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Baker Homes Blog

Treasury propose carbon tax for charities and public bodies

Posted by Richard Lupo on 23/10/15 07:30

Treasury has published a consultation on streamlining carbon reporting. Hidden in the consultation, aptly named “Reforming the business energy efficiency tax landscape” is a proposal for charities and public bodies to report, and potentially pay tax, for their carbon emissions.

Carbon emissions have many impacts for society. They are warming the planet, but perhaps more importantly, they are often a good indicator of other issues, such as air pollution, currently recognised as leading to over 50,000 premature deaths a year and emissions can also be an indicator of the energy efficiency of a business. Where carbon emissions are lower, often energy bills are lower also.

Where users or polluters have to pay for the right to pollute it can help reduce those impacts. The change can be quite monumental. As an indication the charge on plastic bags in Scotland has lead to an 80 percent drop in plastic bag usage.

Do we think the proposals are of use? We do and we have some indication it could also be of use to businesses and the country.

The consultation asks a range of useful questions. The following is our view.

  1. We agree that mandatory reporting is an important element of the landscape in driving the uptake of low carbon and energy efficiency measures. There is ample evidence that this works.

    The environmental reporting scheme for social landlords (SHIFT) has over 74 organisations accredited or going through accreditation. Housing providers who report their impact make real strides to reduce their impacts.

    Just one round of accreditation of just fifty organisations saved over 84,000 tonnes of carbon, the equivalent of taking 15,000 cars off the road. When asked these organisations reported that the majority of the reason for the change was the reporting mechanism and the support provided through the scheme such as case studies and benchmarking. Please download find the report “The Review” which summarises the successes of the scheme.
  1. The consultation also asks, in question three, if reports should require board level sign-off and whether reported data should be made publically available?

    Our feeling is that reports should require board level sign-off. This will ensure that there is senior management buy-in to making carbon reductions. It will also ensure some level of quality assurance for the data in the report.
  1. Question 24 asks “Do you believe that the targets set by the current CCA scheme are effective at incentivising energy efficiency? It also asks “How could CCAs be improved? Are there alternative mechanisms that may be more effective?”

    CCAs are Climate Change Agreements applied to sectors that are excluded from the current Climate Change Levy (CCL) tax. Currently households are excluded from paying CCL.

    There is though, an alternative mechanism that could well be more effective for driving energy efficient social homes. For the social housing sector, many of whom are charities, any tax regime would need to overcome the “split incentive” barrier.

    Currently this barrier occurs because the social landlord pays for the energy efficiency improvements and hence carbon reductions in homes but do not reap any financial benefits from this investment. Social landlords are often restricted from increasing the rent of the home any further. Residents on the other hand do reap the benefits from low bills.

    It is possible to overcome the split incentive barrier. Social landlords could be allowed to collect more rent from energy efficient properties. This can be used to fund energy efficiency measures in other properties. The Baker Homes campaign has long advocated for landlords to recoup 25% of the savings. This way the extra rent collected shouldn’t negate the fuel bill savings associated with living in an energy efficient home.

The benefits of this approach are that:

  • it creates a financial incentive for landlords to make their homes more energy efficient and hence is a further driver to reduce fuel poverty,
  • energy efficiency improvements will create more jobs in the construction sector,
  • applied carefully, there need not be a net cost to Treasury,
  • it is possible to make it align with government’s rent reduction policy. For example by reducing rent in inefficient properties and maintaining existing rent in energy efficient properties an average rent reduction of 1% can still be achieved,
  • it is possible to make it align with the “pay to stay” policy. For example, a little more rent could be collected from energy efficient properties for households whose income means they can afford it.
It is possible to create a more intuitive system where landlords can collect a little more rent from energy efficient properties. This could help pay for more improvements to existing homes or offset initial development costs for new build homes. It leaves the resident still far better off (realising 75% of the benefits), will help reduce fuel poverty and help achieve our carbon reduction commitments.

Please let us know if you are also responding to the consultation, or your view on any of the above. We’d be interested in your thoughts. The consultation closes on 9th November 2015.

Topics: Consultation, Regulations & Standards, Energy, Housing, Carbon tax

SHIFT Awards 2015, the UK’s sustainability awards for social landlords.
10th November 2015 | the Palace Hotel | Manchester
Submit your entry below.


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