CBI calls for overhaul of fines for carbon emissions

The CBI is calling on the Government to overhaul the penalty system for excessive carbon emissions, branding its handling of the £1bn-a-year carbon reduction scheme as dishonest and "discredited" and demanding it is scrapped.

The UK's so-called Carbon Reduction Commitment scheme was announced with great fanfare in 2007 and formed the central plank in the Labour government's attempt to clamp down on corporate CO2 emissions.

The scheme was intended to persuade Britain's 3,000 biggest carbon emitters, with annual electricity bills of £500,000 upwards, to become more energy efficient, by charging them for any emissions above a given level.

The proceeds from those penalties, estimated to be about £1bn a year, were to be returned to companies who made the biggest strides towards reducing their carbon footprint.

However, the CBI argues the CRC scheme was in effect killed by the present Government's October 2010 Spending Review, which said the proceeds would no longer be recycled to the greenest companies, but would be pocketed by the Government.

John Cridland, CBI director general, said: "The Government has snaffled all the receipts, so it's a tax. And if it's a tax, call it a tax. As an incentive scheme, CRC has a huge bureaucracy around it." Mr Cridland said the Government should scrap the CRC scheme to get rid of the "rigmarole, the regulation and league tables" surrounding it.

He stressed the Government should still look to raise about £1bn a year from carbon emissions, but by taxing the companies' energy consumption directly, through an extension of the existing Climate Change Levy. The change should be made in tandem with mandatory carbon reporting, the CBI said.

A spokeswoman for the Department of Energy and Climate Change said they had consulted on the CRC and would publish new proposals shortly.