Financial cost of new CRC commitment revealed

22 December 2010

An analysis of the cost to businesses of the amended Carbon Reduction Commitment (CRC) Energy Efficiency Scheme have been undertaken by hurleypalmerflatt.

The study, by international multidisciplinary consultancy hurleypalmerflatt of its clients from the past two years, shows that while all participating organisations will face considerable cost to their business, those who take a good practice approach to meeting the requirements of the CRC and invest in carbon management stand to lose less money than those only aiming for basic compliance.
The cost of the CRC for a typical organisation with a £1m/year energy spend stands at an estimated £430,000 for those that take a good practice approach to complying with the CRC, while those doing the minimum possible – basic compliance – will see a £640,000 cost to their organisation over the same period, a difference of £210,000.
However, while this sounds like good news for companies going the extra mile, organisations applying good practice are set to lose out more than basic compliance businesses when comparing costs with the original CRC.
In March 2010, hurleypalmerflatt calculated that the CRC would cost basic compliance businesses £280,000 but good practice organisations could receive revenue of £130,000. Now that revenue recycling has been abolished and all receipts will go to the Treasury, good practice businesses will be £560,000 worse off under the CRC now than predicted in March – whereas basic compliance businesses will be £360,000 worse off.*
Organisations covered by the CRC must buy carbon credits annually to cover their expected carbon emissions and will be listed in a league table showing the best and worst performers. Companies which invest in carbon management and reduce their emissions will need to buy fewer credits, will perform better in the league table and will have to pay the Government less than others.
“Many now see the CRC as a green tax by another name. However, our analysis shows even though there will be costs to all it will still pay businesses to invest in good carbon reduction practice,” explains Stuart Bowman, Energy and Sustainability Director, hurleypalmerflatt.
“Companies need to understand the new CRC and approach it well. We are in an era where sound environmental practice makes commercial, as well as ethical, sense – it is just frustrating that those organisations approaching carbon reduction in a comprehensive way will not reap the rewards that they would have before.”
hurleypalmerflatt’s analysis also examined different organisations by type and energy spend. It shows, at the extreme, that the cost of the changes to businesses with very large energy spend could be over £100m between now and 2017.
*hurleypalmerflatt’s figures are based on an indicative scenario of how the CRC may develop. It is undiscounted and excludes investment and savings associated with energy/carbon-efficiency measures. Actual results will depend upon a complex set of factors and could vary from those given here.