The CRC is a significant part of the government's drive to reduce carbon emission by 80% by 2050. It is a mandatory carbon reduction and energy efficiency scheme whereby participants will have to account and pay for the carbon they emit. Commencing April 2011, the CRC presents new risks and opportunities but many organisations are not ready.
Who’s affected?
The qualification threshold is for organisations (with their name on the energy bill) with at least 6,000 MWh of total annual half hourly metered electricity use in 2008 not already in either the EU Emissions Trading Scheme or in a Climate Change Agreement.
It is anticipated that up to 5,000 organisations will be affected with many more below this threshold required to report emissions in a standardised fashion. The scheme focuses on larger energy-using sites and organisations and will include most of the public sector, as well as large offices, small to average manufacturers, retailers and hoteliers, supermarkets and sports clubs. Businesses under the CRC must record, report and buy allowances for all CO2 emissions (all fuels at fixed point sources, i.e. it excludes transport). Only sites in the UK are included.
Key Facts
• 54 % of companies don’t know if they’re affected by the CRC scheme
• 50 % don’t currently measure their CO2 emissions.
• 1 in 3 senior business leaders report needing urgent advice and support
The Scheme
Organisations will need to purchase sufficient credits to cover their energy use and trade back unused credits. Penalties will apply to companies who do not comply with the scheme. Obligated organisations must register in mid 2010 and begin monitoring usage. The first purchase of permits will be in April 2011 (a double purchase as it covers the 2010/11 and 2011/12).
Overall, the scheme is revenue neutral to participants as revenue from permit purchases will be recycled on the basis of a league table with the better performing companies receiving more than they paid in and those at the bottom of the league penalised by receiving less than they paid in. The difference in repayments between the top participants and the bottom will increase through time, raising the incentive to perform well relative to other organisations. The league tables will be published allowing your clients to see your performance, thus producing a reputational risk.
The price of allowances for the introductory phase (2010/11 – 2012/13) will be fixed at £12. After this phase a cap will be set restricting the total number of permits available and the price will be determined by auction and subsequent market activity.
Organisations which are affected need to formulate a strategy for coping with the ne...
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