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Amendments to CRC scheme announced

15 October 2009

The final details of the Government’s scheme to save organisations money on fuel bills and to reduce carbon emissions have been unveiled by the Department of Energy and Climate Change. Greg Davies offers some observations.

The 7th October saw the public release of the “Government Response and Policy Decisions” to the consultation on the draft order to implement the Carbon Reduction Commitment. As Greg Davies of Elementus explains, three consultations and a host of other workshops and meetings went into shaping the, 135 page, response which also sees some interesting policy changes and developments. The CRC is a mandatory cap and trade scheme, designed to not only create a shift in awareness on energy use /efficiency, but deliver tangible reductions in carbon dioxide (estimated to be at least 4.4 million tonnes per year by 2020). Targeting both private and public sectors the scheme, which starts in April 2010, will capture large energy users not already regulated by a Climate Change Agreement (CCA) or the EU Emissions Trading Scheme (ETS).
Qualification for the scheme remains based on two main criteria, these being:
1. One or more half hourly electricity meters (HHM) settled on the half hourly market; and
2. Responsibility for total half hourly metered electricity supplies of at least 6,000 Megawatt hours (MWh).
Organisation that meet both criteria will become full participants, those with HHM, but supplies of less than 6,000 MWh will not qualify, but will have to make information disclosures during the registration period. Estimates are the scheme will affect 20,000 organisations for information disclosure of which approximately 5000 will become full participants.
The response sees a clarification and amendment to the Draft Order covering both policy and how it is to be developed within the scheme.
The main policy changes to the scheme are:
1. The name has changed to the Carbon Reduction Commitment Energy Efficiency Scheme.
2. The first compliance year (April 2010 to March 2011) will be a reporting year only. This means there will be no sale of allowances in year 1 of the scheme.
3. The Early Action Metrics relating to the Carbon Trust Standard have been expanded to include “equivalent” measurements. Further guidance on this is to be issued.
The weighting of the Early Action Metrics has also changed, so as well as being 100% of year 1 total, it will account for 40% in year 2 and 20% in year 3.
4. Principal Subsidiaries, originally these would have be included under the umbrella of the highest UK parent entity for participation and reporting. Now, under Significant Group Undertakings (SGU) these organisations can enter the scheme as a participant in their own right, where qualifying.
5. Definitions relating to Public Sector Organisations, treatment of companies with public sector ownership have clearly defined participation criteria.
6. The assessment criteria of grouping and disaggregation in English universities and colleges have been explained.
The main policy developments are:
1. Landlords and Tenants – a provision is being included to which requires tenants to cooperate with the landlord organisation for the purposes of the CRC.
2. Domestic energy use will be excluded from the scheme. This will affect participants with mixed-use portfolios where domestic accommodation included.
3. Obligations on franchises, Joint Ventures and PFI have been clarified.
4. Fees and charges for the scheme have been identified. The annual subsistence fee will be £1,290. The ID check charge has been reduced to £70 and a £10 fee will be payable for participation in the fixed price sale.
5. Definitions have been clarified for supply and metering (pseudo half hourly meters) as well as other areas covering, transport, fuel listing and reporting and the recognition for renewable generation.
6. Changes have also been made to the proposed civil penalties for non-compliance, together with additions / expansion of their scope.

These changes, both to the policy and its development, will have a variable effect on the participants. The scrapping of the Year 1 sale of allowances will certainly benefit all. The extension to the early action metrics on the other hand could see many organisations make great strides but still end up in the bottom half of the league table.
For those worrying about gathering and recording the data, your sights may be set to low. Bear in mind, for the introductory phase of the scheme the safety valve price will be £12/tonne carbon dioxide. Compare this to the purchase price of your electricity currently, which could be anywhere between £100 and, staggeringly, £268/tonne carbon dioxide for one organisation we have been talking to, and the bigger picture really comes into view.
What is certain though is that how an organisation approaches its CRC obligations strategically will have a huge bearing on its environmental performance, reputation and potentially bottom-line. Imperative to this is a broad, business wide, understanding of the corporate objectives allied with clear and inclusive policies and procedures. Failure to engage will mean failure to perform in the long term.
FM bridges the gap between the energy, environmental, services and suppliers in most organisations. The only element historically missing is active senior management engagement. CRC offers this and more, as a financial and visible demonstration of worth and business value. Therefore concentrate not on just gathering information, but what you and your business are going to do with it once you have it.        

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