News Update - Important Changes to the CRC! - 20/10/2010
The Government's October spending review included an accompanying document that had a single, but very significant, paragraph of information about changes to the CRC.
'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.'
The Bad News - participants will still be required to purchase allowances, but they will not receive any recycled payments.
The Good News - participants have been given a budget to spend on energy efficiency measures over the next 12 months. By scrapping allowances payments in 2011, participants can invest that budget in direct energy-saving measures.
It's very early days to make any solid decisions on the scant information that was made available in yesterday's spending review. Before any definite announcements by Government, rumours will no-doubt run rife, but no matter what, it appears that the CRC scheme will not be going away any time soon.
Participants should make use of the budget and time that they've been given during the next 12 months, to implement effective energy management programmes that will reduce the cost of CO2 allowances before 2012. If they don't, it looks likely that they will now have to pay a considerably higher price.
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What is the CRC?
The Carbon Reduction Commitment (recently renamed the CRC Energy Efficiency Scheme) has now officially started, and is the UK's first mandatory carbon trading scheme. The initial phase of the CRC is compulsory for organisations that consumed 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.
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However, If your organisation had at least one half hourly electricity meter (HHM) settled on the half hourly market in the qualification year 2008, but your total qualifying electricity supplies through all HHMs (i.e. both settled and non-settled supply and dynamic supply) was less than 6,000 MWh, you must make an information disclosure under CRC.
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The aim of the CRC 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 commitment, the scheme is aiming for a 60% reduction 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 was originally the date of the 1st sale of allowances, but in Autumn 2010 the date moved back to April 2012.
July 2011 - Each organisation must submit their Footprint Report by July 2011 and allowances must be surrended by this time.
October 2011 - The first performance league table will be published#
April 2012 - Participants will need to purchase allowances to cover CO2 emissions from 1st April 2010 to 31st March 2011.
The Carbon Reduction Commitment presents a number of benefits to organisations that fall within the scheme.
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.