The UK Government recently announced some significant changes to the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme legislation following its comprehensive spending review. Although much remains the same, this has resulted in a fundamental change such that the scheme effectively becomes a carbon tax.
Just to recap, on 20 October, the UK Government announced that, “The CRC Energy Efficiency scheme will be simplified to reduce the burden on businesses, with the first allowance sales for 2011-12 emissions now taking place in 2012 rather than 2011. Revenues from allowance sales totalling £1 billion a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants. Further decisions on allowance sales are a matter for the Budget process.”1
What are the implications of this announcement for CRC participants?
- In order to clarify the price signal to participants and to support the public finances, revenue from allowance sales will not be recycled back to participants by the UK Government
- The first sale of allowances will take place in 2012 instead of 2011, postponing the financial requirements of the scheme for participants. Participants will therefore be able to purchase allowances to cover their 2011/12 emissions at the end of the 2011/12 compliance year. Further decisions on allowance sales are a matter for the Budget process
- The Performance League Table will be retained as the main reputational driver within the scheme, with the metric weightings and publication dates as envisaged in the current legislation (including the October 2011 table).
What is happening now?
The Government has now launched a short consultation on the proposed changes to the CRC Energy Efficiency Scheme. This will close on 17 December 2010 but allows participants to respond to the following questions:
- Question 1 – Do you agree with Government’s proposal to extend the introductory phase and the associated amendments?
- Question 2 – Do you agree with Government’s proposal to remove the information disclosure requirement?
- Question 3 – Do you agree with Government’s proposal to amend the landlord/ tenant rule in respect of Northern Ireland departments?
- Question 4 – Do you agree with Government’s proposal to redistribute the administrators’ responsibilities?
- Question 5 – Do you agree with Government’s proposal to update reference errors in the original order?
- Question 6 – Do you agree with Government’s proposal to update the interpretation definitions?
Details of the proposed changes and the consultation process can be found at http://www.decc.gov.uk/en/content/cms/consultations/crc_amendment/crc_amendment.aspx and you are encouraged to have your say.
What about the financial implications?
At this stage, we must assume that the price of carbon allowances will remain at £12/tCO2. In addition, an indicative price for phase 2 has been set at £16, see page 25 of the Treasury document: http://cdn.hm-treasury.gov.uk/sr2010_policycostings.pdf. The additional cost of the CRC Energy Efficiency Scheme is already focusing the attention of many organisations onto their carbon emissions and SKM Enviros is supporting them in assessing the potential impact on their business and in developing appropriate carbon management strategies.
Will my Climate Change Agreement still be exempt?
SKM Enviros has also been in discussion with the Department of Energy & Climate Change regarding the uncertainty surrounding the Climate Change Levy and in particular the Climate Change Agreements (CCAs). At present, there is no indication as to what form any new CCA might take and no guarantee that they will continue, but we are continuing to work with many of the trade associations and will provide further information as soon as it is forthcoming.
How can SKM Enviros help?
SKM Enviros can:
- Support organisations in the preparation of the footprint and first annual reports and assist with establishing the evidence pack.
- Work with organisations to assess the potential impact of the changes to CRC on their business.
- Develop full carbon management strategies, including advice on energy efficiency and renewable energy options to reducing carbon emissions
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Carbon Counter Tool
The Carbon Counter compliance service (developed in conjunction with Landmark Information Group) can help your organisation not only manage your data but also establish your evidence pack. Carbon Counter provides step-by-step guidance through the CRC regulations, helping to ensure that your organisation meets its compliance obligations.
This easy-to-use online service offers you a simple and safe data collection and storage solution to ensure that you are not only compliant with the scheme but that you can also minimise the reporting burden and financial exposure. Carbon Counter will automatically generate a comprehensive report with the precise data that you need to submit your reports to the Environment Agency. For more details see:
http://www.carboncounter.co.uk/CarbonCounter/features.jsp
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For further information and details of the requirements, please consult the EA guidance notes http://www.environment-agency.gov.uk/business/topics/pollution/116626.aspx
For any queries regarding the issues addressed in this article, or any other concerns regarding climate change policy, please contact Julie Gartside
1 Excerpt from the Spending Review, http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx
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Who does this affect?
All organisations that had at least one meter settled on the half-hourly market and whose total annual electricity supplies through half-hourly meters exceeded 6,000MWh in calendar year 2008 should now have registered to be a participant in the CRC. This includes supermarkets, hotel chains, large offices and small industrial facilities in the private sector, parts of the public sector e.g. local authorities (including state-funded schools within their portfolio), all central government departments, hospitals and universities. In addition, organisations with electricity consumption falling below the threshold may be entered into the scheme in Phase II, the qualification year for which it is now proposed to be 2012/13.
What do I need to do?
In the short-term, CRC participating companies will still have to submit a Footprint and Annual Report between April and July next year. The information required includes the total consumption of each energy source you use during the period April 2010 to March 2011 – this is well beyond the half hourly meter information that was required for registration. You will also need to identify "core and residual sources" and emissions that are covered by other legislation. You will also still be required to provide information on early action metrics.In addition to the footprint and annual reports, you will be required to establish an evidence pack to demonstrate compliance and this will be audited at least once every five years. Now is the time to make sure that you put appropriate systems in place to capture and store all the relevant information for your organisation.
About the author: Julie Gartside
Julie Gartside is a Section Manager within SKM Enviros’ Climate Change and Sustainability division. She is based in Manchester, UK.
© Sinclair Knight Merz
Requests to re-publish achieve articles should be made here