Chamber and committees

The Scottish Government, along with the UK Government and the other devolved administrations, published a vision for the way ahead in terms of simplifying the CRC scheme on 30 June 2011. This vision sets out the main simplifications that government would like to propose for formal consultation early in 2012. These proposals will provide greater business certainty by continuing the fixed price sale, rather than auctions of allowances in a capped system, into the second phase as recommended by the Committee on Climate Change and allow business greater flexibility for organisations to participate as natural business units. These proposals will reduce the administrative burden, in particular by reducing the number of the fuels reported from 30 to four and a range of other measures. Government will also reduce perceived complexity of the scheme, by removing the 90% rule and CCA exemption rules, but achieving broadly the same outcomes, and reduce overlap with other schemes. In particular, businesses covered entirely by CCAs will not need to register and EU ETS installations will no longer be require to purchase allowances for electricity supplies.

The first reporting year of the CRC is now over, and many organisations are now, for the first time, in the process of identifying and recording their entire energy use. In this year, we have seen the importance of the CRC for stimulating the market for new low carbon goods and service industries, including in energy measurement, in remotely read meters, in voltage optimisers, in low energy lighting.

Government wish to ensure that we take account of all the aspects of the scheme, and the lessons learned in the last year. As participants have not yet completed the first full cycle, and in order to make sure we get the technical details right, and ensure we have correctly identified the likely cost savings, the Scottish Government, DECC and the other devolved administrations will continue the informal dialogue with participants throughout autumn 2011. Government will then formally consult on legislative proposals in early 2012.

There have been suggestions that the CRC should just be turned into a tax. This was considered by the UK Government, however, because of the other elements of the CRC, namely robust organisational measurement of energy use and reputational drivers, the tax required to deliver the same carbon savings would be significantly higher. Energy costs are not a significant fraction of turnover or revenues, other barriers prevent cost effective savings being made. Therefore, the simplified CRC is the best way to achieve these savings. This will provide a basis for a simplified CRC and certainty for the future. Government will review the CRC, and its relation too other policy measures in 2017.