The Department of Energy and Climate Change (DECC) has released new proposals to simplify the Carbon Reduction Commitment Energy Efficiency Scheme (CRC). The alterations are expected to save UK businesses millions of pounds in administrative costs.

The CRC, which is a compulsory trading scheme covering large business and public sector organisations, is designed to deliver carbon savings of 21 MtCO2 by 2027.  The organisations it covers are currently responsible for 12 percent of all UK carbon emissions.

By requiring businesses to report on and pay a tax on energy used, the CRC is able to rank businesses in a performance league table which provides a further reputational incentive to improve their energy efficiency. However, to date the scheme has been criticised for being too complicated.

By simplifying the scheme, UK businesses could see administrative costs cut by almost two-thirds, equating to around £330 million of savings up to 2030.

Commenting on the news, Secretary of State Edward Davey said: “We have listened to businesses' concerns about the CRC and have set out proposals to radically cut down on ‘red tape’ to save businesses money.

The benefits of the scheme are clear though. It will deliver substantial carbon savings helping us to meet carbon budgets, and it encourages businesses to take action to improve their energy efficiency.”

Key benefits of the new CRC include a shortened qualification process, a reduced number of fuels covered (down from 29 to four), a removal of the requirement on facilities covered by Climate Change Agreement or EU Emissions Trading System installations to purchase CRC allowances, as well as a removal of the detailed metrics of the Performance League Table from legislation and placing them in government guidance.

The simplified CRC is also expected feature a reduction in the amount of reporting required by businesses, the length of time participants will have to keep records and an adoption of new emissions factors for the CRC which will align it with Greenhouse Gas reporting processes.

DECC has now opened a formal consultation on the improved CRC, which will run for 12 weeks from today. Once the consultation period has ended, Government will amend the legislation for CRC by April 2013.