Changes recommended for CRC Energy Efficiency Scheme

The Committee on Climate Change has recommended that Government redesigns the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme prior to the start of the second phase (2013-2017), in order to reduce its complexity.

There are three principal recommendations. First, the Committee says the sale of an unlimited number of allowances at fixed price should be extended from the first phase into the second, rather than introducing a second phase cap and complex auctioning scheme. Secondly, separate league tables and revenue recycling should be established for the public and private sectors, and public sector financial budgets should be set to allow upfront investments in energy improvements. This will allow for the fairer treatment of the two sectors, as the current scheme is at risk of transferring funds from public to private sector organisations.

Finally, the Committee says participants should have to purchase CRC allowances to cover renewable energy generation, including heat. This is a departure from the current scheme whereby companies could receive double incentives for use of renewable energy. Financial incentives for renewable heat are important but should be introduced through the renewable heat incentive. League tables should be extended to cover renewable heat and renewable electricity, thereby providing additional reputational incentives for business.

The Committee also set out options for a more fundamental redesign of the scheme, which Government could consider in the context of a strengthened carbon price.

The full report can be downloaded from the Committee on Climate Change website at www.theccc.org.uk