Introduction
The Carbon Reduction Commitment’ (CRC) is a new scheme that was announced in the Energy White Paper 2007, which will apply mandatory emissions trading to cut carbon emissions from large non-energy intensive users in the private and public sectors by 1.1 MtC / year by 2020. EEF responded to the consultation of the implementation of the CRC that was issued summer 2007. Government has now updated its approach in the light of the stakeholder responses received. Below is a summary of the most significant changes to the Implementation Proposals for the CRC.
Definition of a CRC organisation and Coverage
It has been confirmed that the CRC will be a UK wide based scheme. The government proposal for the coverage of CRC is mostly unchanged. However, government has confirmed that organisations where annual electricity consumption from all half hourly meters in Great Britain and 70kVA metering systems in Northern Ireland (no longer restricted to mandatory meters) is greater than 6,000 MWh/year will be included in the CRC.
Defra has clarified that where a company’s highest parent organisation is based overseas, a UK subsidiary be nominated to act on its behalf. In terms of joint ventures, the majority shareholder will hold the responsibility of reporting emissions under CRC.
Government have simplified the flexible de minimis so that it is based on a source based approach, removing the need for an additional site-based fuels de minimis. In addition, they propose that, once every phase, CRC organisations would need to ensure that at least 90% of their energy use emissions are covered by EU ETS, CCAs and CRC.
Importantly, all ‘CRC core sources’ would need to be included in CRC, even if this takes the organisation over the 90% threshold CRC core sources include; electricity use through half hourly meters in Great Britain (and 70kVA metering systems in Northern Ireland), electricity used through profile class 5-8 meters, gas used through daily-read meters and all non-daily metered gas consuming more than 73,200 kWh per annum. If combined emissions do not meet the 90% threshold, then organisations would be required to choose further sites to include in the CRC until it is met.
Monitoring, reporting and auditing
The CRC will be regulated by the Environment Agency. There will be no external verification under the scheme, but a risk based audit of 20% of CRC organisations (selected at random) will be conducted annually. CRC participants therefore, will be required to monitor and fuel and energy use throughout the year. Parent organisations will then be required to collate the information for an evidence pack which, will need to be signed off by a director.
Market Design
Government has confirmed that the Committee on Climate Change will advise on the level of the CRC caps. The price of allowances for the introductory phase (2010 to 2012) has been set at £12.tCO2.
Government has decided that there will be no deferred payment option in the scheme. The payment for allowances will take place at the time of sale/auction. However, to address concerns over cash flow it has been confirmed that there will be two fixed price sales in the first year of the scheme. Therefore, the first revenue recycling payment will be a ‘double’ payment which will incorporate proceeds from the first two year’s sales to avoid government effectively retaining a year’s revenue for the duration of the scheme.
Government have decided to change the timeframe for the CRC league table baseline to a rolling average of the previous five years to ensure that organisational changes are accounted for.
It has been proposed that revenue recycling performance payments will be proportional to 2009 emissions, with a bonus or penalty scheme depending on the position of your organisation on the league table.
Government have introduced measures to improve the early action metric to include an additional component the extent to which organisations have their CRC emissions covered by the voluntary Energy Efficiency Accreditation Scheme (EEAS). The early action metric will only apply to the introductory phase.
Implementation timetable
Climate Change Bill in parliament – November 2007
Consultation on draft CRC regulations – Summer 2008
Draft CRC regulations in force – 2009
CRC qualification year 2008
Identification of CRC participants – Early 2009
CRC scheme begins – January 2010
Introduction to CRC workshop
October - December 2008
EEF's leading training provider Woodland Grange are teaming up with Future Perfect, to deliver a series of workshops designed to give organisational management (at both “Top Most Entity” and “Local” level) an overview of the requirements, challenges and opportunities presented by the CRC.
For further information click here