An "environmental stealth tax" introduced in the Comprehensive Spending Review could cost retail chains up to £20m a year each, it was claimed.

The Carbon Reduction Commitment (CRC) energy efficiency scheme has been changed so it will now cost businesses up to 10 times the amount originally planned.

The scheme was previously intended to give all the money it raised back to businesses taking part and was to pay businesses that did well on an environmental scoring system more than others. But now it won't give any of the money it raises back and will instead raise up to £1bn a year for the government.

"We are dismayed that the £1bn per year participating businesses will put in to the CRC scheme is no longer to be recycled to participants but is to be pocketed by the Exchequer," said BRC director general Stephen Robertson.

"This is a stealth tax on business that not only goes back on the commitments given in developing the scheme but removes a major source of incentives to reduce carbon emissions. This calls the government's green credentials into serious question. Because they use a lot of property, retailers will be particularly hard hit."

The BRC was further infuriated by George Osborne's failure to mention the changes to the scheme in his speech, with the industry only finding out about it in the supporting document. Under the earlier terms, businesses had to buy credits for the CO2 they consumed but were given a refund depending on how they performed in a league table.

In 2012, they would get 90% of their money back, no matter how badly they performed, although this would fall to 50% by 2017.

Tesco had said it expected to spend £40m buying its tax credits for the first two years of the scheme's operation. It would have expected to receive the vast majority of the money back and maybe have made some money as a result of strong environmental performance. Under the new rules, it will see £20m wiped off its bottom line next year.

"We do not think the decision to retain the revenue from the CRC will incentivise carbon reductions and fear it will have a negative impact," said a spokesman.

In addition to the levy, the cost of complying with the scheme would cost retailers an average of £28,000 a year, said the BRC.

"Retailers are some of those that invested most heavily in this scheme," said Ben Wielgus, a CRC expert at KPMG.

That refund? Forget it...
The Carbon Reduction Commitment scheme is compulsory for companies and public sector bodies with electricity bills of about £500,000 a year and above.

Participants are already monitoring their electricity and gas use this year and are to make their first annual payment in April for the following year. Under the old rules they would have been given a refund, depending on their ranking in an environmental league table, in October.

But now there will be no refund. The government will pocket the revenue, which will rise to £1bn a year by 2014/2015.

Read more
Daily Bread: Lucky dip or double dip? (21 October 2010)
Grocery bosses back deep public spending cuts (18 October 2010)