CRC Energy Efficiency Scheme Order 2013

Lord Grantchester Excerpts

Monday 25th March 2013 Grand Committee

[Lord Grantchester]

My Lords, I thank the Minister for her introduction to the order. I am glad that I am speaking to the simplified order in contrast to the prior order, and I hope that the Committee will not be detained very long.

The order coincides with the retirement of the government Chief Scientific Adviser, Professor Beddington. He argues that the evidence for climate change is unequivocal. The order implements the regulations to improve energy efficiency in organisations that are consumers of large amounts of electricity and, by improving energy efficiency, to reduce carbon emissions. The carbon reduction commitment scheme is the key driver for the UK to meet its domestic and international greenhouse emissions reduction targets. The climate change levy part of the policy instrument is levied on nearly all businesses that use electricity and gas.

The Minister has explained the over-burdensome nature of the original CRC order.

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[Lord Grantchester]

The Minister explained the over-burdensome nature of the original CRC order and we agree with her. This simplified scheme is to be applauded, although there are a few concerns about the reduction of benefits as a consequence. Nevertheless, it is right that the Government proceed with the scheme. Despite cost-effective energy efficiency savings being available, the Carbon Trust reported as far back as 2005 that organisations’ emissions were not being reduced. Indeed, they have remained constant for the past 20 years, due to a lack of awareness at board and senior management level, a lack of financial incentives to reduce emissions and a lack of prestige associated with efficiency activity.

Generally, energy costs tend to be only 1% or 2% of operating costs for business. While I can confirm acceptance of the order today, I want to ask the Minister about one or two concerns arising from this simplified scheme. Since the scheme began in 2010, it has drawn considerable criticism for being too complex, burdensome, difficult to understand and costly to administer. It is good that the Government are bringing in a more practical scheme, but has something been lost in the translation?

While the memorandum explains that considerable savings will be made—a 55% reduction in overall administrative costs—it does not explain what percentage reduction in efficiency improvements and carbon emission reductions may result from the simplification. For example, it says that there is a reduction in fuels from 29 to two and that the scheme will cover only emissions generated from the consumption of electricity and gas. This is still important, but will the Minister confirm that the scheme will still capture a major percentage of the efficiency improvements targeted by the original scheme?

On this benefits side of the equation, there is a loss from the original scope of the order. The impact assessment puts this at around £183 million. The Secondary Legislation Scrutiny Committee also commented on this in its 33rd report. It is not clear from the Minister’s department’s reply to the questioning on the validity of the order, when set against such loss of benefits, whether this is due to double counting of benefits as a result of reducing the overlaps between CCL, CCA and EU ETS instruments. Will the noble Baroness explain whether this loss of benefit is per phase or a loss for the total scheme to 2039?