Industry News1 April 2010 will see the start of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES), a mandatory cap and trade programme that has been designed to cut 1.2 million tonnes of CO2 per year by 2020. The scheme will apply to organisations that used 6,000 MWh of half hourly metered electricity during the 2008 qualification year.
The CRC EES has been designed to avoid overlapping existing schemes and so emissions already captured by Climate Change Agreements (CCAs) or the European Union Emissions Trading Scheme (EU ETS) will be excluded. Organisations legally required to comply with the scheme will need to take proactive steps to measure, record and report on emissions associated with energy use on an annual basis. They will also be required to purchase and surrender carbon allowances corresponding to their overall emissions which, during the introductory phase, will be sold at a fixed price of ?12 per tonne.
The revenue raised in each auction will be recycled back to participants depending on their position in a performance league table. The first league table is based on the Early Action Metric and will rank all participants on their performance in the first year (April 2010 – March 2011). The payment received for recycling will be based on the number of allowances an organisation has purchased as a proportion of the total amount raised in the sale by all participating organisations. For this reason it will be important for organisations to be able to accurately monitor performance so that they can anticipate any likely costs or gains.
The Early Action Metric has been split into two equally weighted factors:
Smart Metering
Implementing Smart Metering across non-half hourly and gas supplies will provide an invaluable tool for monitoring consumption and measuring performance. It will also eliminate any estimated reads which are subject to an automatic 10 per cent uplift when reporting for CRC EES. An increased understanding of energy usage across a portfolio of sites will also provide tighter cost control.
The Carbon Trust Standard (or equivalent)
The standard has been designed to encourage good practice in carbon management and to help organisations improve their green credentials by committing to reducing their carbon footprint. It can be easily integrated by organisations already working to minimise their carbon impact or a great starting point for organisations that need to develop an energy policy.
Registration
The six month registration period opens on 1 April 2010. Any organisations wishing to divide any Significant Group Undertakings (SGUs) must register by 30 June 2010 in order to allow the SGUs to complete their own independent registration before the deadline.
Organisations are required to self register for the scheme before the deadline and failure to do so will result in a ?5,000 fine, plus an additional ?500 per working day until the registration is complete. In addition to this, organisations may be publically named on the CRC EES website for non-compliance.
During the registration process, organisations must nominate individual contacts that will have specific roles under the scheme, including a Registrant, Senior Officer as well as Primary and Secondary contacts.
Due to the penalties involved and, in some cases, the complexity of information required for registration, organisations should have already prepared information on:
- Any changes that have occurred to the organisational structure since 31 December 2008;
- A list of half hourly meters and supplies;
- Qualifying electricity, identifying any exclusions or exemptions.
Organisations that qualify for a CCA exemption must still register and pay the registration fee, however they can claim exemption based on the data collected in the CCA target period which ended in 2008. Organisations that have insufficient data to do this can claim exemption as part of the first footprint report based on the CCA target period ending in 2010.
Take Early Action
It is crucial for organisations to have a firm understanding of their obligations under the scheme and to start putting the relevant processes and strategies in place to ensure compliance. There a number of ways in which organisations can minimise poor performance, such as:
- Determining the extent to which your organisation will be effected by the scheme – will you be required to make an information disclosure or register as a full participant;
- Raising organisational awareness – If your organisation is part of a group, make sure you understand your responsibilities and that all relevant people are also aware of their individual obligations;
- Gathering information – if you have not already, start preparing all of the required information and data ready for registration. This will form part of your evidence pack, so keep all of your information organised to ensure a complete and accurate audit trail;
- Developing a procedure – Have a plan which details the implications for the business from all perspectives and develop a written procedure ensuring continued compliance;
- Understanding financial implications – Early anticipation of 2011-2012 emissions through accurate monitoring and organisational awareness will mean organisations can budget in advance of the first allowance sale;
- Setting up a CRC EES Team – The CRC EES will affect the whole organisation, therefore working closely with all departments is crucial to ensure effective management of the scheme.
Benefit or Burden?
Some organisations view the CRC EES as another legislative burden; however benefits can be realised by delivering a reduction in CO2 emissions. Although the penalties for poor performers are sizeable, top performers can receive substantial bonuses. It also encourages and incentivises organisations to implement strategies to minimise their carbon footprint, thereby providing long-term financial benefits and reducing the overall short-term cost impact of the scheme. The CRC EES will help organisations run their business more efficiently, reduce energy bills and potentially benefit from the recognition of their achievements through the publication of results.
Compliance Services
It is important for organisations not to underestimate the resources that will be required to manage, monitor and report under the scheme to comply with their legal obligations.
EIC has expanded their already exceptional capability in legislation compliance to offer organisations support in the form of a structured CRC EES Compliance Management Programme. Our team of experts can assist organisations to fulfil their mandatory obligations under the scheme and provide the resources and expertise required to allow you to turn the CRC EES from a burden into a benefit.
For more information on the EIC CRC EES Compliance Management service, Smart Metering, or the Carbon Trust Standard, please contact the Carbon Management team at carbonmanagement@eic.co.uk or call 01527 511 757.