22 Oct 2010
0 comments

CSR Part 2: the knock-on effects

Major retailers, large businesses and major public sector organisations such as local authorities were unexpectedly hit a £3.5bn carbon tax in the CSR.

The Carbon Reduction Commitment Energy Efficiency Scheme, (CRC), which came into force on April 1, was to have created a financial incentive for organisations to cut carbon, as good performers at the top of a public league table would benefit from the “recycling” of the funds paid to buy emissions allowances.

Instead, the money raised will now be held by the government, in effect creating a carbon tax.

Liz Peace, chief executive of the British Property Federation, told Building: “The coalition said they wanted to simplify the complexities of the CRC and they have certainly found a novel way to do that. This will not however ‘remove the burden on businesses’ as they claim, but ensure that the CRC will cost the wider business community almost £3.5bn more than it would have.”

In other news, Construction News, Building and the Construction Enquirer website have reported that:

The government has formally agreed to fund Crossrail, although the trans-London rail project will now be completed at least a year later, in 2018. The programme of Tube upgrades will continue, but Transport for London will have to carry them out with a near-30% budget cut. In the rail sector, the £127m Birmingham New Street upgrade will go ahead but the future of Thameslink, which was not mentioned, remains in the balance.

The CSR has given more freedom to local authorities by removing “ring fences” from specific budgets, allowing them to allocate the available funding with more flexibility. Thanks to new legislation announced in the review, councils will now be able to finance development projects using tax incremental financing (TIF) - a mechanism that allows borrowing against future business rates.

Only £1bn was earmarked for the Green Investment Bank, with the prospect of more being added if the government sells more assets in the future. However, experts suggest that £4-6bn is a more realistic figure to help shift the UK’s economy to low carbon. Meanwhile, another £1bn was committed to commercial scale carbon capture and storage, although the announcement was preceded by E.ON saying it would not go ahead with the method at Kingsnorth power station in Kent.

The Warm Front Energy scheme, which pays for insulation for those on benefits will be ended, while a £1bn “green deal” fund for green retrofits will be delayed until 2013/2014. On the plus side, the renewable heat incentive will be introduced next year, although funding levels are still under discussion. The feed-in tariff for renewable electricity generation is to continue with the rate likely to be reduced in the future.