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UK's Largest Firms Could Pay up to £20m for CRC

The cost of participating in the Carbon Reduction Commitment (CRC) scheme could exceed £20m a year for some of the UK's largest firms, according to new research undertaken following the government's decision to no longer return revenue raised through the scheme to participating organisations.

The study from Edinburgh-based carbon management consultancy applied a financial impacts model to publicly available carbon emissions data provided by some of the largest Scottish organisations participating in the CRC.

It concluded that based on the government's plans to charge organisations £12 per tonne of carbon under the CRC, Edinburgh City Council will have to pay £990,000 a year while Aberdeen City Council is facing a bill of £800,000.

Meanwhile, Tesco is expected to have to pay £21.37m through the scheme and the Royal Bank of Scotland will be charged £5.39m.

The figures are likely to further fuel criticism of the government's surprise decision to scrap the revenue recycling element of the scheme - a controversial move that has been widely branded as a "stealth tax" and is expected to raise the Treasury £1bn a year.

However, speaking in the wake of the decision last month, energy and climate change secretary Chris Huhne said the changes were necessary to help tackle the deficit and ensure that organisations have a sufficient financial incentive to invest in energy efficiency measures.

Kevin Houston, director and co-founder of Carbon Masters, agreed the changes to the scheme and substantial bill many organisations now face will force them to increasingly focus on measures that can help reduce their energy use.

"We have calculated that the likely minimum tax charge for qualifying businesses will be £42,000," he said. "When you add this cost to rising energy prices, there is a huge incentive for CFOs to seek reductions in their companies' energy usage. They could see their total bill for electricity, gas and carbon tax almost double over the next five years, if their consumption increases by a relatively modest five per cent per annum. Every one tonne of carbon saved by taking energy-saving actions reduces their total energy and carbon bill by around £178."

He added that with the payment component of the CRC not scheduled to come into effect until April 2012, businesses still had time to complete the kind of energy efficiency projects that will help to reduce costs

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