UK Carbon Reduction Commitment year 1 energy reports due by 31st July | 8th Mar 2011
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) was introduced in 2010 following years of design and many rounds of consultation. Registration and the making of Information Disclosures took considerable effort for many organisations and most hoped that things would settle down from 30th September 2010. But before a month was out the Comprehensive Spending Review heralded further change, which was consulted on over a 4 week period in the run up to Christmas 2010. And in January 2011 a further five Government discussions papers were issued in an attempt to engage business in further simplification measures.
Here's what you need to know - but please check back periodically or subscribe to our RSS feed to keep up to date. Things are still very unclear and a lot still remains un-resolved.
Phase 1 registration and information disclosures are closed. The Environment Agency is currently contacting those organisations that it thinks are responsible for half-hourly electricity meters that were not declared in those registrations and information disclosures.
Participants in Phase 1 (those who made full registrations) should be tracking and recording ALL their energy consumptions from 1st April 2010.
Participants should also be conducting internal audits, keeping records of them and be prepared for an Environment Agency audit. There is a planned 20-25% coverage of random audits each year.
Year 1 full energy reports need to be summited this summer! Participants in Phase 1 will need to report their full year 1 energy consumptions (1st April 2010 to 31st March 2011) in the period 1st April 2011 to 31st July 2011. The report must include ALL energy used, not just the electricity through the half hourly meters that were declared during registration. Does your organisation know where else it uses energy - all those other electricity supplies, gas supplies, oil users, etc...? Most don't and tracking them down is already proving a big challenge for many.
Participants in Phase 1 will have to buy their first tranche of emissions allowances in summer 2012 and they must buy enough to cover their actual emissions in year 2 (1st April 2011 to 31st March 2012). In other words they will be buying in arrears. Prices will be fixed at £12/tonne, equivalent to approximately 10% of the total cost of the energy itself.
There is no revenue recycling so CRC is now a flat tax at £12/tonne of CO2 or roughly 10% of the energy bill itself.
The league table will still be published, based on the same performance metrics as before - absolute emissions, relative emissions and early action metrics - with the early action metrics tapering away over the first three years.
Future allowance sales (to cover emissions created in year 3 and beyond) might be in arrears but they might be in advance of the year in future. The price of future allowances is unclear and is likely to be set by the Treasury as part of the national budget process. We anticipate that the allowance price will rise considerably over the coming years. Saving energy is the only way to mitigate the rising cost of CRC allowances and energy prices themselves. Click here to find out more about our energy management services.
CRC Phase 1 now runs until 31st March 2014, in other words it has four reporting years rather than the previous three.
The Phase 2 qualification year is 1st April 2012 to 31st March 2013. Phase 2 registration occurs in the period 2013/2014. The first reporting year in Phase 2 will be 1st April 2014 to 31st March 2014 and the fifth reporting year of Phase 2 will end 31st March 2019.
Companies should be aware however that the government is still considering whether Phase 2 will operate as was outlined in the November 2010 consultation. The government's five discussion papers, issued in January 2011, call into question whether there will be changes to:
- Supply rules - how we determine who is responsible (in CRC) for a given energy supply.
- Qualification criteria
- The timing and frequency of allowance sales
- Organisational rules - should groups continue to be forced to aggregate subsidiaries into a "group" structure?
- Reducing the overlap between CRC and other emissions schemes (e.g. Climate Change Agreements)
It is our view that abolishing the requirement for parent companies to aggregate and report on subsidiaries (and then possibly disaggregate, subject to certain criteria) is a potential major simplification. It will mean that many small subsidiaries, currently swept up into the CRC scheme, may be "let go" from the scheme's clutches in future. However, going hand-in-hand with a revision such as this would certainly be a significant reduction in the threshold for inclusion (currently 6,000MWh/yr of half-hourly electricity). So it is very unclear what the overall effect of these two possible combined changes would be.
As we move through 2011 it is very clear than CRC is far from a "done deal". There may very well be significant changes to the scheme yet to come. Understanding the scheme as it stood in 2010 was hard enough for most companies and life is not going to get any easier.
WSP prides itself in keeping up to date not only with the thoughts of regulators and industry members but also with understanding what the various scenarios might mean for our clients and their organisations.
If you have any concerns over CRC as it stands today, compiling and submitting your Year 1 footprint report or how future changes might affect your organisation, please give us a call. For reporting we are very serious when we say "don't leave it until the last minute". It took organisations over 12 months just to map their business and the half hourly electricity supplies they had in order to register in 2010. Many companies have a lot more energy supplies than just half-hourly electricity and we know that most don't know where they are. You've been warned!