Carbon Reduction Commitment: carbon trading or a carbon tax?

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There are less than six weeks before organisations need to register for the Carbon Reduction Commitment (CRC).

Almost 1,600 organisations have registered, which is about half the number now expected by the Environment Agency.

The scheme is mind-blowingly complicated with new rules appearing all the time. For instance, in early August the agency decreed that even insolvent firms and those in administration have to register!

DECC has realised the degree of complexity and has belatedly asked for suggestions on simplification.

The difficulty in implementing the CRC has strengthened calls for a simple carbon tax to be introduced rather than trading schemes, which would be a break with the long-running preference amongst policy-makers.

A recent report by the Policy Exchange noted that trading schemes are wide open to lobbying by vested interests and that the pricing signal of the CRC is too small to have an impact, and builds in complexity.

The report also called for the axing of Feed-in-Tariffs estimating that as well as being socially unjust they are costing £460 per tonne of carbon saved.

Personally, I feel that a carbon tax would be a far simpler and more effective solution than trading schemes which, while excellent in principle, are a nightmare to administer.

What is clear though is that the CRC has forced the issue of carbon measurement and reduction up boardroom agendas largely because of the reputational issues linked to the league tables and this element needs to be retained.

Food versus fuel

Another area where policy is struggling to deal with the complexity of our global economy is around land use.

A 30 per cent rise in the price of bread has caused food riots in Mozambique. Wheat prices are soaring largely because Russia has suffered an extreme heat wave and associated fires, causing the world’s third largest producer to impose an export ban for the second year running.

The rising price of wheat has called into question the wisdom of the EU’s biofuel targets introduced in an attempt to wean us from our dependence on oil.

The UK has to meet a compulsory target ensuring that 10 per cent of our transport fuel comes from renewable sources by 2020. To hit this target production capacity is being developed that could guzzle one-fifth of our total wheat production.

The Renewable Transport Fuel Obligation always seemed a crazy piece of legislation to me. We did some research on the issue around the time it was introduced and even our cursory inspection highlighted the problems it would create around land use.

Posted on September 11, 2010 · in UK

Tagged as: Carbon Reduction • Carbon Tax • DECC