U.K. ‘Stealth’ Carbon Tax May Add 10% to Company Energy Bills
The U.K. Treasury’s decision to keep about 3.5 billion pounds ($5.5 billion) from a carbon-cutting program for large electricity users may add 10 percent to energy bills for universities, hospitals and shops.
The change, announced by the Treasury yesterday after Chancellor of the Exchequer George Osborne’s spending review, will add about a tenth more to the bills of the program’s participants, said Ben Wielgus, lead adviser on the program for the accounting firm KPMG.
“It’s a double whammy for the public sector because they’re all facing spending cuts and they’re being taxed as well for their energy use,” Wielgus said today in a telephone interview. KPMG and its clients will be affected by the changes, he said. “Organizations in the scheme are now paying significantly more for energy.”
U.K. Energy Minister Charles Hendry said in a phone interview today that the shift is designed to make the program “simpler” to understand. The British Retail Consortium, an industry lobby group, called it a “stealth” tax on companies including its members, the supermarket chains Tesco Plc, J Sainsbury Plc and Wal-Mart Stores Inc.’s Asda unit.
“It affects almost all of the retailers with an annual turnover over 60 million pounds,” Richard Dodd, head of campaigns for the lobby group, said today by telephone. It will cost one “major” national retailer 10 million pounds a year, he said, declining to name the company.
Deadline to Enroll
Companies had until Sept. 30 to register for the program or face fines. Under the original plan, they would have had to pay for emissions allowances starting in 2011. The government yesterday postponed that by a year and scrapped league tables that would have redistributed the revenue back to participants based on their emissions-reduction performance.
“This is a measure for simplifying the process,” Hendry said today. “Much of the feedback we’ve had from business about the CRC has been about the complexity of it. The changes that we’ve made now give a clearer, stronger price signal for participants, which will certainly incenitivize the take-up of energy saving measures.”
The plan covers about 10 percent of U.K. emissions, taking in companies and organizations not included in the European Union Emissions Trading System. The government’s climate adviser, the Climate Change Committee, last month recommended the program be simplified with participants split into public and private sector to prevent a redistribution of revenue from schools and hospitals to corporations.
Cost of Permits
The allowances will cost 12 pounds per ton of carbon dioxide to start, and the Treasury said it assumed the cost will rise to 16 pounds a ton starting in the tax year ending in 2014.
Under the original plan, companies and groups that improved energy efficiency the most would have received back a bonus of as much as 10 percent above what they paid into the program, paid for by the worst performers, according to Wielgus.
“Organizations like universities who thought they’d do well and had invested to do so now face a 10 percent charge so instead of making a profit, they’re making a loss,” Wielgus said. “Under the old plan, even if you were a hospital at the bottom of the league table you’d have had to pay about 1 percent of your energy bills extra. Now it’s nearer 10 percent.”
Asked if the charge will remain in place for universities and hospitals included in the program, Hendry said, “There’s a consultation process which we’ll be starting shortly that will look at the detail of how this goes forward.”
To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net Catherine Airlie at cairlie@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net Stephen Voss on sev@bloomberg.net
Rate this Page