The CBI will today urge Chancellor George Osborne to use next month's budget to fundamentally reform the UK's green tax regime, calling on him to scrap the Carbon Reduction Commitment (CRC) and replace it with an expansion of the Climate Change Levy (CCL) scheme and the introduction of mandatory carbon reporting rules.

Writing in a letter to Osborne accompanied by a formal budget submission, CBI Director-General John Cridland advised the Chancellor to merge the CRC and the CCL in order to simplify the emission reporting requirements faced by businesses.

'The CRC as it now stands does not deliver an effective and proportionate mix of the financial, reputational and reporting drivers required, adding complexity and confusion when businesses desperately need simplicity and clarity,' the letter states. 'The CBI proposes to simplify the policy landscape and reduce the burden on business by replacing the CRC with a reformed Climate Change Levy (CCL) in tandem with Mandatory Carbon Reporting.'

The CBI has been campaigning since late 2010 for the government to ditch the CRC, after Osborne changed the scheme to remove an incentive element that promised payments to those firms that delivered the greatest improvements in energy efficiency.

The move led to complaints that the government had turned the complex scheme into a stealth tax, prompting the CBI to call for the adoption of a simpler corporate carbon tax and the implementation of government proposals, still currently under consideration, for a new mandatory reporting regime that would require large firms to publicly disclose their greenhouse gas emissions.

The letter represents the clearest call yet for the government to scrap the CRC and will crank up pressure on the government to deliver on its long-standing promise to simplify the regulations governing the scheme.

It also follows thinly-veiled criticism by the CBI of the Chancellor's approach to green issues and his decision last autumn to characterise environmental policies as 'burden' on businesses, as well as frustration with the government's handling of changes to policies such as the feed-in tariff and the Green Deal.

In addition to calls to scrap the CRC, the letter contains a raft of recommendations which, if enacted, could have a major impact on green businesses and environmental policy.

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