The consultation on changes to the business energy tax landscape has closed. What happens next?

The consultation ran from 29th September to 9th November 2015 with the results expected to be announced in 2016.

Posted on 16 November 2015.

The consultation on reforming the business energy tax landscape announced by the Government in the summer budget has now closed.

It is anticipated that HM Treasury will lead the implementation of any changes to the current schemes; the Carbon Reduction Commitment (CRC), Climate Change Levy (CCL), the European Union Emissions Trading Scheme (EU ETS), the Energy Savings Opportunity Scheme (ESOS) and Greenhouse Gas (GHG) reporting, which are likely to be radical.   Any revisions to UK legislation will obviously need to adhere to EU Directives already in place, and will also have to respond to the outcome of the UN Climate Change Conference (COP21) to be held in Paris in December 2015

The overall aim of the review is to reduce compliance costs and complexity for businesses whilst strengthening the price signals to support Government objectives and commitments to reduce emissions.

General opinion from within businesses is that the existing climate change legislation schemes overlap, are confusing, and that there should be a simplification of the requirements on businesses to respond to the need to reduce emissions.

Speculation has centred on the scrapping of the CRC scheme in favour of either an increase in the CCL and/or the inclusion of more organisations in a bolstered ESOS scheme to incentivise or mandate greater uptake of energy efficiency measures.

Scrapping CRC is thought to be a favoured option, with revenue maintained by increasing Climate Change Levy (CCL) across the board and by balancing the level of CCL applied to different energy sources i.e. bringing CCL levied on gas into line with that on electricity.

The public sector is currently part of CRC but exempt from ESOS.  In order to maintain the incentive for public sector organisations to minimise carbon emissions, they would be brought into ESOS.

Currently HM Treasury receives in excess of £800m pa in CRC payments.  Essentially this will mean that the CCL price per kWh on energy bills will have to increase to offset this reduction in revenue. The increase in CCL could disproportionately affect the participants in the EU ETS scheme who are currently excluded from CCL.

It is also thought that the EUETS has failed to meet its objectives as the price of freely marketed CO2 allowances has consistently languished well below the expectations of c.30 euros per tonne and in recent times has rarely exceeded 8.5 euros per tonne.

Even some industrialists have argued for a price building up to between 30 and 40 euros per tonne to incentivise businesses to move towards more sustainable technologies and the take-up of renewable sources of energy. Taxes raised at these levels could then be re-invested in those businesses taking up the low carbon investments to maintain their competitiveness.

Reducing the number and complexity of the sometimes conflicting schemes has to be the way forward to encourage and oblige organisations to embrace the necessity for reducing emissions into the future.

This will only happen if there is less confusion, clear objectives and well structured incentives to support a more robust approach to employing energy efficient techniques and investment in well proven technologies.

If you would like more information on this, or any other energy management issue, please contact us at or call 0800 6127 567.