CRC Energy Efficiency Scheme Order 2013

Lord Deben Excerpts

Monday 25th March 2013 Grand Committee

Overall, the necessity and benefits of the CRC scheme are well recognised and supported by respondents to the consultations. I confirm agreement to the order and look forward to its start in May this year.

[Lord Deben]

My Lords, I declare an interest as chairman of the Climate Change Committee. I am pleased that we are looking to make such arrangements as simple as they can be. One of the most important things that we have to do is ensure that this very important business of making Britain able to meet the statutory target of an 80% reduction in emissions by 2050 is accomplished with as little harassment and difficulty as possible. When the original scheme was introduced, I criticised it because of its complication. We now all agree that it would have been better to make it less complex, but it was an important step that I am not undermining in any way.

I have a particular question for the Minister, the answer to which I found hard to discover in the documentation. It is about the half-hour meter. This is a boring technicality but it is very important. For reasons that no one has ever understood, the original system depended not just on the amount of energy used but also on whether one had a half-hour meter. The difficulty is that many firms with a half-hour meter use less energy than firms without a half-hour meter. More importantly, there is a competitive problem. Some companies that have them—restaurants, for example—are competing with other companies that do not. One is paying and the other is not. It may be my own ignorance and inability, but I have been unable to discover whether the new CRC Energy Efficiency Scheme Order will overcome this problem. I was promised by the then Minister in the House of Commons that this would be put right “when the opportunity arose”, which I think was the phrase used. I should very much like to understand whether that comes into the purview of this order, and if not, why not. Will we now put this right? With a Government who are very committed to competitiveness, it would be sad if this quirk in the system should continue to make things difficult.

Let me explain why I feel strongly about this. There are many organisations which, in the aggregate, meet the requirements of the CRC. It was very important to have an aggregated system, because, if we had not, we would not have reached out. I congratulate the former Government on recognising that, for example, franchisees had to be part of the system, otherwise there would have been a major disadvantage for other companies which were not so organised. However, the difficulty is that some franchised organisations have a clear advantage over others because of the half-hourly meter arrangement. I shall say something that I hope the Minister will not be upset about. When I inquired into this matter previously, it became quite clear that the only reason for it was none of the reasons which Ministers of both sides have proposed; it was just administrative convenience. It happens to be true that people think that this is a convenient way of doing it rather than the right way of doing it. I do not want to make it more complicated—nor do I want to get into names of particular companies—but I can think of two restaurant chains, one of which pays the CRC and the other does not, yet their customers and turnover in many of their individual restaurants are very similar. That does not seem to me something that we should allow in this structure. Therefore, I hope that the Minister will be able to reassure me that, under these arrangements, the half-hourly meter element will be removed and that we will go to a much more sensible system, which is a proper, basic amount of energy used on this narrower basis of gas and electricity. It would be de minimis arrangement, but one which did not discriminate between organisations.

[Baroness Verma]

My Lords, I welcome noble Lords’ support for the order. Whereas the previous order was very complex, I am pleased to say that I am bringing balance to the debate by trying to make this measure simpler. We have tried, through engagement with stakeholders, to ensure that we have much better informed and not excessively burdensome regulation for industry. We are trying to make sure that there is a reason to use CRC as a means of reducing carbon emissions.

The noble Lord, Lord Grantchester, asked a couple of very poignant questions, so I shall respond first to those and then go to those of my noble friend. The noble Lord asked why schools in England had been removed from the CRC. Due to the continued growth of academies and their independence from local government, the CRC is not the best mechanism to achieve energy efficiency across the English schools estate. The Government therefore decided to withdraw all state-funded schools in England from CRC participation and implement alternative measures to incentivise and support those schools in obtaining both energy cost and emission savings. However, that does not mean that schools will not partake; it just means that they will take a different route.

The noble Lord asked whether the benefits of the scheme would be reduced. The loss of emissions coverage is very small, being less than 5%. The key drivers—awareness, publication of data and the financial incentives arising from needing to buy allowances—will still be part of the scheme. As I said in the previous debate, we want continually to review what we are doing so that we get the best outcomes from these measures.

My noble friend Lord Deben asked about half-hourly metering. I welcome his support for the order and thank him for it. If the Committee will allow me, I shall take away my noble friend’s question and perhaps give him a much more detailed response—I shall ensure that the opposition Benches also have a copy. If I was to give him a half-hearted response now, it would not satisfy the Committee and certainly not my noble friend.

Overall, I am pleased that noble Lords have seen the benefits of simplification and the fact that it will reduce administrative costs to industry by quite a large sum. It also allows greater flexibility for industry to organise its own businesses as it sees fit. I welcome the support of noble Lords and commend the order to the Committee.