The scheme will be an important part of the national effort to reduce the UK’s carbon emissions. The scheme is due to start in 2010.
Your organisation will be captured by the CRC if its total half-hourly metered (HHM) electricity use is greater than 6,000 megawatt-hours (MWh) between 1 January 2008 and 31 December 2008. This corresponds to annual electricity bills of approximately £500,000. Once an organisation is in, it will be required to account for all its energy use not just half hourly metered electricity.
However, to minimise policy overlap, your organisation’s emissions covered by a CCA or EU ETS will not be required to be reported in this scheme. In addition, CRC subsidiaries with more than 25% of their current emissions covered by a CCA will also be exempt from the scheme.
CRC is designed to drive energy efficiency and carbon saving by requiring companies to buy permits to cover emissions and giving them a financial incentive through emissions trading. The objective is to instil behavioural change by actively engaging participants in energy use/emissions. There are also Corporate Social Responsibility type incentives as the organisation’s performance will be published in a league table.
Revenue raised from the CRC will be recycled back to participants. Each year a Performance League Table will be drawn up, based mainly on the absolute carbon reductions since the beginning of the scheme. Organisations that have done the most to reduce energy consumption will be rewarded and placed higher up the league table and those that have done little will be penalised. A bonus or penalty will be added to your initial payment from the scheme. The amount will depend on the position of your organisation on the league table.
The government will be contacting sites with HHMs at the beginning of 2009 with an information pack on the CRC and instructions on what to do next. There will also be an obligation on energy suppliers to supply bill payers of half hourly metered electricity with an information pack. Bill payers will be required to collate the information they have been given from each of their electricity suppliers and pass this information onto their highest UK parent organisation for them to assess their status as a whole and respond to the government.
- April 2010 will mark the beginning of the three year introductory phase of the scheme. The introductory phase will run from April 2010 –March 2013.
- The price of allowances for the introductory phase will be set at £12 per tonne of CO2 . As well as the price being fixed, the amount of allowances available will be unlimited in this first phase.
- The scheme will run on a financial year basis from April to March. Therefore the government sale of allowances will take place in the April of each year.
- In the introductory phase the first sale of allowances will take place in April 2011.
In the April 2011 sale, organisations will need to buy sufficient allowances to cover both their forecast emissions for 2011/2012 as well as their actual emissions for 2010/2011.
The first year of the scheme would be the only time that the UK Government allows organisations to “borrow” allowances from future years – i.e. buying allowances from the sale/auction to cover their previous year’s emissions.
The UK Government will continue to recycle all the money raised from the sale of allowances back to participants.
The gap between auction and revenue recycling will be six months. With the scheme operating on a financial year, the first recycling payment would take place at the end of October 2011, six months after the first auction in April 2011.
For further information visit the DECC website.