Much has been written about the UK Government’s Carbon Reduction Commitment (Energy Efficiency) Scheme (‘CRC’) over the last two years. Many in the property sector are aware of the complications around reporting carbon emissions to comply with the CRC and charging the costs of allowances to those consuming the fuel.

The UK Government’s comprehensive spending review last week has actually taken a positive step to simplify CRC but has done so in a way which will undoubtedly increase the cost of CRC for all of the participants.

Many in the industry are calling this a stealth tax but as everybody immediately noticed the impact of the change that must be a misnomer!

As originally envisaged, the CRC was going to reward those cutting their carbon emissions by refunding them the cost of their allowances many months after they had originally bought them. Plenty of controversy arose as to how this was going to be measured and calculated but the original idea of the CRC was that it was revenue neutral for the UK Government.

Not surprisingly, given the state of the UK economy, the proceeds from selling the carbon allowances will now form part of the public finances. Here at Reed Smith we had been expecting that.

There is no doubt that businesses, particularly those with a keen interest in green issues, will be disappointed by the loss of the refund for those improving their emissions. They will see their costs increasing. On a tiny positive note, the change means that businesses will know with more certainty at the start of each year what the CRC will cost. We wonder if more landlords will now try harder to get tenants to pay a share of the building’s CRC costs now the complex refund provisions have been abolished.

The recent report from the Committee on Climate Change on reducing the complexities of the CRC is already out of date and we await developments but, in the meantime, any business that thinks it has to comply but missed the September deadline for registration should still work on their compliance process. See our posting outlining the CRC Scheme if you are still unsure.

We have saved the good news until last! The only sweetener that the Government have offered is that the first sale of allowances to cover the CRC year 2011 – 2012 will now take place in 2012 and not 2011 as previously planned.

For advice or to arrange a client workshop get in touch with your usual contact at Reed Smith or the authors.