The Carbon Reduction Commitment introduces new, mandatory carbon management requirements for organisations with half hourly metering.
Do you qualify for the CRC?
You may if your organisation owns or occupies one or more sites with half hourly electricity meters. You will definitely qualify if your organisation used more than 6 GWh (6,000,000KWh) of electricity through these meters during 2008.
In making this assessment, you should consider every site of every subsidiary (by majority ownership) to be part of the organisation for CRC purposes. Also every type of meter that can take a half hourly reading counts. This includes half hourly settled meters, AMR (automated meter readers or smart meters) and pseudo half hourly meters.
What are your obligations if you
don’t qualify
You may not be out of the woods yet. Every organisation with a half hourly metered site will have to register for the scheme in 2010.
Your obligations if you do qualify
After registering as a CRC participant in 2010, each year qualifying organisations will be required to:
- Forecast their annual carbon emissions for all their energy use (excluding transport)
- Buy carbon allowances to cover these carbon emissions
- Report on their actual carbon emissions and surrender a matching number of carbon allowances each year
- Maintain an evidence pack to prove their carbon reporting is accurate if audited
What are the risks and opportunities
The CRC is designed to encourage carbon savings through energy efficiency. A league table will be published each year to show the relative carbon saving performance of participating organisations. This presents financial and reputational risks and rewards for participants.
Financial: The money paid for allowances will be recycled back to participants according to their ranking in the league table. Those at the top will be rewarded at the expense of those at the bottom. There are also significant fines for organisations that don’t comply with the scheme.
Reputation: Companies at the top of the league may appear better at reducing their carbon emissions than those at the bottom. As more consumers consider the environmental impact of companies they choose to buy from, your league table ranking could enhance or damage your organisation’s brands.
CRC in a nutshell
Click to download CRC PDF fact sheet
On the road to 80% by 2050
The Carbon Reduction Commitment heralds a new era for companies to take control of their carbon emissions as a business as usual practice. This is a significant step towards establishing the effective mechanisms and encouraging the development of the new carbon conscious business culture that will be required to meet the tougher national carbon reduction targets announced in the Climate Change Act last year.
Estimated carbon savings
The scheme is aimed at a sector comprised of ‘large non energy intensive organisations’. This includes businesses such as supermarkets, retail chains, hotel chains, large offices, small to medium industrial facilities, and almost all public sector organisations. This sector accounts for 14 million tonnes of carbon (MtC), nearly 10% of the UK’s total annual carbon emissions. Defra originally estimated the CRC will save 1.2MtC per year by 2020, though this estimate is likely to increased.
How to cut carbon
The scheme aims to drive the sector to find cost effective carbon emissions reductions through greater energy efficiency, rather than buying renewable energy or investing in carbon offsetting. Saving energy is what counts in the CRC.
CRC in a nutshell
Click to download CRC PDF fact sheet
Any organisation with a half hourly (HH) metered site should take note as they will have to register for the scheme whether they qualify or not.
The qualification threshold
Qualification depends on how much electricity the organisation used at their sites with HH type metering from January to December 2008. HH type metering includes HH settled meters, AMR (or smart meters) and pseudo HH meters.
The threshold is 6 GWh (or 6,000 MWh) and the HH sites considered are those for which that organisation is ‘counterparty to the electricity supply contract’, i.e. financially responsible for the electricity bill.
All electricity use through half hourly meters counts. Organisations with renewable energy supplied from the grid cannot claim relief from qualification, nor can they claim associated carbon savings once the CRC starts.
All subsidiaries included
Foreign ownership and subsidiary or divisional reporting structures are an irrelevance. Organisations have to count their electricity usage for relevant sites for all their UK operations. If necessary, they will have to appoint one operation as the UK parent, or ‘primary member’, with responsibility for the compliance of all their UK subsidiaries.
Few exemptions exist
Some exemptions apply to organisations participating in the EU Emissions Trading Scheme (EU ETS) and/or a Climate Change Agreement (CCA). All direct emissions for sites covered by the EU ETS are fully exempt from the CRC.
It’s a little more complex for CCAs. If more than 25% of a subsidiary’s emissions are covered by a CCA, then allowances will not have to be purchased for the emissions of the entire subsidiary. However the electricity use of the subsidiary during 2008 still counts towards the parent organisation’s qualification.
Outcomes
Those exceeding the threshold will have to monitor and report on their CO2 emissions from all fuels used on site each year and buy carbon allowances (or certificates) to cover these emissions. Those below the threshold still have to register for the scheme and show they don’t qualify.
What energy use is included once it starts
Each year organisations will need to report on and also buy allowances for their CO2 emissions from fixed point’ energy use, i.e. all energy used on site. This includes electricity, gas, oil, diesel, coal and others, but does not include transport fuels.
The scheme is designed as a cap and trade scheme. This means that those participants that cut their emissions will be able to sell their excess allowances, while those that increase their emissions will need to buy more allowances. Initially there will be no limit on the number of allowances available, but in later phases of the scheme the number of allowances will be capped and reduce each year.
The scheme officially begins in 2010 with an introductory phase to help participants adjust to the scheme. This phase runs from April 2010 to March 2013. At least two capped phases are planned: from 2013 to 2017 and from 2018 to 2022.
Costs and rebates for participants
In the introductory phase allowances will be priced at £12/tCO2. In later phases allowances will be sold by auction at the market rate. These funds will be recycled to participants depending on their relative performance in reducing their emissions. Good performers will receive a rebate greater than the cost of their allowances, and vice versa for underperformers.
The performance of participants will be published in a publicly accessible league table. Three metrics will be taken into account:
- Absolute reduction: this carries a 60% weighting and considers the percentage reduction of the current year versus the previous five years
- Early action: this carries a 20% weighting and will reward firms that install Smart Metering on their non half hourly metered sites before 2011, and/or qualify for the Carbon Trust Standard
- Growth: this carries a 20% weighting and will consider emissions per unit turnover
2010 and 2011 are unique
The first two years of the scheme are a little different. Firstly, participants will buy their allowances for 2010 and 2011 in 2011 and that has budgeting implications. Secondly, only the Early Action metric is taken into account for determining league table rankings and recycling payments in 2011. So the amount of smart metering in place and how much of your organisation is accredited by the Carbon Trust Standard by 2011 is now much more important.
Café Energy workshops
Attend a Café Energy workshop for a detailed clear explanation of the mechanics, risks and opportunities of the CRC. In half a day you’ll gain the knowledge and materials to help you explain the implications of the scheme to other people within your organisation. This is vital if you’re charged with managing compliance within the scheme.
Book now
Our customers that attended our Café Energy workshops in 2008 and the recent Spring 2009 events rated them nine out of ten for usefulness.Download our PDF booking form and get yourself on the next 2009 event today
If your organisation is likely to be included in the scheme, it’s a good idea to use 2009 to prepare for it. Here are some ways we can help.
Understand the scheme
Like any new piece of legislation, many people find the Carbon Reduction Commitment complicated at first sight. In 2008, nearly 500 people learnt about the mechanics, risks and opportunities of the CRC through our Café Energy workshops and rated them 9/10 on average for usefulness. Click here to register for the next events.
Improve your metering
The Carbon Reduction Commitment provides incentives for companies to invest in Automated Meter Readers (often called Smart Meters) before 2011. Smart Meters enable more reliable and detailed measurement of energy use than traditional manually read meters. This information is a must for effective energy management and also helps make energy reporting easier. To arrange a cost effective Smart Metering package for your business, please click here.
Make your carbon reporting easier
The scheme places regular carbon reporting requirements on participating organisations. Those that are able to easily monitor their energy use across all their sites and subsidiaries will find complying with the scheme more manageable. Our Energy View service is an automated energy monitoring and targeting facility that can help make your carbon reporting easier, and also help highlight opportunities for energy savings. To arrange an Energy View package for your business, please click here.