Environmental Update (March 2009)

Warning all high energy users - The Carbon Reduction Commitment is coming

The Carbon Reduction Commitment(CRC) is a government energy saving scheme designed to reduce businesses' CO₂ emissions; the scheme starts in 2010. In England, Scotland and Wales, it will affect you if your total half-hourly electricity use exceeded 6,000 megawatt-hours(MWh) in 2008. In Northern Ireland it will affect organisations whose 70kVA electricity use was above 6,000MWh in 2008.

This means that the CRC will mainly affect large private and public sector organisations. If your organisation (this can be made up of several businesses) spends more than £1,000,000 a year on electricity, you are likely to be covered by the CRC. Although state-funded schools in England, Scotland and Wales will be covered by the CRC, they will be included as part of their local authority, not as individual organisations.

If you have a half-hourly meter you'll automatically get a letter from the CRC Scheme Administrator (Environment Agency) in summer 2009, asking for information about your energy use in 2008 (1^st Jan- 31^st December), which your energy providers will be able to give you. This will determine whether you're going to be included in the CRC.

If the CRC applies to you, you will have to trade carbon allowances and cut carbon emissions. The CRC will cover both electricity use and direct emissions from energy use, including gas and fuel oil.

There will be no overlap with existing schemes. The CRC will not cover: emissions that climate change agreements (CCAs) already cover, direct emissions that are included in the European Union emissions trading scheme (EU ETS) or organisations that have more than 25% of their energy use emissions in CCAs.

If your business falls within the CRC, you will have to:

• register online;
• measure and record your business' energy use (i.e. electricity, gas, fuel oil, coal, liquefied petroleum gas etc) and calculate your carbon dioxide (CO2) emissions annually (excluding transport emissions);
• provide annual energy data to the Scheme Administrator, via an online registry;
• buy allowances, corresponding to your emissions from energy use;
• submit an annual report on your emissions to your environmental regulator, i.e. the Environment Agency in England and Wales, the Northern Ireland Environment Agency (NIEA) and Scottish Environmental Protection Agency;
• surrender allowances equivalent to your emissions to the Scheme Administrator at the end of the year; and
• trade allowances with other businesses if you have bought too many or too few allowances.

The Scheme Administrator will produce a performance league table each year. The money raised from the sale of allowances will be redistributed when you surrender your allowances at the end of the year. Each organisation will receive a different amount than they originally paid for their allowances, according to their performance during the year.

There will be a three-year introductory phase from April 2010, with fixed price sales of allowances. The first sale of allowances will be in April 2011, with a fixed price of £12/tCO₂. You will be able to buy allowances for both 2010/11 and 2011/12. All subsequent sales and auctions will only be for allowances for the year ahead.

From April 2013, there will be a sale of allowances each year via an auction. The government will cap the total number of allowances available each year to ensure that overall emissions fall.

The government plans to issue a detailed consultation asking for feedback on draft Carbon Reduction Commitment Regulations later in 2009. 

If you have concerns about any of the above, please contact our Telephone Advice Service on 0800 634 7000 (option 3 'environmental management') or contact your environmental consultant.