(Adds CO2 price support rate reaction in final 2 paras)
LONDON, March 21 The UK government may adopt an
alternative environmental tax to replace its scheme to cut
corporate energy use if it cannot reduce the scheme's
administrative costs, finance minister George Osborne said in
his budget statement on Wednesday.
The so-called Carbon Reduction Commitment (CRC) was devised
under the previous Labour government.
The mandatory energy efficiency scheme forces businesses
including banks, hotels, hospitals and schools to help cut
Britain's greenhouse gas emissions by 4 million tonnes and
corporate energy bills by 1 billion pounds ($1.6 billion) a year
The CRC has been widely criticised for being costly,
confusing and unfair.
"The Carbon Reduction Commitment is cumbersome, bureaucratic
and imposes unnecessary costs on business," Osborne said.
"We will seek major savings on the administrative costs, and
if that cannot be done, we will replace the revenues with an
alternative environment tax."
If savings cannot be delivered, the government will make
proposals in autumn this year for an alternative tax.
"The government will bring forward proposals in autumn 2012
to replace CRC revenues with an alternative environmental tax
and will engage with business before then to identify potential
options," the budget document said.
The government will also raise a carbon price support rate
for 2014-2015 by over 30 percent to 9.55 pounds per tonne of
carbon dioxide from 7.28 pounds, the budget document showed.
Last year, the government announced plans to set a price
floor for European Union emissions permits in the UK at 16
pounds per tonne from April 1, 2013, rising to 30 pounds per
tonne by 2020.
The government hopes the floor will underpin the price of EU
emissions permits, which have lost over half their value in the
past year, and incentivise investment in low-carbon technology.
To ensure the price floor targets are reached, the
government proposed the introduction of a "top-up" tax from
April 2013. The last budget said the top-up component for
2013-14 would be set at 4.94 pounds per tonne and could rise to
7.28 pounds/tonne in 2014-15.
"Setting the tax rate two years in advance relative to a
volatile commodity is fraught with challenges. There is also the
risk that the support rate will be punitive should carbon credit
prices return to historical averages," said Jonathan Grant,
director of sustainability and climate change at
UK manufacturers' organisation EEF said the support rate
rise would push industrial electricity prices up another 6 to 7
percent on top of existing policies.
($1 = 0.6307 British pounds)
(Reporting by Nina Chestney and Karolin Schaps; Editing by Mark
Potter and Jane Baird)