Energy Minister Charles Hendry admitted that the Department of Energy and Climate Change had in fact made a mistake with the Carbon Reduction Scheme.
He said DECC were in the wrong but also wanted to fix the problem: “It is basically a tax and I think it’s wrong to try and suggest otherwise. But I think where you (businesses) will see the benefit this year is in terms of the simplification of the process. The incredibly complex way in which it is administered has caused a huge amount of problems and we’re absolutely committed to simplifying that.”
Introduced in April 2010 the scheme is applicable to organisations which have a half-hourly metered electricity consumption greater than 6,000 Mwh. It is estimated to affect organisations which have an annual electricity bill of over £500,000 a year.
Jeremy Nicholson, Director at the Energy Intensive Users Group said: “The minister’s correct, it has turned itself into a tax. It was a great shame that at the same time as consumers were being hit indirectly by carbon tax proposals that the opportunity wasn’t taken to abolish the CRC. Virtually all the good things about it, in terms of league tables etc, could have been done without the mechanism of a separate tax. We all understand the purpose for carbon-based taxation. If we’re moving toward it then why do we need this quasi-carbon tax would criticise it in terms of inefficiency.”
A consultation to simplify the CRC scheme closed in February but many in business were left unsatisfied.