Chairman, Energy and Climate Change Committee

Mr Tim Yeo

House of Commons
7 Millbank
London
SW1P 3JA

6 July 2012

Dear Mr Yeo,

Re: Energy and Climate Change Select Committee Enquiry into CRC

We were interested to read the transcript of the sessions on the CRC and very pleased to see that you had identified a number of issues in your letter to the Minister of 24th May 2012, including the removal of incentives for investing in energy efficiency and the fact that DECC’s projected savings are subject to considerable uncertainty. Since the Select Committee has taken an interest in the CRC Energy Efficiency scheme, we thought it worth passing on a few observations of our own.

We have just completed our ninth consultation response onthe CRC – the third on proposed simplifications to the scheme - and we still have very serious concerns about the scheme. There are clearly some fundamental problems with the design and implementation of CRC which prevent it from being an effective policy tool. There is consensusacross all sectors that CRC penalises growth, creates market distortion, encourages carbon leakage and, moreover, is over-complex and as a result, unduly burdensome. As we explain in our response, the proposed simplifications fail to address these flaws and will at best only have a marginal impact on the administrative burden for participants.

Whilst we support an open consultation process, stakeholder meetings do seem to have been dominated by third parties and consultants, who, however objective they try to be, may not represent the views of those obliged under the scheme. On this note we were disappointed to see that none of your nine witnesses were actually CRC participants.

Should you ever revisit this topic, we would be more than happy to put you in touch with a range of business participants. These could include a company obliged under EUETS, CCA and CRC, a rapidly growing, energy intensive UK-based company that has to compete in a highly commoditised global market, and a multinational inward investor. Collectively I believe they could shed additional light on the shortcomingsofthe CRC as a policy tool.

Just for good measure I have attached Intellect’sresponse to the latest consultation. Please do not hesitate to contact me should you have any queries or require further information.

Yours sincerely