By Max Clarke

The Government’s flagship energy efficiency scheme is untenable in its current form, as it reiterated its call for the incentive behind the Carbon Reduction Commitment (CRC) to be restored, warns the CBI (confederation of British Industry).

Announced in March 2009 and introduced in April 2010, CRC is a mandatory scheme designed to improve efficiency and reduce carbon dioxide emissions for large public and private sector organisations with average electricity bills of at least £500,000 a year.

Launching a new policy brief, Back to the Answer: Making the CRC work, the UK’s leading business group argues that the Government’s decision to remove the revenue-recycling element at October’s Spending Review has undermined the original purpose of the scheme of encouraging organisations to cut emissions.

The CBI added that the fact that the decision was made just two weeks after the final deadline closed came as an unexpected blow to organisations that had joined the scheme in good faith.

“We now have a carbon reduction scheme that doesn’t encourage companies to reduce carbon emissions, and actually adds to the cost of doing business,” said Rhian Kelly, CBI Director for Business Environment. “The Government pulled the rug out from under organisations that signed up to a scheme to reward them for becoming energy efficient in good faith.

“Without a proper incentive the scheme lacks credibility and has lost businesses’ trust. Policy uncertainty like this undermines the long-term energy efficiency plans of companies, and will do little to help us reach our emissions targets", concluded Kelly.

The CBI said if the Government restores the original incentive behind the scheme, progress could be made on making it more effective. This could involve two possible options:
• Maintaining the CRC in its current form which would involve participants being able to buy carbon allowances at a fixed price
• Moving the CRC to a full cap and trade system.

However, if the Government does not restore the original incentive in the CRC, it should scrap the scheme and consult on a more simplified mechanism to encourage energy efficiency across the business community. This mechanism should be distributed across all sectors and avoid the complexity and resulting business concerns the CRC currently creates.