The Carbon Reduction Commitment: April 2010

All organisations with electricity usage of +6,000MWh/yr, at least one half-hourly meter (HHM) and less than 90% of emissions under the Climate Change Agreement (CCA) or the EU Emissions Trading Schemes will be required to undertake a Carbon Reduction Commitment (CRC) from April 2010.

Final details of the Government’s scheme to reduce carbon emissions have now been released and in April 2010, the UK Emissions Trading Scheme will be tightened through the lowering of CRC thresholds.

It is believed that the scheme will save organisations a total of £1 billion and more than 4MtCO2 each year, which will in turn reduce the UK’s carbon emissions by 1.2Mt by 2020, making considerable contributions towards the targets set in the Climate Change Act 2008. CRC will establish an important link between a business’s carbon emissions and their bottom line.

The proposed introductory timetable for CRC is:

In essence, the CRC functions as a cap and trade scheme. Participants will be obligated to purchase allowances for their predicted emissions (initially priced at £12/tonne). If organisations have purchased too few allowances they are required to purchase additional allowances from the secondary market consisting of those organisations with surplus they wish to sell. The CRC performance of each organisation will be published each year. CRC is designed to be broadly “revenue neutral” with all revenues raised through the sale of allowances being recycled back to participants according to their performance.

Following consultation with businesses and trade bodies, the Department for Energy & Climate Change has made a number of modifications to the initially outlined scheme, these include:

• organisations will no longer have to ‘double pay’ for CRC in its introductory year (2010/2011), buying both allowances for used energy in 2010/2011 on top of the predicted allowances for 2011/2012. The 2010/2011 emissions will simply need to be reported
  In 2011/2012 extra weight will be given to organisations which take action to improve energy efficiency
• those companies who produce energy via onsite renewable technology will be recognised via publication of the increased carbon savings made
• organisations will also be given greater flexibility in how they participate in the scheme. Subsidiaries which are large enough to qualify in their own right may opt to do so, independent from their organisational group.

Substantial sanctions are placed for non-compliance with the CRC, with organisations risking both civil and criminal penalties of up to £5,000 and 3 months imprisonment.

The Carter Jonas Energy Team is well-placed to offer advice to CRC participants regarding reducing the financial implication of the introduction of CRC in April 2010, advising on improving energy efficiency and the feasibility of on-site renewable energy generation options.