Archive for the ‘Carbon Reduction Commitment (CRC)’ Category

Two-fold surge in smart meter orders seen in UK as firms ready for the CRC

Sunday, March 28th, 2010

A massive surge in demand for non half hourly automated meters (AMRs) as firms rush to be ready for the new Carbon Reduction Commitment (CRC) legislation that comes in to play in the UK at the end of this month has been observed by carbon and energy consultancy IMServ.

In an average month, IMServ installs around 3,500 smart meters as part of its Business SMART service, the company said in a statement. However in March this year approximately 7,000 units are planned for install and already orders have been taken for a further 6,000 units for April.

In order to manage the number of orders IMServ has had to recruit ten more office staff and it has up to 100 technicians working round the clock, seven days a week to meet demand.

The CRC legislation is aimed to provide organizations in the public and private sectors with an incentive to reduce their energy consumption and carbon emissions. Under the legislation organizations will be required to measure and monitor their energy consumption and to calculate their carbon emissions, and to buy allowances per tonne of CO2 that their organization is responsible for. The organizations also will form part of a league table ranking them in terms of how well they manage to reduce their carbon emissions.

“This huge surge in demand for the Business SMART service is in direct response to the CRC legislation and we expect this level of demand will continue into October this year,” commented IMServ managing director Steve Brown. “The penny has finally dropped with many businesses now realising that they need to step up to the plate and take this legislation seriously. If they don’t act now, companies could face large fines not to mention the knock on effect that poor performance in the league tables will have on their corporate reputation.”

UK cities pledge emission cuts

Thursday, November 19th, 2009

Britain’s biggest cities have pledged to cut their green house gas emissions over the next two years, beginning by making buildings more energy efficient.

John Shipley, leader of Newcastle City Council, announced that the Core Cities Group comprising eight major regional cities, would work with the Clinton Climate Initiative (CCI) and the Greater London Authority to reduce the emissions of its cities.

The two-year partnership will see the councils of Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield initiate a number of projects, starting with improving the energy efficiency of buildings.

Mr Shipley said: “This gives us the chance to demonstrate our commitment to addressing climate change, show leadership, and show that we are acting together to reduce carbon emissions across all our cities on a big scale.”

Ira Magaziner, chairman of the Clinton Climate Initiative, said: “We will provide the cities with technical support and assistance, building on our experience working with other cities around the world that are committed to reducing greenhouse gas emissions.”

In partnership with CCI, London has already initiated the retrofitting of 42 buildings in the first stage of the Building Energy Efficiency Programme (BEEP), with 58 more to follow suit.

Carbon Reduction Commitment

Thursday, May 21st, 2009

The Carbon Reduction Commitment

Starting in April 2010, the Carbon Reduction Commitment is the UK’s first mandatory carbon trading scheme. The initial phase of the Carbon Reduction Commitment will be compulsory for organisations that consume over 6,000 MWh (6,000,000 kWh) of half-hourly metered electricity during the period from January 2008 to December 2008. At today’s prices, this is roughly equivalent to total half hourly electricity bills of approximately £500,000 per year.

The aim of the Carbon Reduction Commitment is to reduce the level of carbon emissions currently produced by the larger ‘low energy-intensive’ organisations by approximately 1.2 million tonnes of CO2 per year by 2020. As a Climate Change Bill commiment, the scheme is aiming for a 60% redution in CO2 emissions by 2050.

The Carbon Reduction Commitment will cover both public and private sector organisations. At present, the carbon reduction scheme is expected to affect approximately 5,000 organisations in the UK. In doing so, it is anticipated that the scheme will affect 25% of total business sector emissions within the UK.

The scheme will work in tandem with the existing European Union Emissions Trading Scheme and Climate Change Agreements. As a result, where emissions have been captured by the EU ETS and CCA, these emissions will not be captured by the CRC. In essence, the CRC is targeted at low energy-intensive users.

The Climate Change Bill also sets the enabling powers for the Carbon Reduction Commitment and sets out the role of the Climate Change Committee that will oversee much of the CRC scheme.

While the scheme doesn’t officially start until April 2010, many organisations will need to make preparations before that date to ensure that they comply with all legal requirements and fully participate in the scheme.

Carbon Reduction Commitment Timeline

2008 — the period from January 2008 to December 2008 will be used to identify which non-energy intensive organisations in the UK have consumed more than 6,000 MWh of half hourly metered electricity.

July 2009 – The Environment Agency will issue letters to the billing address of all half hourly metered properties asking organisations to identify whether or not they qualify for the Carbon Reduction Commitment

April 2010 – The Carbon Reduction Commitment scheme officially begins. This date will be used as both the start ot the 1st compliance year and the start of the ‘Footprint Year’

April to September 2010 – This is the official ‘Registration Period’

April 2011 – The 1st sale of allowances will take place in April 2011 and act as a ‘Double Sale’ to cover both the previous year emissions (actual), and the following year’s emissions (forecasted)

July 2011 – Each organisation must submit their Footprint Report by July 2011 and allowances must be surrended by this time.

October 2011 – The 1st Recycling Payment will be made with companies receiving their allowances plus/minus the bonus/penalty payment depending on their performance in the league table

The Benefits of the Carbon Reduction Commitment

The carbon reduction commitment presents a number of benefits to organisations that fall within the scheme.

Financial

The carbon reduction commitment sets out a clear risk to organisations that fail to reduce their carbon emissions. The financial implications could result in penalties of thousands, or even millions, of pounds for large organisations. However, there is also the opportunity for the best performing organisations to receive similarly large bonus payments as reward for their efforts.

Brand and Marketing

With the carbon reduction commitment league tables being published each year, the media will have full access to the performance information of all organisations that fall within the scheme. As such, the best performing organisations will benefit from recognition of their achievements.

Corporate Social Responsibility

Over time, organisations that make significant savings in the first few years will find it more and more difficult to achieve such high-level percentage savings on their carbon emissions. This could be considered as a negative aspect of the carbon reduction commitment scheme, as there will be less incentive for organisations to continue their commitment to reduce CO2. However, having reduced their carbon emissions, these organisations will enjoy long-term financial benefits from reduced energy costs.

What Is the Aim of the Carbon Reduction Commitment?

The British government is committed to reducing carbon emissions within the UK by 60% by 2050, in comparison to 1990 levels. As part of this commitment, in 2001 the government targeted energy intensive organisations to reduce their level of carbon emissions under the Climate Change Agreement. Subsequently, from 2010 the largest non-energy intensive organisations will be targeted via the Carbon Reduction Commitment.

What is the Cap and Trade Scheme?

The the carbon reduction commitment will use a cap and trade scheme will enable companies to start buying carbon allowances to cover their carbon emissions, and that will involve measuring and recording energy use and calculating carbon dioxide (CO2) emissions (not including transport emissions).

The revenue generated from carbon auctions will be redistributed between the scheme’s participants. Each company will receive a larger or smaller amount than they originally paid for their carbon allowance, according to their performance in the CRC league table.

CRC Compliance

The carbon reduction scheme is currently aimed at approximately 5,000 of the UK’s largest organisations, including supermarkets, banks, property management companies, government departments, hotel groups, food retail chains and local authorities.

Essentially, the carbon reduction commitment will affect organisations whose half hourly electricity consumption totals more than 6,000 MWh per year (equivalent to approximately £500,000 annual spend). Any organisation that falls within this category will be required to record account for all energy (other than transport fuels), including electricity, gas and oil.

Energy consumption during 2008 will be used as the qualifying year to identify if an organisation will be subject to the Carbon Reduction Commiment. Records of electricity use will be taken from mandatory half hourly meters, voluntary half hourly meters, remote read meter readings and pseudo hal hourly meters.

If the total of all of these half hourly meter readin exceeds 6,000,000 kWh during 2008 then you wll fall within the scheme. Either way, if you have any half hourly meter readings, you will have to declare whether or not you qualify for the scheme during April to Septeber 2010 (updated date).

During summer 2009, the environment agency will issue a letter to the billing address of every organisation in the UK that has an electricity meter that records half hourly readings. The letter will ask for these organisations to identify whether the entire organisation uses more than 6,000 MWh of HH electricity and therefore be required to enter into the carbon reduction commitment scheme, or not.

Organisations may be exempt from the Carbon Reduction Commitment scheme if they have a large Climate Change Agreement. Declarations of exemption due to CCA will need to be made by 31st July 2011 (revised date from 31st July 2010).

Organisational Structure

In identifying the organisational structure, it should be a relatively simple process where the organisation and/or subsidiaries are owned and operated in the UK. However, where a qualifying organisation has a foreign owner, the owner will be required to appoint of an agent to act on behalf of the subsidiaries within the UK. In doing so, regardless of whether or not the agent has direct control over the subsidiaries, they will be able to act as a representative to group all subsidiaries as one.

CRC Definition of an Organisation

Under the carbon reduction commitment, an organisation is defined as the ultimate parent company.

Where the parent company is located outside the United Kingdom, the organisation must nominate one of its UK sites to be responsible for compliance to the carbon reduction commitment for all of its UK subsidiaries.

CRC and State-funded Schools

The government has proposed that state-funded schools (including academies) within Great Britain, will participate within the carbon reduction commitment scheme under the umbrella of their local authority. In doing so, it is the carbon footprint of the local authority that will be legally and financially responsible for participation in the carbon reduction commitment scheme, rather than the individual schools.

It is also the local authority that will be positioned within the carbon reduction commitment, rather than the individual schools.
The local authority will be subject to a number of obligations and duties including:

* Responsibility for calculating all local authority missions including state funded schools and academies
* Purchasing allowances to Cover the above permissions
* Monitoring and reporting annual energy consumption and surrendering allowances where appropriate
* Maintaining the evidence pack for auditing

However, while the local authority will be legally responsible under the carbon reduction commitment, a duty will be placed on schools to require them to supply the local authority with annual energy consumption data. At a minimum, the data will need to be provided to the local authority at least once a year and would typically take the form of complete energy invoices for all non-transport electricity and fuel consumption.

Local Authorities should be prepared to provide advice and services to schools, to ensure that they collectively reduce energy consumption, secure a high place in the CRC league and avoid penalties and fines.

CRC Benefits for Schools and Local Authorities

Under the carbon reduction commitment, local authorities will be held legally and financially responsible for state funded schools within their geographical area. As such, the CRC aims to increase energy management practice between local authorities and the schools that fall under their umbrella.

Local authorities will be incentivised to assist schools with resources and energy management advice so as to ensure lower carbon emissions and a higher place in the CRC league table. In doing so, the local authority will benefit from better corporate social responsibility and reduced financial impact of the CRC, with the potential to receive substantial funding from bonus payments when allowances are recycled.

Schools will be required to provide their local authority with the necessary energy and emissions data for the carbon reduction commitment. While there will be an administrative cost and time associated with these tasks, it should be significantly outweighed by the benefits of increased energy efficiency.

In receiving energy management advice from the local authorities, schools should be able to significantly reduce energy consumption and costs. In most circumstances, it is considered likely that schools should be able to reduce energy consumption by over 20% by adopting no-cost or low-cost measures to reduce energy consumption.

CRC Reporting for Schools

Under the carbon reduction scheme, local authorities will be responsible for reporting at least 90% of their total emissions, including state-funded schools and academies.

Indicator 185, of the new Local Government Performance Framework in England, will require schools to provide their local authority with the necessary emissions data to fulfil this obligation.

The statutory local government performance indicator EEF/001a will require schools in Wales to report their emissions data to their local authority.

Local authorities should already be collecting information from schools that fall within their responsibility to the CRC.

CRC and Private Schools

Independent (writer) schools will be required to enter into the carbon reduction commitment if their highest parent organisation consumes more than 6000 MWh of half hourly metered electricity per year. Electricity consumption within private schools will not be included in any local authority involvement in the carbon reduction commitment.

CRC and Half Hourly Meters

Organisations will be required to participate in the carbon reduction commitment, if their total half hourly metered electricity exceeds 6,000 MWh from 1 January 2008 to 31 December 2008.

For the purpose of determining the scheme qualification, the government has proposed that the definition of “half hourly metering” will include all meters that monitor electricity consumption on a half hourly basis. To this end, half hourly metering will include voluntary automatic meters that produce half hourly data. The definition will also include pseudo half hourly meters (irrespective of whether or not they are settled on the non-half hourly market).

The above approach has been implemented to address the risk of large organisations choosing to settle half hourly metered electricity on the non-half hourly market, and thereby falling outside the Carbon Reduction Commitment.

Carbon Reduction Commitment Exemptions

In particular circumstances, some organisations in the UK will not be affected by the carbon reduction commitment. Where an organisation already has 90% of its emissions covered by the EU Emissions Trading Scheme or the Climate Change Agreement, it may be exempt from being included in the carbon reduction commitment.

Direct emissions covered by the European Union’s emissions trading scheme are exempt.

Under the climate change agreement, a subsidiary will be exempt if more than 25% of the total energy is covered by the CCA.

Transport fuels are excluded from the carbon reduction commitment.

CRC and CCA

The carbon reduction commitment (CRC) will be exempt from organisations that have more than 25% of their energy and emissions covered by a climate change agreement (CCA). However, these organisations will still be required to register under the CRC in order to set out their legal position.

During the initial stages of registration for the carbon reduction commitment, organisations that are subject to a CCA should still report all half hourly to figures for 2008 in order to be assessed for exemption. Where exemption applies to part of an organisation, the remainder will still be liable to report under the carbon reduction commitment if the total remaining half hourly metered electricity consumption was over 6000 MWh during 2008.

Landlord And Tenant Responsibilities

Where a landlord and tenant arrangement exists, regardless of who owns the property, who occupies the property or ultimately who uses the energy. In all situations, the responsibility to report under the CRC will lie with whichever organisation has a direct contract with the energy supplier.

This arrangement exists for both the half hourly electricity consumption liability and preliminary reporting, as well as the CRC’s requirement for annual compliance.

Significant Subsidiaries

A significant subsidiary is any part of a larger organisation that in itself consumed more than 6000 MWh of half hourly electricity during 2008. In this circumstance, the significant subsidiary may be able to enter into the carbon reduction commitment scheme in isolation from the rest of its parent or group organisation.

By entering any significant subsidiaries into the carbon reduction scheme as an entity in their own right, the parent or group organisation may benefit by separating itself from the subsidiary and brands, marketing, financial or practical implications that would otherwise exist.

CRC Management

As the Carbon Reduction Commitment continues to develop, it is clear that organisations involved in the scheme will need to set aside significant resources if they are to maximise the benefits of the CRC.

Even where the desire is only to obtain legal compliance, businesses will still need to invest time in ensuring that they have identified the entire organisational structure and accounted for a minimum of 90% of all emissions.

Carbon Reduction Commitment Action Plan

In developing a Carbon Reduction Commitment action plan, the first thing that any organisation will need to do is to understand their liability.

The ‘Organisation’

The full organisational structure of any company will need to be ascertained to identify whether or not it will be required to enter into the carbon reduction commitment scheme.

Total Half Hourly Electricity Consumption

Organisations will need to assess all the consumption from their half hourly electricity meters during 2008 to calculate whether or not they exceed the 6,000 MWh threshold.

Exemptions

Further investigation will be needed to look at areas of the organisation may be exempt under CCA, EUETS, or ‘Significant Subsidiaries’ rules, to better identify the organisation’s total liability to the Carbon Reduction Commitment scheme.

90% Emissions Rule

The next stage of the process will be to identify a minimum of 90% of the organisation’s total emissions covered by any combination of Climate Change Agreements, EU European Trading Scheme and core sources of non-transport energy consumption. Where all of the above do not account for the minimum threshold, non-core sources of energy will need to be accounted for and submitted to reach the required is 90% mark.

Identify Opportunities

organisations will need to investigate had opportunities to reduce energy consumption. A marginal abatement cost curve can help in this process by providing a tool to communicate investment required to reach compliance with the carbon reduction commitment and demonstrate that priorities have been investigated.

Targets

In developing the action plan it is important to identify what you aim to achieve. To this end, you may be simply looking for compliance with the law. However, you may be looking for the potential financial rewards that can be gained from the bonus payments. Additionally, you may be especially interested in the brand and marketing potential of being a leading organisation in the Carbon Reduction Commitment league table.

Early Action Metrics

The early action metrics form 100% of the league table assessment criteria during the first year of the carbon reduction commitments scheme. Essentially are two areas in which an organisation can qualify for bonus payments under the early action metrics. The first of these can be obtained by achieving the Carbon Trust Standard.

Carbon Trust Standard

The Carbon Trust Standard essentially requires an organisation to calculate its carbon footprint (including transport), demonstrate absolute or relative reduction in carbon emissions by more than 2.5 percent per year, and demonstrate good carbon management.

In order to qualify as an early action metric, an organisation must have received the Carbon Trust Standard by March 2011. By obtaining the Carbon Trust Standard, the organisation will be eligible to receive half of the 10% bonus payment that can be awarded at the end of the first year of the Carbon Reduction Commitment scheme.

Automatic Meter Reading

Automatic Meter Reading forms the other half of the early action metric, and in doing so it provides the opportunity for organisations to receive half of the available bonus payment during the first year. In order to qualify, the automatic meter readings to cover both electricity and gas. The equipment must also meet a minimum standard in its ability to capture, store and retrieve data at half-hour intervals, and provide software to manipulate the data into usable data.

To do well in the Carbon Reduction Commitment, participants will need to:

Implement Automatic Meter Readers before March 2011
Sign up to the Carbon Trust Standard
Establish comprehensive monitoring and targeting mechanisms
Collect and record procedures
Assign repsponsibilities and ownership for energy reduction tasks
Carry out regular reviews of data collection
Reduce emissions within the scheme
Proactively develop a strategy to identify and implement future energy savings

First Year Action Plan

To the first year of the carbon reduction commitment, organisations should carry out a number of actions to make best use of the scheme.

The organisation should forecast its business as usual emissions.
Cost-effective abatement options should be identified and implemented at the first opportunity. During the first few years of the carbon reduction commitment, the fixed price of £12 per tonne of CO2 provides a simple costing of opportunities.
Organisations should also monitor all included sources of emissions, to identify the potential future opportunities and risks.
During the first year, organisations should decide on a strategy for purchasing allowances with consideration for the perceived cost of allowances in future years. Having bought allowances in April 2011 the organisation will then need to report and surrender the year one allowances by the end of July 2011.

Organisations will need to make careful allowance for the cash flow implications of purchasing allowances that are subsequently tied up approximately 6 months before they are returned with either bonus payments or penalty deductions attached.

During the second year of the carbon reduction commitment scheme, organisations will need to carry out similar operations as those outlined above. However, they will also need to make either balancing sales all purchases on the secondary market to adjust their allowances before reporting and surrendering by the end of July 2012.

 

90 Percent Emissions Rule

The Carbon Reduction Commitment’s 90 percent emissions rule, otherwse known as the ‘flexible de minimis’ rule, requires all particpants to account for at least 90% of their total carbon footprint emissions. The 90% rule aims to focus attention on the largest, and most cost effective, opportunities to reduce carbon emissions.

The 90% emissions rule can include all energy reported through the Climate Change Agreement, European Union Emissions Trading Scheme, as well as all ‘Core Sources’ of non-transport energy consumption.

Where any organisation has identified all of the above, but is still unable to reach the 90% minimum, it will be required to identify enough ‘Non-core’ non-transport sources of energy to reach the required 90% threshold.

During the initial energy assessment for the Carbon Reduction Commiment, particpants must attempt to report 100% of emissions. Beyond this period, opportunities exist for organisations to opt-in the non-core sources of energy consumption if they wish to do so.

By opting-in, organisations have the opportunity to include existing energy consumption that may have considerable potential to be reduced in the future. Naturally, this would increase an organisations total carbon liability, but it may still be a worthwhile option if the reductions are made in the future.

Core and Non-Core Sources

Within the carbon reduction commitment, energy consumption is divided into ‘core sources’ and ‘non-core sources’.

Core sources will typically include all electricity and non-transport fuel those provided as a constant supply and invoiced on a regular or monthly basis. It will be mandatory for all organisations to report their core sources of energy,

Non-core sources will generally include more ad hoc energy supply, including some bulk fuels. Organisations will only be required to record their non-core sources if they are unable to identify a minimum of 90% total carbon emissions from the core sources.

Automatic Meter Reading Standards

As of January 2009, the required standards for automatic meter reading equipment have not yet been published. However, during summer 2008 the government published draft consultation on the Carbon Reduction Commitment and it is considered that the standards published in that document will not change with regards to Automatic Meter Reading equipment.

In essence, Automatic Meter Reading equipment will need to meet minimum standards in the way that it collates and stores data, including the frequency with which it carries out this process (at least every half an hour). The Automatic Meter Reading system will then need to manipulate and present the data (probably via a software package) so that it can be easily understood and used to reduce energy consumption.

The official standards for Automatic Meter Reading equipment are due to be published in the first quarter of 2009

Core and Non-Core Sources

Within the carbon reduction commitment, energy consumption is divided into ‘core sources’ and ‘non-core sources’.

Core sources will typically include all electricity and non-transport fuel those provided as a constant supply and invoiced on a regular or monthly basis. It will be mandatory for all organisations to report their core sources of energy,

Non-core sources will generally include more ad hoc energy supply, including some bulk fuels. Organisations will only be required to record their non-core sources if they are unable to identify a minimum of 90% total carbon emissions from the core sources.

Emissions Factors

In calculating the carbon emissions with regards to electricity consumption within organisations and subject to the carbon reduction commitment, a five-year average emissions factor will be applied to all electricity. To this end, the same factor will be used to measure emissions from all organisations regardless of whether or not they purchased their grid electricity supply from a wind power, nuclear, coal powered or any other form of electricity generation scheme.

However, if you produce your own on-site renewable electricity and you do not claim renewable obligation certificates, then you will be able to submit this use of electricity as zero emissions.If you claoim ROCs you will have to apply electriicty emissions at grid emission ratings.

Evidence Packs

All participants in the Carbon Reduction Commitment will be required to produce evidence packs in case of an audit. The evidence pack must include:

Structural Records – with clear definitions for the structure of the organisation. Information on implmentin early action metrics and growth metric across all subsidiaries.

Data Records – to show the annual organisation-wide energy consumption. Estimated bills can be used, but they must be idenitifed in the evience pack. Standard unmetered supplies UMS billing methodology is considered to be ‘estimates’. An upward adjustment factor of 10% will be applied to estimated consumption. The evidence pack must also provide evidence of actual readings for at least 6 consecutive months of the year.
Special event records – to identify unusual activity from, such as acquisitions

The evidence pack must be signed by a Director of the company

What type of energy is included in the Carbon Reduction Commitment?

Whilst qualification for the Carbon Reduction Commitment determined by electricity use, it aims to capture all non-transport energy consumption. As a result, if you’re in the Carbon Reduction Scheme, you will be required to report on electricity, gas, oil, diesel etc.

Core sources in the CRC includes all half hourly metered electricity, profile class 5 to 8 electricity, daily metered gas and non-daily metered gas over 73,200kWh per annum.

90% emissions rule means that of your entire organisaiton’s carbon footprint, you will be to be able to show that 90% has been captured by the EUETS, CCA and/or the ‘core sources’ of the CRC ‘. If the total comes to less than 90%, you will be required to opt-in to reportin on additional non-core sources to reach the 90% level. The first year assessment of the 90% rule will be made during the period from April 2010 to March 2011 (the frist year of the scheme). This reporting must be must be reported by 31st July 2011.

If you’re in the Carbon Reduction Commitment, but you also have liabilities under the Climate Change Agreement and/or European Union Emissions Trading Scheme, then those emission will not be covered by the CRC.

 

Carbon Commitment Reduction Enforcement

The environment agency has overall responsibility to enforce the carbon reduction commitment in its capacity as the scheme administrator. Regional regulators will be tasked with carrying out the necessary audit of 20% of participants each year.

Carbon Reduction Commitment Audits

The Carbon Reduction Commiment will operate on the basis of participiants recording and reporting their own emissions to the scheme. As such, their level of emissions will not necessarily be subject to any verification. However, 20% of all particpants will be audited annually; via a rolling programme of desk-based audits that will be carried out throughout the year.

Carbon Reduction Commitment Evidence Packs

Organisations will be required to provide evidence pack’s that will include:

The details of the organisation
Annual energy consumption throughout the organisation
Details of early action metric throughout the organisation
Details of growth metric throughout the organisation
As above for all significant subsidiaries
Structural records, data records and special events

 

What is the Annual Reporting for the Carbon Reduction Scheme?

Annual reporting for the Carbon Reduction Scheme will fall in line with the financial year compliance cycle, from April to March, as opposed to the original reporting that was based on calendar year reports from Januaury to December.

Organisation within the Carbon Reduction Commitment will be required to maintain an evidence pack, and a source list of all emissions included in the CRC.

Additional rules will apply to the reporting on the generation of renewable energy, exporting power from your own energy generation and the use of combined heat and power.

At the end of each reporting year (March 31) you will be required to submit your report by the end of July. At this point he will also be required to surrender allowances that will be equal to your level of emissions, where 1 allowance wil be equal to 1 tonne of CO2.

The carbon reduction commitment scheme is based on audits rather than verification. As such, you will not be required to verify your commission’s statement, which differs from exiting EUETS schemes. However, the audit process wl cover 20% of al participants each year.

 

CRC Costs

The Carbon Reduction Commitment will typically result in a range of costs for participating organisations. These could include administration and consultancy advice, implementation of new technology, as well as the potential for fines and penalties due to non-compliance or poor performance.

However, in the long term, it is likely that most organisations will enjoy significant financial benefits due to improved efficiency and lower energy costs.

For some organisation that do well on the CRC league table, the Carbon Reduction Commitment presents the opportunity to benefit from bonus payments that could more than outweigh any financial investment.

 

CRC Fines

If a company fails to register by the required deadline it could receive a fine of £5,000, plus an additional £500 per day, until it is successfully registered on the scheme.

Where an annual report is submitted late, the fine looks as though it could be £5,000 + £0.05 per tonne of allocated allowances per working day

Where submitted carbon emission details are more than 5% variation from actual, a fine of £40 per tonne of allocated annual allowances (compared to £12 per tonne of first phase allowance costs).

Where an evidence pack is incomplete or not up to date – £5 per tonne of allocated allowances.

Non conformance will be treated as a civil offence. However, failure to respond to subsequent demands will lead to issue being treated as a criminal offence.

 

Carbon Reduction Commitment Allowances

Having identified their total annual CO2 emissions, participating organisations will have to purchase carbon allowances at a fixed price of £12 per tonne during the first three years. The initial three-year introductory phase of the carbon reduction commitment scheme will run from the beginning of April 2010 to the end of March 2013. However, allowances will not be sold until the end of the first year, at which point all organisations within the scheme can purchase allowances for both the previous and forthcoming years.

When purchasing allowances, organisations will be allowed to purchase unlimited quantity and bank these allowances for future years, but only within each phase of the carbon reduction commitment scheme. To this end, participants may purchase several years allowances in 2011, but cannot be banked beyond the end of March 2013.

There are no free allowances in the scheme. All allowances must be bought and sold, and cannot be borrowed between organisations for any period.

The revenue raised from the sale of Carbon Reduction Commitment allowances will be recycled into the scheme. The income received in April will be issued back to participants, with bonus or penalty adjustments, in October of the same year. As a result, there will be cash flow implications during the period from April to October while all organisations in the scheme wait for the revenues to be recycled.

In April 2013 the carbon reduction commitment will adopt an auction trading mechanism for allowances, using sealed bids.

 

Carbon Reduction Commitment Bonus and Penalties

The carbon reduction commitment aims to use a bonus and penalty scheme as part of the incentive for organisations to reduce their levels of emissions. Any bonus for penalty administered to an organisation will be based on their position in the league tables.

During the first year of the carbon reduction commitment scheme, the early action metric will act as the sole indicator of performance for organisations within the league tables, however the end of the third year, the early action metric will be removed from the league table calculation. From that point onward, all organisations will be measured largely (75%) on absolute emissions and partially (25%) on the growth metric.

During the second year the margins for bonus and penalty will increase to 20%, with 30% being applied to the third year and so on. By the fifth year, organisations in the top half of the table will receive a bonus, whereas all the organisations in the bottom half will receive a penalty.

Year 1 – max 10% ./- bonus or penalty
Year 2 – max 20% ./- bonus or penalty
Year 3 – max 30% ./- bonus or penalty
Year 4 – max 40% ./- bonus or penalty
Year 5 – max 50% ./- bonus or penalty

Following the initial five-year period, the bonus and penalty has yet to be established. However, it is expected that the government will continue to take advice from the climate change committee and has not ruled out a 100% bonus and penalty scheme. As such, companies at the bottom of the league table would not receive any of their allowance payments back.

There are no requirements for organisations to reinvest bonus payments to further reduce energy by investing in green technology or services.

 

Carbon Reduction Commitment Emissions Trading Scheme

The carbon reduction commitment emissions trading scheme will target of emissions that are not currently included in the European Union’s emissions trading scheme all climate change agreements. It is anticipated that the trading scheme will affect approximately 5000 of the UK’s largest organisations.

During the initial phase of the carbon reduction commitments emissions trading scheme, starting 2010, all allowances will be sold at a fixed price of £12 per tonne of CO2. However, it is anticipated that from 2013, all allowances will be allocated through auctions that will develop a market price. Over time, the number of available credits will diminish which is likely to drive up the price.

 

Carbon Reduction Commitment Recycle Payments

The carbon reduction commitment’s recycle payments will take place over three stages.

First stage – based payment

During the first year, from April 2010 to March 2011, calculations will be made to identify each organisation’s share of the total carbon covered by the scheme. This percentage share will then be used for all subsequent years. The percentage share will then be multiplied by the recycled pot

Second stage – bonus or penalty

During the first year, the organisation at the top of the league table will receive only 10% bonus.

Adjustment factor

The adjustment factor will be applied to all participants of the scheme to ensure that there are enough finances in the total pot to make payment of the recycles

 

Carbon Reduction Commitment Action Plan

Whilst the carbon reduction commitments does not officially start until April 2010, there is still a large amount of work that many organisations may have to do prior to that date.

Identify organisational structure

The carbon reduction commitments operates under special rules that may mean some organisations will be included in the scheme even though they think they are too small and energy user to have two participate. To this end, it is imperative that all companies identify exactly where they fit in with larger parent or group organisations, and where at how each will be liable to the carbon reduction commitment.

The carbon reduction scheme applies at the highest level of the organisation, except where there are significant subsidiaries. Significant subsidiaries are defined as individual energy uses that in themselves consumed more than 6000 MWh during 2008. As such, the significant subsidiary could be included into the carbon reduction commitment scheme in its own right, and made separate from the rest of the organisation.

Organisations will also need to identify which parts of their energy consumption already fall under climate change agreements and the EU emission trading schemes; and therefore be excluded from the carbon reduction commitment. One these elements have been identified, the total needs to be calculated to account at least 90% of the organisation’s total carbon footprint

Electricity consumption

Having identified the organisational structure, the next step will be to ascertain the total amount of electricity consumption from all half hour meters. If the sum exceeds 6000 MWh during 2008 in the organisation will fall under the carbon reduction commitment scheme.

 

CRC League Table

The Carbon Reduction Commitment league table will rank all participants in the scheme on the basis of performance in three metrics.

 

Carbon Reduction Commitment League Table

The Carbon Reduction Commitment league table will rank all participants in the scheme on the basis of performance in three metrics.

First metric – Absolute Emissions

The first metric will look at the percentage of carbon emissions reduction for the organisation compared to the previous year. The absolute emissions metric will be based on a rolling average period of the past five years so, on any given year, the organisation will be compared with the previous five years. During the initial five-year period of the scheme, organisations will only be compared against the years that have passed since the start of the scheme. In the first year, ‘Absolute Emission’ will not be included in the league table calculations.

Second Metric – Growth

The second metric will consider the percentage reduction in other carbon emissions per unit of turnover, which aims to recognise the growth of companies. As with the absolute emissions in the first metric, the second metric will operate on a rolling five-year comparison, but fewer years during the start of the scheme and not at all in the frist year.

Third Metric – Early

The early metric will consider early action initiatives made by the organisation to reduce their carbon emissions prior to April 2011. Qualification for the early action metric will require organisations to be assessed for coverage of the carbon trust standard and automatic meter readings. During the first year of the carbon reduction commitment scheme, the early action metric will act as the sole indicator of performance for organisations within the league tables

 

Carbon Reduction Commitment Publish League Tables

As part of the carbon reduction commitment, the Environment Agency will publish publicly accessible league tables of participants performance at the end of each year.

In addition to the published league table positions for organisations within the carbon reduction commitment, the scheme will also publish the responses to three questions:

1. Does your organisation disclose long-term carbon emission reduction targets?
2. Does your organisation disclose carbon emissions performance against these targets?
3. Do you have a named director with responsibility for overseeing carbon performance?

These questions are designed to indicate if participants are actively attempting to reduce their carbon emissions.

 

Growth Metric

As the growth metric is based on the percentage change based on production unit turnover, it may not always be possible to identify a measurable unit of production. In these circumstances, the growth metric will be based on emissions per unit of revenue.

Where the growth metric is based on revenue, the measurement will apply to the organisation’s total revenue, rather than just the area covered by the measured energy consumption.

If an organisation changes its structure or operations, the information will not be updated in the CRC until the start of the second phase.

If an organisation significantly reduces consumption as a result of ceasing operations in some areas of their business, they will be able to benefit from this reduction in the CRC league table.