The carbon reduction scheme is currently aimed at approximately 5,000 of the UK's largest organisations, including supermarkets, banks, property management companies, government departments, hotel groups, food retail chains and local authorities.
Essentially, the carbon reduction commitment will affect organisations whose half hourly electricity consumption totals more than 6,000 MWh per year (equivalent to approximately £500,000 annual spend). Any organisation that falls within this category will be required to record account for all energy (other than transport fuels), including electricity, gas and oil.
Energy consumption during 2008 will be used as the qualifying year to identify if an organisation will be subject to the Carbon Reduction Commiment. Records of electricity use will be taken from mandatory half hourly meters, voluntary half hourly meters, remote read meter readings and pseudo hal hourly meters.
If the total of all of these half hourly meter readin exceeds 6,000,000 kWh during 2008 then you wll fall within the scheme. Either way, if you have any half hourly meter readings, you will have to declare whether or not you qualify for the scheme during April to Septeber 2010 (updated date).
During summer 2009, the environment agency will issue a letter to the billing address of every organisation in the UK that has an electricity meter that records half hourly readings. The letter will ask for these organisations to identify whether the entire organisation uses more than 6,000 MWh of HH electricity and therefore be required to enter into the carbon reduction commitment scheme, or not.
Organisations may be exempt from the Carbon Reduction Commitment scheme if they have a large Climate Change Agreement. Declarations of exemption due to CCA will need to be made by 31st July 2011 (revised date from 31st July 2010).
In identifying the organisational structure, it should be a relatively simple process where the organisation and/or subsidiaries are owned and operated in the UK. However, where a qualifying organisation has a foreign owner, the owner will be required to appoint of an agent to act on behalf of the subsidiaries within the UK. In doing so, regardless of whether or not the agent has direct control over the subsidiaries, they will be able to act as a representative to group all subsidiaries as one.
For CRC, undertakings such as companies, partnerships and unincorporated associations are grouped together using the tests in the Companies Act 2006. The definition of “undertaking” applies as set out in section 1161(1) of the Companies Act, but the definition is expanded in CRC to include unincorporated associations which carry out charitable activities. In some instances, CRC will bring together organisations that are not legally related. A vital first step is therefore to identify the group structure, including any franchise arrangements, joint ventures, private finance initiatives and landlord and tenant agreements.
CRC is restricted to UK energy use, but under the rules of CRC the group structure should be identified from the highest parent, even where it is overseas, to bring together all UK energy supplies in the entire group.
The government has proposed that state-funded schools (including academies) within Great Britain, will participate within the carbon reduction commitment scheme under the umbrella of their local authority. In doing so, it is the carbon footprint of the local authority that will be legally and financially responsible for participation in the carbon reduction commitment scheme, rather than the individual schools.
It is also the local authority that will be positioned within the carbon reduction commitment, rather than the individual schools.
The local authority will be subject to a number of obligations and duties including:
* Responsibility for calculating all local authority missions including state funded schools and academies
* Purchasing allowances to Cover the above permissions
* Monitoring and reporting annual energy consumption and surrendering allowances where appropriate
* Maintaining the evidence pack for auditing
However, while the local authority will be legally responsible under the carbon reduction commitment, a duty will be placed on schools to require them to supply the local authority with annual energy consumption data. At a minimum, the data will need to be provided to the local authority at least once a year and would typically take the form of complete energy invoices for all non-transport electricity and fuel consumption.
Local Authorities should be prepared to provide advice and services to schools, to ensure that they collectively reduce energy consumption, secure a high place in the CRC league and avoid penalties and fines.
Under the carbon reduction commitment, local authorities will be held legally and financially responsible for state funded schools within their geographical area. As such, the CRC aims to increase energy management practice between local authorities and the schools that fall under their umbrella.
Local authorities will be incentivised to assist schools with resources and energy management advice so as to ensure lower carbon emissions and a higher place in the CRC league table. In doing so, the local authority will benefit from better corporate social responsibility and reduced financial impact of the CRC, with the potential to receive substantial funding from bonus payments when allowances are recycled.
Schools will be required to provide their local authority with the necessary energy and emissions data for the carbon reduction commitment. While there will be an administrative cost and time associated with these tasks, it should be significantly outweighed by the benefits of increased energy efficiency.
In receiving energy management advice from the local authorities, schools should be able to significantly reduce energy consumption and costs. In most circumstances, it is considered likely that schools should be able to reduce energy consumption by over 20% by adopting no-cost or low-cost measures to reduce energy consumption.
Under the carbon reduction scheme, local authorities will be responsible for reporting at least 90% of their total emissions, including state-funded schools and academies.
Indicator 185, of the new Local Government Performance Framework in England, will require schools to provide their local authority with the necessary emissions data to fulfil this obligation.
The statutory local government performance indicator EEF/001a will require schools in Wales to report their emissions data to their local authority.
Local authorities should already be collecting information from schools that fall within their responsibility to the CRC.
Independent (writer) schools will be required to enter into the carbon reduction commitment if their highest parent organisation consumes more than 6000 MWh of half hourly metered electricity per year. Electricity consumption within private schools will not be included in any local authority involvement in the carbon reduction commitment.
Organisations will be required to participate in the carbon reduction commitment, if their total half hourly metered electricity exceeds 6,000 MWh from 1 January 2008 to 31 December 2008. For the purpose of determining the scheme qualification, the government has proposed that the definition of "half hourly metering" will include all meters that monitor electricity consumption on a half hourly basis. To this end, half hourly metering will include voluntary automatic meters that produce half hourly data. The definition will also include pseudo half hourly meters (irrespective of whether or not they are settled on the non-half hourly market). The above approach has been implemented to address the risk of large organisations choosing to settle half hourly metered electricity on the non-half hourly market, and thereby falling outside the Carbon Reduction Commitment.
In particular circumstances, some organisations in the UK will not be affected by the carbon reduction commitment. Where an organisation already has 90% of its emissions covered by the EU Emissions Trading Scheme or the Climate Change Agreement, it may be exempt from being included in the carbon reduction commitment.
Direct emissions covered by the European Union's emissions trading scheme are exempt.
Under the climate change agreement, a subsidiary will be exempt if more than 25% of the total energy is covered by the CCA.
Transport fuels are excluded from the carbon reduction commitment.
The carbon reduction commitment (CRC) will be exempt from organisations that have more than 25% of their energy and emissions covered by a climate change agreement (CCA). However, these organisations will still be required to register under the CRC in order to set out their legal position.
During the initial stages of registration for the carbon reduction commitment, organisations that are subject to a CCA should still report all half hourly to figures for 2008 in order to be assessed for exemption. Where exemption applies to part of an organisation, the remainder will still be liable to report under the carbon reduction commitment if the total remaining half hourly metered electricity consumption was over 6000 MWh during 2008.
Where a landlord and tenant arrangement exists, regardless of who owns the property, who occupies the property or ultimately who uses the energy. In all situations, the responsibility to report under the CRC will lie with whichever organisation has a direct contract with the energy supplier.
This arrangement exists for both the half hourly electricity consumption liability and preliminary reporting, as well as the CRC's requirement for annual compliance.
A significant subsidiary is any part of a larger organisation that in itself consumed more than 6000 MWh of half hourly electricity during 2008. In this circumstance, the significant subsidiary may be able to enter into the carbon reduction commitment scheme in isolation from the rest of its parent or group organisation.
By entering any significant subsidiaries into the carbon reduction scheme as an entity in their own right, the parent or group organisation may benefit by separating itself from the subsidiary and brands, marketing, financial or practical implications that would otherwise exist.