Budget 2016 - CRC to be abolished

Wednesday 16th March 2016

In the budget today George Osborne has announced that the Carbon Reduction Commitment  scheme (CRC) will be abolished from April 2019.  This will be replaced by an increase in the Climate Change Levy (CCL) from 2019.  The cost will then be charged on energy bills, on a cost per unit basis.

This means that from 2019 the cost will be paid monthly instead of once per year alongside annual reporting and allowance orders.  This will reduce the administrative burden on companies that currently take part in CRC, although it will penalise smaller organisations who are currently below the CRC threshold.  The new CCL charges will be applied to all commercial supplies.

The CRC timetable will likely be as follows:

September 2016 – compliance payment for 2015/16 CRC year

September 2017 – compliance payment for 2016/17 CRC year

September 2018 – compliance payment for 2017/18 CRC year

April 2019 – Climate Change Levy increases

September 2019 – compliance payment for 2018/19 CRC year

There are therefore another 4 payments to make for CRC before the scheme is scrapped.  There will also be a level of crossover between paying through CCL and having to make the final CRC payment (unless you purchase forecast allowances 15 months earlier).

So although there is still some time to serve on CRC, at least the scheme will stay the same until the end date, and the replacement will be much more straightforward to administer.  It is also possible that the cost will come down slightly for CRC participants from 2019, as the burden will be spread across all commercial supplies.

It will also affect commercial customers who are not in CRC, as from April 2019 they will see CCL rise significantly.  It has not been confirmed whether the cost per unit will match the equivalent CRC cost (which would be around 0.82p/kWh for electric or 0.30p/kWh for gas) or whether it will be reduced, as it will be affect far more supplies than CRC would have covered.  There is also a point in the budget to say that CCL will be rebalanced to be heavier on gas.