The Comprehensive Spending Review has stolen the green incentive of the carbon credit scheme. Is the coalition all stick and no carrot, asks Mike Kielty

Switching off the lights sounds obvious.

Yet a lot of supermarkets still leave them on at night. Up and down the country you'll also find fridges and freezers that are old and knackered. And do you really need to heat/cool a supermarket when you've got all that refrigeration gear in the building?

What better way to encourage investment and innovation than to redistribute the tax credits from the Carbon Reduction Commitment (CRC) scheme to the most conscientious and most environmentally responsible retailers and manufacturers?

The credits were to be redistributed, according to a carbon footprint league table, with 90% of the cash to be refunded by 2012, falling to 50% in 2017.

But the carrot of competition has been discarded following the Treasury's Comprehensive Spending Review ('Outcry as Osborne carbon stealth tax lands on retailers', The Grocer, 23 October, p4). All the 'credits' raised will now go straight to the Treasury, raising an estimated £1bn a year by 2014/15.

The supermarkets are furious. Tesco, while still committed to becoming a zero-carbon business by 2050, said it believed the decision "would not incentivise carbon reductions and feared it [would] have a negative impact".

The remaining environmental schemes to help businesses cut their carbon emissions
- Feed-in Tariffs (FITs): Provides payment for electricity produced for a company's own use, and for electricity it feeds into the National Grid. See for more information. 

- Renewable Heat Incentive: Focused on heat, rather than electricity. The incentive is not yet in force, but will come into operation in April 2011. See for more information. 

- Loans from the Carbon Trust: Your business can borrow between £3,000 and £10,000 at 0% to invest in energy saving projects. See
Stephen Robertson, the director general of the British Retail Consortium, went further: "Applying a stealth tax is madness right now. The extra cost which is estimated at £20m annually for Tesco alone would "hurt investment, hurt jobs and add to inflation".

Michael Rea, chief operating officer at the Carbon Trust, says that the implications of the change in the model are significant: "For all businesses in the Carbon Reduction Commitment, this means there will be a very clear and real cost of carbon."

And a spokeswoman for the Department of Energy and Climate Change says that while "every department has to play its part", there is also help for businesses trying to cut emissions, through government-supported bodies such as the Carbon Trust, the Energy Saving Trust and Salix.

And the financial incentive is still there: the amount a business pays will be less if their emissions are lowered. "There is a direct cost to business for the volume of emissions it emits," says Tom Meney, of the environmental business consultants Carbon Zone, "and therefore an even more direct incentive to reduce emissions".

Moreover, there is a corporate reputation incentive. This derives from the CRC league table, which the government may still introduce, to single out the best and worst performances.

However, after the first few years, when a company's pre-existing environmental record will be considered to determine the rankings, the plan devised for the scheme was to base the rankings on year-on-year reductions. And Ben Wielgus, an expert on the Carbon Reduction Commitment at KPMG, believes there is a risk that the most progressive companies will receive unfair criticism as the scheme continues, because large reductions in CO2 emissions in the early years will make it harder to cut emissions in the future. In fact, the policy could favour companies that have so far done little to cut their emissions, or those that eke out modest reductions over a longer period.

Wielgus adds: "As the league tables stand, a major retailer could invest millions to build a green brand and yet easily find their record being undermined by negative press coverage."

Read more
Outcry as Osborne's carbon ‘stealth tax’ lands on retailers (22 October 2010)