CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment)

The Carbon Reduction Commitment (CRC) is a new mandatory emissions trading scheme that aims to improve energy efficiency and reduce the amount of carbon dioxide (CO2) emitted in the UK. This is vital to achieving the overall targets of reducing greenhouse gas emissions by 2050 by at least 80% compared to the 1990 baseline.

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. Participant organisations will have to monitor their emissions and purchase allowances, sold by Government, for each tonne of CO2 they emit.

The more CO2 an organisation emits, the more allowances it has to purchase. So there is a direct incentive for these organisations to reduce their emissions.

As well as reducing carbon emissions, by increasing energy efficiency the scheme will help organisations save money by reducing their energy bills. These savings should be well in excess of the costs of participating in the scheme.

In addition, the better an organisation performs in terms of reducing its emissions, the higher it will appear in the annual performance league table Government will publish, showing the comparative performance of all participants. This in turn provides a further benefit: all the revenue raised from selling allowances is ‘recycled’ back to participants, and the league table position affects how much of the revenue each organisation receives.

When does the Scheme Start?

CRC starts in April 2010. For administrative purposes, the scheme is divided into set time periods known as phases. The first phase is the introductory phase and runs for three years. Subsequent phases each last for seven years. The first 2 years of these phases are preparatory, and overlap with the previous phase.

Each phase has:

• A qualification period, where organisations must assess whether or not they qualify to make an information disclosure or participate fully in CRC
• A registration period, during which organisations that are required to take action under the scheme must either submit their information disclosure or register as a participant with the administrator
• A footprint year, where participants must monitor their total emissions from energy use and determine what emissions must be included in CRC. This data must be reported to the administrator in a footprint report, and
• A series of compliance years, which run from April to March like financial years. During a compliance year, participating organisations must purchase allowances for each tonne of CO2 they emit, based on expected energy use, and monitor their usage.

What emissions are covered by CRC?

There are rules covering what emissions count towards CRC emissions that organisations must report to Government. This ensures that organisations do not have to buy allowances for activities or emissions covered by other Government policies.

Emissions that participants will not have to purchase allowances for include:
• Transport emissions
• Emissions from activities covered by a Climate Change Agreement or the EU Emissions Trading System.

What are the Qualification criteria?

Qualification for CRC is based on half hourly electricity consumption during the qualification period. For the introductory phase, this is the 2008 calendar year.

An organisation qualifies as a full participant in CRC if, during the qualification period:
• It had at least one half hourly meter (HHM) settled on the half hourly market, and
• Its annual electricity consumption through all HHMs was at least 6,000 MWh.

Organisations that have at least one HHM settled on the half hourly market, but whose annual energy consumption is less than 6,000MWh do not have to participate fully in CRC.

Penalties?

Yes! The CRC includes civil and criminal penalties for non-compliance. For example, a failure to register will attract a fine of £5,000 plus £500 per day. Company directors will be responsible for signing-off the footprint report and ensuring full compliance with the regulations. The Environment Agency anticipates auditing 20% of participants each year.