Renewables industry slams "crazy" cap-and-trade plans

The government's flagship plans to extend carbon trading to include large energy users such as supermarkets, hotels and government departments could actually penalise those firms that procure green energy or make use of onsite renewable technologies.

Under the planned Carbon Reduction Commitment (CRC) around 5,000 organisations with energy bills in excess of £500,000 a year will be obliged to enter into a cap-and-trade scheme. But while it is known as the Carbon Reduction Commitment firms procuring zero carbon forms of energy will still have to buy carbon credits to cover their energy use at the same rate as if they were using conventional grid energy.

"The renewables industry is extremely hacked off about the CRC as there are no incentives for renewables," said Leonie Greene of the Renewable Energy Association. "In fact, if you are switching from a relatively low carbon energy source, such as natural gas, to a genuinely green energy source you could end up paying more for carbon credits through the CRC because the green energy is rated as having the same emissions as the average UK energy mix."

Information on the Defra website confirms this is the case, claiming that " organisations that import ‘renewable/green electricity’ via the grid will have to report this within CRC at the grid emissions factor".

Early movers that have already committed to procuring 100 per cent of their electricity from renewable sources, such as BT and Marks & Spencer, will now find they enjoy no financial advantage over competitors within the CRC, according to Greene.

She added that firms will also struggle to maximise the brand benefits that they should enjoy as a result of switching to green energy. "The CRC will include a league table of all the companies in the scheme and doing well in that kind of league table is exactly the type of thing responsible green companies want to shout about," she explained. "But under the current proposals those companies using renewables will see no boost in the league table."

Dale Vince, managing director of wind farm operator Ecotricity, said that the government had missed an opportunity to provide a valuable incentive for firms to switch to greener energy, adding that it was counter intuitive to make firms "pay a carbon tax like this when not producing carbon".

A spokesman for Defra argued that the CRC would not offer incentives for firms to switch to green energy, but nor would it penalise firms that did so. He added that the scheme may be changed over time to reward firms that switch to green energy, but argued that in the initial phase such a move would unduly complicate the legislation.

"The main aim of the CRC is to get organisations to measure how much electricity they use and encourage them to improve their energy efficiency," he said.

It could also be argued that even those firms using green energy should be encouraged to enhance energy efficiency on the grounds that the small proportion of the UK's energy coming from renewable source should be made to stretch as far as possible.

However, Greene countered that if the primary aim of the new scheme is to enhance energy efficiency then it should not confuse matters by referring to it as the Carbon Reduction Commitment.