What is Carbon Reduction Commitment?
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a new mandatory emissions trading scheme that aims to reduce the amount of carbon dioxide (CO2) emitted in the UK.
Reducing the amount of CO2 we emit is vital to achieving the UK's overall targets of reducing greenhouse gas emissions by 2050 by at least 80% compared to the 1990 baseline.
"The CRC should not just be about process and bare bones compliance: use it to reduce energy costs, invest in cost-effective technologies, change culture and lead by example. This should be core business for us all."
Cllr. Paul Bettison, Chairman of Local Government Association Environment Board.
Who Will Be Affected?
CRC will affect large organisations in both the public and private sector. Organisations that meet the qualification criteria, which are based on how much electricity they consumed in 2008, will be obliged to participate in CRC.
Government estimates indicate that around 20,000 public and private sector organisations will initially be required to participate in CRC in some way. The majority of these will simply be required to make an information disclosure about their electricity usage.
Around 5,000 organisations with annual electricity demand of over 6,000MWh - will be required to participate fully. This means they must not only record and monitor their CO2 emissions, but also purchase allowances.
CRC for Business
The (newly renamed) Carbon Reduction Commitment Energy Efficiency Scheme is designed primarily to encourage businesses to reduce their greenhouse gas emissions. CRC particularly targets firms with an annual electricity demand of over 6,000 MWh.
If you think your business may be affected then this website is for you. The Carbon Reduction Commitment legislation has perhaps 5 key characteristics which we explain in this website (click here) and remember there are penalties for businesses failing to register or comply with the legislation.
Am I affected by the CRC Scheme?
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) has, essentially, two levels of participation. Full participation in CRC will require organisations to monitor their emissions and purchase allowances, sold by Government, for each tonne of CO2 they emit.
An estimated 5,000 organisations are expected to meet the criteria that determine whether an organisation is required to fully participate in the CRC scheme; that is where, during the qualification period (2008 calendar year) the organisation:
- had at least one half hourly meter (HHM) settled on the half hourly market, and
- had annual electricity consumption through all HHMs of at least 6,000 MWh
An estimated, additional 15,000 organisations will need to participate in the CRC scheme to a lesser extent by way of disclosing information about their HHMs and the associated electricity consumption.
Importantly, for the time being at least, there is no requirement for such companies to purchase allowances or be represented in CRC performance league tables. Organisations required to participate to this lesser extent are those that during the qualification period:
- had at least one HHM settled on the half hourly market, and
- annual electricity consumption through all HHMs of less than 6,000 MWh
Under the currently proposed rules of the CRC scheme, an organisation may be a single entity or an organisational group. In the case of the latter, organisations that are part of a larger organisational group must act together as one entity, although subsidiaries with over 6,000MWh annual electricity demand in their own right will have the option of registering separately if such a move does not take an organisational group's annual electricity consumption below the 6,000MWh threshold.
An organisational group counts as a single entity in terms of both qualification and participation in the scheme; the energy consumption across the whole organisational group must be taken into account in this instance.
The definition of an organisation under the CRC scheme includes specific rules in respect of:
- organisations that are part of an organisational group, (e.g. a subsidiary)
- GB central Government departments or related bodies/agencies
- joint ventures
- local authorities; and
The definition of organisation is very complicated under the CRC scheme and the following is a good rule of thumb for determining responsibility: "any electricity consumption counts as your responsibility if your organisation holds the contract with the electricity supplier for that electricity supply."
Generally this will be the organisation responsible for paying the bill. However, if there is any confusion, organisations are advised to seek further advice.
How Do I Comply?
Carbon Reduction Commitment compliance will bring about an important new requirement for businesses. 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 will be required to take part.
Companies that demonstrate CRC compliance will ensure that they avoid potentially significant financial penalties and reputational damage. However, proactive organisations, which fully engage in the process, could generate significant benefits, including cost savings through reduced energy usage, reduced expenditure on CRC allowances and an enhanced "green" reputation, through the published league tables showing performance and renewable energy usage. In order to generate benefits, as opposed to merely avoiding costs, organisations will need to approach Carbon Reduction Commitment compliance in one or more of three ways:
- Reduce emissions through the use of dedicated/on-site renewable energy projects; and/or
- Reduce emissions through enhanced energy efficiency measures; and/or
- Purchase allowances from the Government, other CRC organizations with surplus allowances and/or the Environment Agency.
When considering an organisation's CRC compliance it is important to note that, as a general rule, any emissions across an organisation which are already covered by Climate Change Agreements (or the EU Emission Trading Scheme) do not ultimately need to be included in your Carbon Reduction Commitment emissions.
In order to ensure CRC compliance, participating organisations will be required to:
- register online (if energy consumption is above 6,000 MWh in 2008, equivalent to an annual electricity bill of ~£500,000, register as a full participant for the scheme between 1st April 2010 and 30th September 2010);
- measure and record its energy use (ie electricity, gas, fuel oil, coal, liquefied petroleum gas etc);
- calculate its carbon emissions annually (excluding transport emissions);
- provide annual energy data to the Scheme Administrator;
- buy allowances corresponding to its emissions (from the first "compliance year", April 2011- March 2012, onwards);
- submit an annual report on its emissions (from the first "reporting year", April 2010 - March 2011, onwards);
- surrender allowances equivalent to its emissions; and
- trade allowances if it has too many or too few
Who Monitors Compliance
Monitoring of CRC compliance will be carried out by the participating organizations themselves, ie CRC will be "self-certifying". However, up to one-fifth of participants will be subject to external audits each year. This will not be random and will focus disproportionately on organizations that have misreported and/or those which show a significant drop in CRC emissions.
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