Starting in April 2010, the Carbon Reduction Commitment (recently renamed the CRC Energy Efficiency Scheme) is the UK's first mandatory carbon trading scheme. The initial phase of the Carbon Reduction Commitment will be compulsory for organisations that consume over 6,000 MWh (6,000,000 kWh) of half-hourly metered electricity during the period from January 2008 to December 2008. At today's prices, this is roughly equivalent to total half hourly electricity bills of approximately £500,000 per year.
The aim of the Carbon Reduction Commitment is to reduce the level of carbon emissions currently produced by the larger 'low energy-intensive' organisations by approximately 1.2 million tonnes of CO2 per year by 2020. As a Climate Change Bill commiment, the scheme is aiming for a 60% redution in CO2 emissions by 2050.
The Carbon Reduction Commitment will cover both public and private sector organisations. At present, the carbon reduction scheme is expected to affect approximately 5,000 organisations in the UK. In doing so, it is anticipated that the scheme will affect 25% of total business sector emissions within the UK.
The scheme will work in tandem with the existing European Union Emissions Trading Scheme and Climate Change Agreements. As a result, where emissions have been captured by the EU ETS and CCA, these emissions will not be captured by the CRC. In essence, the CRC is targeted at low energy-intensive users. The Climate Change Bill also sets the enabling powers for the Carbon Reduction Commitment and sets out the role of the Climate Change Committee that will oversee much of the CRC scheme. While the scheme doesn't officially start until April 2010, many organisations will need to make preparations before that date to ensure that they comply with all legal requirements and fully participate in the scheme.
2008 -- the period from January 2008 to December 2008 will be used to identify which non-energy intensive organisations in the UK have consumed more than 6,000 MWh of half hourly metered electricity.
July 2009 - The Environment Agency issued letters to the billing address of all half hourly metered properties toi make them aware of the Carbon Reduction Commitment.
April 2010 - The Carbon Reduction Commitment scheme officially begins, but most organisations should have started managing their portfolio for several months. This date will be used as both the start ot the 1st compliance year and the start of the 'Footprint Year'
April to September 2010 - This is the official 'Registration Period'
April 2011 - The 1st sale of allowances will take place in April 2011 to cover the following year's emissions (forecasted)
July 2011 - Each organisation must submit their Footprint Report by July 2011 and allowances must be surrended by this time.
October 2011 - The 1st Recycling Payment will be made with companies receiving their allowances plus/minus the bonus/penalty payment depending on their performance in the league table
The carbon reduction commitment presents a number of benefits to organisations that fall within the scheme.
Financial
The carbon reduction commitment sets out a clear risk to organisations that fail to reduce their carbon emissions. The financial implications could result in penalties of thousands, or even millions, of pounds for large organisations. However, there is also the opportunity for the best performing organisations to receive similarly large bonus payments as reward for their efforts.
Brand and Marketing
With the carbon reduction commitment league tables being published each year, the media will have full access to the performance information of all organisations that fall within the scheme. As such, the best performing organisations will benefit from recognition of their achievements.
Corporate Social Responsibility
Over time, organisations that make significant savings in the first few years will find it more and more difficult to achieve such high-level percentage savings on their carbon emissions. This could be considered as a negative aspect of the carbon reduction commitment scheme, as there will be less incentive for organisations to continue their commitment to reduce CO2. However, having reduced their carbon emissions, these organisations will enjoy long-term financial benefits from reduced energy costs.
The British government is committed to reducing carbon emissions within the UK by 60% by 2050, in comparison to 1990 levels. As part of this commitment, in 2001 the government targeted energy intensive organisations to reduce their level of carbon emissions under the Climate Change Agreement. Subsequently, from 2010 the largest non-energy intensive organisations will be targeted via the Carbon Reduction Commitment.
The the carbon reduction commitment will use a cap and trade scheme will enable companies to
Companies will have to start buying carbon allowances to cover their carbon emissions, and that will involve measuring and recording energy use and calculating carbon dioxide (CO2) emissions (not including transport emissions).
The revenue generated from carbon auctions will be redistributed between the scheme’s participants. Each company will receive a larger or smaller amount than they originally paid for their carbon allowance, according to their performance in the CRC league table.