. Sites that are eligible commit to reducing energy use and in return receive a discount to their CCL.

The consultation reports that feedback on CCAs is mixed and, therefore, seeks views on the following areas:

  • Should CCAs only be for industries that are at a competitive disadvantage and at risk of carbon leakage
  • Can existing CCAs be improved?
  • If full CCL was paid, would it incentivise the same energy efficiency measures as those currently encouraged by CCAs?
  • Are there alternative mechanisms to consider?

The government also seeks views and suggestions for other energy efficiency incentives, such as a possible tax relief for energy saving measures. Other suggestions include government “matchfunding” for investments or a link to ESOS whereby incentives could be claimed in order to assist with actions recommended in the ESOS audit.

The consultation runs to 9th November 2015 and a formal response is expected in the 2016 Budget. A more detailed consultation on policy design and implementation could follow this one. The full consultation can be found here.

Written By- Nikki Wilson

Alfa Energy Group

Alfa Energy Group is an international energy, water, and sustainability consultant partner with 200 employees over 4 international locations. For over 25 years, Alfa has been servicing its clients’ needs through energy and water management, sustainability, and compliance consulting, and an intuitive ecosystem of user-driven energy, water, and carbon management software platforms. With coveted awards, an international industry-wide recognition, and clever simple solutions, today Alfa is partnering with clients to establish and deliver pivotal net zero strategies. Through smart energy management, the expertise and diligence of its people, transparent processes, and data management, Alfa continues to lead through its recognised gold standard of service delivery.