Energised by a Change in Policy; Alex Curtis, from Irwin Mitchell LLP in Birmingham, Looks at the CRC Energy Efficiency Scheme

Article excerpt

Byline: Alex Curtis

In October last year, the new coalition Government, as part of its spending review, announced that the sale of allowances in the CRC Energy Efficiency Scheme would no longer be recycled back to participants of the scheme, but instead would be utilised to support public finances. The scheme is due to come into effect in 2012.

The Government has obviously been hugely under pressure to close the budget deficit and so the announcement marked a significant departure from the Scheme as previously introduced, which was to have been revenue neutral.

A number of industry bodies have severely criticised the announcement, which has been described as a stealth tax.

Details are still to be worked up as to how the revised scheme will be implemented, but a great deal of work had been undertaken in connection with the revenue recycling payment and the revised arrangements will have a significant impact on the relationship between landlord and tenant.

The previous scheme The CRC Energy Efficiency Scheme is an emissions trading scheme which required participants to purchase allowances linked to the organisation's CO2 emissions.

The revenue recycling repayments that were due to be received by participants were to be based on actual emissions that had taken place and their position in a League Table relating to these.

In multi-let buildings, it was the landlord who was to be responsible for purchasing allowances and these were to be recycled at a neutral cost.

The issue which the industry had been seeking to address over the last two years is how the scheme would fit in to the contractual relationship between landlord and tenant.

The prevailing view was that because the scheme was revenue neutral, existing standard lease provisions which dealt with the payment of taxes or outgoings, would actually not permit a landlord to recover costs from its tenant. There have been attempts to identify a uniform approach in leases with the intention of establishing an industry position, but this has largely been unsuccessful due to the complexity of the legislation. …