UK Carbon Allowance Rebate Scheme to Become a Carbon Tax


The U.K.'s nascent Carbon Reduction Commitment (CRC) Energy Efficient Scheme appears to be making a dramatic change from a rebate program to an outright tax. Before the first carbon allowances have even been sold, Britain's efforts to reduce its budget deficits apparently are the driver for taking the CRC from a scheme that "recycles" carbon allowance revenues back to users and converting it to the government keeping that revenue to "support public finances."

Original CRC Scheme

The U.K. just launched the CRC on April 1 this year to apply to roughly 20,000 businesses, including banks, hotels, government facilities (including schools), and industries. As outlined in the CRC User Guide (PDF), organizations that use more than 6,000 MWh of electricity a year, about one-fifth of all covered users, would have to buy carbon allowances based on their energy usage. The initial phase of the scheme set a fixed price of £12/tonne of carbon (US $18.86) for allowances, with sales to begin in April 2011. The plan was to recycle the carbon allowance revenue back to users according to an organization's energy performance -- those who ranked highest in energy efficiency would get the most back. The first rebates were to be paid out in October 2011.

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