QPANI Respond to Consultation on Simplification of Energy Efficiency Scheme

QPANI-Logo-(Dark)QPANI has called for the scrapping of the proposed CRC Energy Efficiency Scheme, formerly known as the Carbon Reduction Commitment.

In a written response to the CRC Team at the Department of Energy and Climate Change in London, Regional Director Gordon Best says QPANI believes the scheme, even with simplification measures put in place, will have a major impact on the competitiveness of large companies in Northern Ireland.

“We would echo the CBI view that the CRC should be scrapped and mandatory carbon measurement implemented as an alternative,” he says.

He points out that QPANI members produce over 95% of aggregates extracted in Northern Ireland, including sand and gravel and crushed rock. They are also responsible for the manufacture of approximately 95% of concrete, asphalt and other quarried products. They range in size from a number of major companies to a high number of SMEs employing directly in excess of 3000 people.

“There are a number of aspects of this scheme which give rise to concerns. When originally devised the CRC required large energy users to pay a tax on each tonne of carbon they generated through their energy usage. The original scheme however also rewarded organisations who were more efficient by providing a revenue return for those who reduced their carbon emissions year on year. This rebate element of the scheme was removed by the Chancellor in his autumn budget statement in 2010, meaning that the scheme has now moved from one which encouraged energy efficiency to a straight carbon tax.

“One of the perversities of the scheme is that in many ways it is a circular tax. In Northern Ireland 48 organisations are required to register under this scheme. Of these only 19 are private sector companies, while the other 29 are public sector organisations including government departments, health trusts, local councils and of course NI Water who are the largest energy user in the Province. So we have ended up with a scheme which results in government taxing itself! This will significantly increase costs for the NI Assembly who of course fund domestic water charges and local government departments, yet there appear to be no plans for an increase in the block grant to fund such increased costs.

“In the private sector, only our largest and most successful companies are included in the scheme, which will result in increased energy costs of between 5% and 10%. This will mean additional costs for some of our members of up to £500,000 per year.

“Energy costs in Northern Ireland are already some 18% higher than our competitors in the Republic of Ireland, 15-20% higher than in GB, and 30% higher than in France. It does seem preposterous that government is encouraging companies to become world leaders, and then introduces a tax which results in them becoming less competitive in world markets – effectively a tax on success!”

He says that despite recent proposals from the Department of Energy and Climate change to simplify the scheme, the associated costs to administer this ‘overly complex and onerous scheme’ are also excessive and likely to result in costs of at least £10,000 per annum for each organisation that are required to make returns.

“Private sector companies will also find themselves suffering double or triple taxation as a result of the scheme. It is patent that NI Water will have to increase water charges to fund this tax, while undoubtedly Belfast City Council will also increase business rates to fund their commitment to the charge, further adding to costs in the private sector.

To sum up, it is apparent that modifications to the scheme since it was first mooted have resulted in this scheme becoming an overly complex bad tax which should be scrapped.”
QPANI suggests that any new scheme should create a level playing field in the market place and across all sectors of the economy. To be viewed as a true energy efficiency scheme, it says, a means of the recycling of the revenue should be found rather than a revenue grab by the Treasury and that credit against any levy/ tax should be given for investment in energy efficiency measures.