'Cumbersome' CRC could be scrapped if savings not found

George Osborne said that the current system was "cumbersome" and "bureaucratic" and imposed "unnecessary costs on business".

Proposals for an "alternative environmental tax" will be published this autumn if the Government is unable to find "major savings" in the administrative costs incurred by businesses complying with the scheme, the Chancellor announced in today's budget statement.

A spokeswoman for the Department of Energy and Climate Change (DECC) confirmed to Out-Law.com that DECC would be putting its proposals for simplification of the scheme out for consultation next week.

The CRC is a mandatory scheme aimed at improving energy efficiency and cutting CO₂ emissions in large public and private sector organisations that are not  caught by the EU Emissions Trading Scheme (EU ETS). CRC participants must  measure and report on their emissions,  and purchase allowances to cover  their emissions.

In the budget, the Chancellor confirmed that CRC allowances for 2012-13 emissions would be charged at £12 per tonne.

Environmental law expert Linda Fletcher of Pinsent Masons, the law firm behind Out-Law.com, said that in the short term the announcement would create "more uncertainty" around the operation of what, for businesses, was already a "complex scheme".

"Businesses have already committed vast resources, time, effort and money to comply with the scheme," she said. "Strategies and business plans must take account of current and likely future legal obligations and the costs of compliance. The announcement means more dialogue and consultation to deal with for businesses already under pressure."

"Going forward, if the proposals to replace the CRC with a stand alone environment tax bring certainty for business, the measures will ultimately be welcomed," she said.

“The proposed changes mean that once again we will need to consider how best to future-proof property documents in order to ensure that the costs of compliance with any amended scheme or alternative environment tax are catered for effectively," said property law expert Siobhan Cross, also of Pinsent Masons. "Although overall if it means greater simplification and generally accords with the suggestions and comments made by organisations representing the property industry then change must be welcomed.”