CRC U-turn - what are the implications?

Blog, 21 October 2010

The fall-out of the unexpected CRC U-turn is still being worked through by participating organisations and the not inconsiderable advisory industry that has sprung up to support the scheme. Initial reactions from participants have been predictably very negative (words such as ‘fury’ and ‘appalling’ litter the media). But what really are the implications of the changes to this scheme? We think this is perhaps a good opportunity to clarify the muddle of carbon legislation that now exists.

• Is reputational risk now a non-issue? With the recycling payments gone, we wouldn't be surprised if the government scrap the league table to quell business anger and further simplify the scheme. If so, the main driver beyond compliance for many (reputational risk) will have been removed. 
• It’s simpler! Organisations have complained in the past that the scheme was too onerous and complicated (e.g. compliance costs were significant – some large organisations we know have staff working on CRC compliance almost full time). This new development is a simplification, and so should reduce some costs (unfortunately for some employees) 
• A blow for the green investment. Green investment is already seen as a risky venture. This dramatic change in policy direction will add more uncertainty. Why pump money into meeting or supporting green policy when the rules can change so quickly and dramatically? 
• Is it really that bad? Energy cost savings for the best CRC performers was always going to eclipse the added financial bonus of getting some cash ‘recycled’ from poor performers within scheme (we estimate by 10:1). Stopping energy efficiency initiatives because of this change in the CRC would be a case of ‘biting off your nose to spite your face’. The worst performers were, unfortunately, going to lose an increasing chunk of that cash anyway … 
• Don’t forget CEMARS! Carbon reduction certification schemes who positioned their products so closely next to CRC performance must be seriously concerned. There is a danger that they are now dismissed by organisations as being pointless. That would be a shame: they existed long before the CRC and offer benefits beyond league table improvements. (Of course this impacts us as accredited suppliers of CEMARS certification!). 
• A muddle of legislation. Finally, could this be a wake-up call to review the muddle of carbon legislation that currently exists (CRC, CCAs, EU ETS, DECs etc etc). Why not really reduce the complexity: tax carbon, get it into the price and let the market work!

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