In Parliament >> The gutting of the CRC

Alan Whitehead, Labour MP and energy and climate change committee member, lambasts the Treasury for gutting the CRC

The chancellor’s announcement in his autumn statement that the government planned to “simplify” the carbon reduction commitment (CRC) energy efficiency scheme received little publicity at the time. But it is a decision that I think underpins a wider Treasury view towards all things low carbon.

The original CRC, introduced in April 2010, was supposed to be an instrument that prompted CO2 savings in those sections of the economy not affected by the climate change levy or carbon trading.

It was designed to reward good CO2 reduction performance by transferring levies from those performing poorly; a public performance league table (PLT) would provide a reputational record. Because of the redistribution of levies from poor to good performers, it was revenue neutral.

It has been apparent from the off that the chancellor doesn’t like the CRC, except in one aspect, which he demonstrated with his first bite at the legs of the scheme in the 2010: CRC levies would not be circulated but go to the Treasury, netting it a handy £1 billion a year. But at least the PLT remained so we could still see who was doing well and who was not.

Now we have further simplification. The PLT is to be abolished, but the levy whereby all CRC participants must pay a “forecast allowance price” of £12 per tonne of CO2, rising to £16 per tonne in 2014/15, to the Treasury continues. And, in a telling passage in the statement, the Treasury has indicated that it would like to remove the tax as well, but will only get round to that when public finances allow.

The stealthy but complete evisceration of the CRC is, I think, a minor scandal, especially since its whole purpose and design has now been removed. But it still produces a good wedge of cash for the chancellor, so perhaps that’s what matters most.