An energy efficiency scheme which targets businesses and large public sector organisations should be redesigned to make it less complex in the future, the committee which advises the government on climate change has urged.

Ahead of the start of the first phase of Carbon Reduction Commitment, the committee said the second, more complicated, phase - due to begin in 2013 - should be simplified.

Under the scheme, large energy users in the private and public sector must buy permits for the amount of energy they expect to use over a year, and take steps to try to improve energy efficiency.

At the end of the year, a league table is produced revealing to the public which organisations have done most to improve their energy efficiency and which have done least.

The top performers will receive the money they spent on permits back plus a reward, while the worst businesses and public bodies will be penalised.

But the second phase of the scheme adds in a further complication in that unlimited permits will not be sold at a fixed price, but will be limited and auctioned - making it harder for companies, which not only have to estimate how many permits they will need but also what price they should pay for them.

Climate Change Committee chief executive David Kennedy warned the change would not add benefits to the existing scheme and was “going too far”.

The committee also raised concerns that a single league table covers both businesses and public sector organisations such as hospital trusts.

They fear the public sector organisations will have less potential to cut their energy use, and in the current climate of financial austerity will not be able to invest in the upfront costs of improving energy efficiency.

As a result, hospitals and other public sector organisations may end up at the bottom of the league table, losing money to reward major companies for their energy efficiency efforts.

Energy and climate change minister Greg Barker said: “My department asked the Committee on Climate Change to provide advice on the CRC scheme and today I welcome their response.

“I have made it clear before now that I want to simplify the bureaucracy of the CRC scheme that the coalition government inherited.

“Today’s report will help inform our thinking on setting the cap for CRC and will feed into our work on simplification of the scheme.

“In the meantime, I continue to urge businesses to register by the 30th September deadline.”