Think tank: Mandatory reporting should replace costly CRC scheme

London – The UK government should scrap the CRC Energy Efficiency Scheme, and instead oblige businesses to reveal more about the amount of carbon they produce, according to Policy Exchange, an independent think tank.

In a new report, Policy Exchange’s the environment & energy unit describes the CRC as “an unfair, complex and unnecessary piece of regulation that should be abolished.”

Replacing the CRC with mandatory reporting and a clearer carbon price would help unlock the potential of energy efficiency to deliver savings - both in cost in and the amount of carbon emitted, argues the report titled Boosting Energy IQ: UK energy efficiency policy for the workplace.

The study found that climate policies have created widely differing carbon prices across the economy. As a result, it said, a firm inside the CRC will effectively pay five times as much to emit a tonne of carbon using electricity than a firm outside the CRC will pay for carbon emitted using gas.

Policy Exchange, therefore, wants the government could reduce these distortions by abolishing the CRC, which, it said, imposes an unfair tax on certain parts of the commercial and public sectors.

“Despite the government’s recent moves to simplify the scheme, the CRC remains unnecessarily complex – overlapping with other climate policies, such as Climate Change Agreements and creating a league table which risks making unhelpful and damaging comparisons between different sectors,” it said.

Replacing the CRC with mandatory carbon reporting would be simpler, more transparent and would establish a more consistent carbon price in the commercial and public sector, the think tank continued. Removing the tax distortions will help firms make the cheapest possible investments in energy efficiency while mandatory reporting will ’nudge’ businesses into making carbon reduction a greater priority.

Guy Newey, author of the report, said, “The genuine potential of energy efficiency to deliver carbon savings has been undermined by overlapping and distorting carbon prices and over-complex policies, such as the CRC. This has frustrated people trying to cut energy use in the workplace.

“Untangling the current policy jumble will allow the market to decide where the cheapest carbon reductions can be made. Introducing mandatory reporting will allow businesses to get a reputational boost from green action. It will also allow investors and consumers to cut through the greenwash and make more informed choices.”