There are huge dangers arising from the UK Government’s CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment), which is the UK’s mandatory climate-change and energy-saving scheme due to come into operation in April 2010.
At a time of huge economic uncertainty when companies are already extremely concerned about their future – faced with rising taxes, increased levels of red tape and worries about job security – the introduction of this blindingly stupid piece of legislation should be delayed, or preferably cancelled completely.
In the case of the UK Government, the so-called Carbon Reduction Commitment is also an example of blatant political hypocrisy.
According to the Department of Energy and Climate Change (DECC) PR machine, it has been designed to raise awareness in large organisations and encourage changes in behaviour and infrastructure, all of which are aimed at improving the energy efficiency of large organisations.
It will apparently operate as a “cap and trade” mechanism, which means it puts a price on carbon emissions from energy use. What that means, of course, is that it’s just another tax.
The scheme’s operators – presumably DECC – will also produce what it describes as an annual performance league table that ranks companies on their performance. Or, in other words, just a crude name-and-shame exercise.
Initially, the scheme is predicted to impact on about 5,000 public and private-sector organisations across Britain, and as time goes on and its bureaucratic tentacles reach out further, it will almost certainly impact on many more.
These organisations will include supermarkets, water companies, banks, local authorities and all central government departments. So food prices could go up, as could bank charges, water costs, council tax and central tax.
Along with most things this Government has done on energy, I judge the CRC Energy Efficiency Scheme as not just juvenile in its approach, but anti-enterprise and downright dictatorial.
When judging the quality of Government legislation, it’s important to take into account not just how big and effective the stick might be, but what the carrot – if any – might comprise.
Will it result in something positive, such as investment in new technologies, creating new companies, new jobs, and so on and so forth?
If you like, it’s the same sort of judgment many people rightly deploy over fuel taxes. Most ask what the point is of increasing fuel taxes to try to get people to use their cars less if there isn’t an equally convenient public-transport alternative and/or the additional tax paid doesn’t go into researching and developing new forms of fuel or transport, and so on and so forth. Or – where has the money gone?
To ensure that this happens requires a Government that is intellectually capable – metaphorically speaking – of rubbing its belly and tapping its head at the same time. This Government certainly isn’t, and I’ll explain why.
As Energy pointed out a couple of months ago, UK energy R&D investment is considerably lower than any of our main competitors.
The twice former energy minister, Malcolm Wicks, also said: “The UK does not compare well with other countries. This is partly a result of the UK not having a major industrial base in the energy sector.”
His words, not mine nor those of Energy’s editor – and many of you know how outspoken both of us are on that issue.
There is now more evidence from an independent source that the UK Government really only has an interest in the “wielding a big stick” approach.
The Worldwide Fund for Nature has just published the results of a pioneering study that says the same thing. It amounts to the first ever comparison of countries on the basis of sales of their clean-technology products.
It includes the 27 EU member states and all G7 and BRIC countries, and the major renewable-energy and energy-efficiency sectors.
As the WWF says, a country’s position in the ranking reflects its ability to produce and sell products and services that reduce CO emissions. Self-evidently, the higher a country is ranked, the better its capability to generate high economic value and employment for a skilled workforce.
This is important because it tells us who is getting real economic benefit from this new low-carbon era we are heading towards.
Denmark, Brazil and Germany lead the ranking, but the UK is only 20th out of 27. Shall I say that again? 20th out of 27.
For a country whose leadership purports to be leading the world in climate-change targets this is pitiful – but, to a large extent, it was to be expected.
News on virtually every sector of the clean-technology industry from just about everywhere else in the world has been consistently better than news than from the UK for perhaps 10 years or more.
The only sector where it might be argued that we are making headway, and which could lead to large-scale sales at home and abroad, is in tidal and wave technologies – but, even here, if we don’t continue to nurture the sector and invest in it using both public and private-sector funds, we could lose the small advantage we have.
Worse – against this deeply disappointing and, in many senses, depressingly predictable WWF report, we now have this flawed CRC Energy Efficiency Scheme to contend with.
And it is something that we will have to contend with rather than welcome because I can pretty much guarantee that it will not lead to the development or, more importantly, the commercialisation of new technologies on any grand scale, if at all.
But what it will almost certainly lead to is companies working out how they can fudge the numbers to keep their liabilities to a minimum and avoid the need to make too many costly changes.
It will also lead inevitably to companies looking at the option of shifting their entire businesses overseas.
On top of the increases in national insurance and other company tax burdens, this is really the last thing industry needs.
Let me give you a couple of examples.
According to a very good friend of mine, Dr Brian Murray, who is a strategist at a large IT services and technology company, Scotland has become a hub for large organisations to locate data centres, and to a large extent, this is due to this wee nation’s increasing number of renewable-energy initiatives.
However, because they use hundreds, or even thousands, of servers to support their operations, they are heavy energy users and will get badly hit by this new CRC Energy Efficiency Scheme. Of course they won’t actually because they just won’t stay here.
Switching entirely to renewable sources, which some data-centre designers are working on, also won’t help because it also seems that an organisation sourcing all its power from renewable energy would be treated the same as a company that uses non-renewable power.
You want more proof that this is a tax and not an incentive?
Well, another industry that it appears will be hit hard is the private-equity sector. Putting it simply, because these companies tend to own a lot of other companies, or bits thereof, the Government plan is to lump all these together and treat them as one big company. Needless to say, the PE brigade is trying to get this changed. Good luck to them.
DECC dictates that organisations will have to comply with this new regulation if they (and their subsidiaries) have at least one half-hourly electricity meter (HHM) settled on the half-hourly market. They also qualify if their total half-hourly electricity consumption exceeded 6,000 megawatt-hours (MWh) during 2008.
It will be interesting to see how many companies in the oil&gas industry this applies to and how quickly they will be included in this new tax trap.
Happy New Year, folks.
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