The BSA - Business Services Association. Simplifying the CRC Energy Efficiency Scheme
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1 The BSA - Business Services Association Simplifying the CRC Energy Efficiency Scheme Introduction 1. The BSA The Business Services Association represents service providers, and their advisors, delivering services across the private and public sectors. A full list of members is provided in an annex. 2. BSA members are involved across the full range of public service provision including health, education, defence, environmental, food service, waste management, housing and other local services, IT and digital services, security and transport. The industry creates and sustains jobs and value added in every region of the UK. It directly employs 10% of the workforce - some 3.1 million people - more than manufacturing, and more than financial services and public administration put together. 60 per cent of its work is for the private sector, and 40 per cent for the public sector We welcome the opportunity to respond to DECC s consultation on simplifying the CRC Energy Efficiency Scheme (CRC). We support the government s ambition to reduce carbon emissions. As DECC states, we need a new leaner, simplified and refocused CRC, one that makes compliance easier and less burdensome for participants. 4. With this in mind we believe that the proposed reforms are a step in the right direction, but that more needs to be done to ensure the CRC is not a burden on business and that it can achieve its full potential. This submission makes the following key points: We would welcome clear commitments from DECC with regard to the CRC and how it will develop in coming years. We would welcome a forward price profile similar to the approach taken to the landfill tax and carbon floor price, thereby providing greater certainty and allowing businesses to plan accordingly. The quality of energy suppliers statements must improve if they are to be of benefit to CRC participants and to make compliance easier. Introducing listings within the CRC Performance Table according to business practice would make it easier to compare participators progress and would make the table more user-friendly. This would be particularly useful in order to help the public understand participators progress, and would help explain the different challenges that different sectors face to reduce carbon emissions. All partners should be incentivised to reduce energy consumption as far as feasibly possible, which must also apply to academies and maintained schools. With this in mind, we support the establishment of an education-sector specific CRC energy scheme to help drive reductions in energy costs. A mandatory carbon reporting obligation for academies and the schools sector would help the sector concentrate on its emissions and identify opportunities to reduce energy use and carbon emissions. Regional emissions reporting may have the adverse consequence of complicating the CRC process rather than simplifying it, especially for multi-site companies where emissions from transport are often a major source of carbon emissions. There is a case for the proposed changes to take effect before April 2013 in so far as they will reduce the reporting burden on companies. 1 Oxford Economics report for the BSA, April 2011: The Size of the UK Outsourcing Market Across the Private and Public Sectors. BSA The Business Services Association 2nd Floor, 130 Fleet Street, London, EC4A 2BH T: W: The Business Services Association Limited is registered in England No Registered office as above.
2 Clarity and consistency 5. We support the government s intention to make it easier to comply with the CRC. In keeping with the Red Tape Challenge, we welcome efforts to reduce regulatory burdens on businesses which will, in turn, support growth. An efficient regulatory environment is vital for good business and growth. This is also true for business confidence, much of which emanates from government itself. In times of economic difficulty, certainty and confidence is vital if businesses are to invest for the future and implement energy saving measures. 6. In order to promote a strong business environment, we encourage the government to be clear about the future of the CRC and its green growth agenda. We recognise the importance of all parties, including the public and private sectors, working to reduce carbon emissions. As the Chancellor has made clear, progress in this area must be achieved at the same time as supporting growth. 7. CRC participants will have invested a considerable amount of time and money into CRC compliance, and would therefore welcome clarity about any future changes. For instance, a clearer timetable from DECC and HM Treasury on future possible changes to the CRC, together with any proposed alternatives and changes to related areas of work such as mandatory carbon reporting, would be widely welcomed from industry and would provide a considerable degree of clarity. 8. Feedback from members suggests there are mixed views on the merits of keeping the CRC compared with abolishing it entirely and introducing a new tax. Overwhelmingly, however, our members have told us that they need business certainty in order to invest for the future, in order to grow their businesses and to create jobs for local communities. Energy suppliers statements 9. We welcome announcements to improve energy suppliers statements with improved guidance from Ofgem and CRC Regulators. In order to make the CRC simpler and less burdensome, it is vital that the information received from energy suppliers is reliable and does not require verification by individual CRC participants. One option could be to adopt a template format for suppliers to use, with greater clarity over the methodology for calculating each element within the CRC, to be submitted in a standard format such as Excel or a CSV file. This should help simplify the process for energy suppliers. As part of the government s open data agenda, this should also make it easier to compare and use this information. 10. We would encourage DECC and Ofgem to use every tool at their disposal to ensure energy suppliers comply with their responsibilities and support CRC participators to carry out their obligations. We would encourage Ofgem to monitor the level of compliance among energy suppliers and to consider introducing sanctions where these are not met. 11. With this in mind, we welcome further consultations which propose giving Ofgem the power to secure compensation for consumers from energy providers when they fail to comply with their regulatory requirements. Such failures by energy companies can carry significant costs for businesses if the information provided is not reliable. It is vital therefore, that where Ofgem receives additional powers they will be used to support business consumers as well as individual households. 2
3 Listings and League Tables 12. Members differ in their views on league tables. What is clear however is that for such tables to be effective, and for them not to put companies at an unfair competitive disadvantage, they need to compare like with like. 13. Some members have put forward the view that, in order to improve how the CRC table is used, DECC should list companies according to their business practice in order to make it easier to compare how similar participants are doing in terms of reducing energy consumption and carbon emissions. This would make the table more user-friendly for consumers, empowering them to make more informed consumer choices. It would enable consumers to make informed choices which in turn will direct business behaviour. 14. We understand DECC has opposed introducing such lists as it is felt this would be too complex an undertaking for consortiums who operate across a range of business areas. One option would be to allow businesses to self-allocate according to their main business practice. Moreover if proposals to increase the flexibility for disaggregation, allowing undertakings to register and participate in their own right, are introduced, it will be easier still to compare businesses according to their business practices. 15. There is a particular issue for those companies which operate in a variety of sectors, one of which may account for a small proportion of revenue but a large proportion of carbon output. It is important that such circumstances are recognised so as to compare like with like and to continue to provide an incentive to reduce emissions across a company s activities. 16. The consultation includes separate proposals for Academies with the intention of incentivising energy reduction. We strongly believe that reporting participators performance on a like-for-like basis will help incentivise energy reduction and make reported data easier to use for businesses and consumers. 17. Moving the performance league table from Regulations to Guidance is felt by many to be a positive step. Academies 18. The main priority under the CRC scheme is to encourage and incentivise participants across the public and private sectors to reduce energy use. This is equally important for the schools sector as they are responsible for 21% of public sector emissions. 19. Under the current system, maintained schools and academies are grouped with their relevant local authority. As the consultation points out, where local authorities are responsible for administering the system, there is no differential impact on schools and this limits the effectiveness of the scheme to encourage energy reduction within individual schools. Instead, in some cases it may allow for poorer performing schools to free ride on the back of schools in their area who are investing in efficiency measures. 20. With this in mind, we believe that the most suitable arrangement would be the introduction of a mandatory carbon reporting obligation to be applied to the schools sector with each school submitting data individually thereby making schools accountable for their energy reduction plans. Through better data collection and an individualised approach to school energy use, it will become easier to identify poorly performing schools and ensure that every cost saving and energy reduction measure is applied across the schools sector. 3
4 Regional Emissions 21. While we recognise the intention behind regional reporting on emissions, rather than simplifying the CRC process for participants, additional reporting requirements for regional emissions would complicate the process. Introducing requirements to report carbon emissions on a regional basis will not only increase the time and cost to businesses but, in some cases, for instance transport, it will not be feasible to report emissions on a regional basis as they cross local and regional borders. 22. Moreover, although many responsibilities on the environment are devolved matters, and devolved governments and assemblies have a role to play to support the government s agenda, it is the UK government who is responsible for overall targets to reduce carbon emissions. Reducing Scheme Fuel Numbers 23. In response to DECC s proposal to reduce the number of fuels covered by the scheme, some members have welcomed the easing of the reporting burden which this implies. They have called for this measure to be introduced before April so as to affect the end of the introductory phase and significantly reduce CRC costs. 24. Nevertheless the Government should also consider some perverse incentives to which this measure may give rise. One is on construction sites, with companies deciding to use generators rather than installing temporary electricity supplies to avoid paying the CRC. It is currently considered industry best practice to install temporary electricity supplies as they reduce carbon emissions by not having to run continuously. They are also considered safer as no refuelling is required and they do not generate noise. 25. There would also be issues of complexity. For example, if a generator is being used to power a portacabin which uses electric heaters would the portacabin be in or out of scope? Paragraph 62 acknowledges that there will be a new administrative requirement for participants to distinguish between fuel used for heating purposes and fuel used for electricity generation, and alludes that some estimation leeway would be granted. We question how this fits with the requirement for 100% reporting. CRC Sales 26. While we appreciate DECC s proposal to simplify the scheme s sales aspect under the second phase, some of our members question the practicality of forecasting emissions, suggesting that doing so will add to administrative burdens. Members in the construction sector particularly, suggest that accurate carbon emission forecasts will be difficult to produce due to unforeseen project rescheduling resulting in unexpected levels of energy consumption. Consequently, there is a case for basing CRC sales on historic, rather than forecast, emissions. 27. Moreover, some of our members are unfamiliar with trade allowances and participation in auctions. As a result, they are concerned that required additional management time will result in additional costs being incurred. These additional resources may be better spent on measures to reduce energy consumption and carbon emissions. Moreover, an annual one-off payment based on actual emissions, rather than the purchase and sale of allowances, may reduce administrative costs. 4
5 Appendix List of BSA Members Full Members: Amey ARAMARK Babcock Infrastructure Services Balfour Beatty Workplace Berendsen Capita Carillion ClearSprings Compass Group Elior UK Enterprise ETDE G4S Interserve ISS UK John Laing Kier Services Ltd Maximus Employment & Training UK MITIE Group Morrison Facilities Services Ltd OCS Group UK Ltd Pinnacle PSG Rentokil Initial Serco Sodexo TerraQuest Associate Members: Barclays Commercial Bevan Brittan Deloitte ECI ERSA - Employment Related Services Association Expert Patients Programme Community Interest Company Grant Thornton Harvey Nash KPMG Metzger Navigant Consulting Nicholas Moore PA Consulting Pinsent Masons PricewaterhouseCoopers UK Reynolds Porter Chamberlain LLP Royal Bank of Scotland Serco Institute Trowers & Hamlins WH Ireland 5
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