The CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) is an initiative introduced by the UK Government under the Climate Change Act 2008. Its purpose is to:

• Encourage reduction of CO2 emissions by large public and private sector organisations
• Raise awareness of energy consumption in large organisations
• Provide financial incentives for companies to comply
• Levy financial penalties on companies not meeting agreed targets
• All money raised through the sale of Carbon Allowances will be recycled back to participants according to performance

This initiative comes into effect on 1st April 2010

Inclusion Criteria

Inclusion is based on half-hourly metered electricity usage. An organisation will be included if, during the 2008 calendar year it:

• had one half-hourly electricity meter (HHM) settled on the half-hourly market across the whole organisation
• had a total half-hourly electricity consumption over 6,000 megawatt-hours (MWh/6 million KWh) per annum excluding electricity for transport and domestic accommodation

Current electricity supplier will be able to confirm this information. These half-hourly meters include any:

• mandatory half-hourly meters
• voluntary half-hourly meters
• half-hourly light meters
• pseudo half-hourly meters (used to measure consumption of external lighting

Organisations meeting the HHM criteria above, but consuming less than 6,000MWh per annum, will not qualify. They will however still need to submit information to the administrator at the beginning of the scheme. More information available at the Department of Energy & Climate Change website.

Action Required Before October 2010

This scheme is compulsory for all organisations consuming over 6 million KWh of half hourly metered electricity during the period from January 2008 to December 2008. This is roughly equivalent to an energy bill of £500,000 per year.

Eligible organisations must:

• Measure carbon emissions accurately and provide an Annual Footprint Report to the Environment Agency
• Produce an Evidence Pack providing supporting information on the footprint report
• Register to buy carbon allowances to cover energy use at a current fixed price of £12 per tonne of CO2

Exposure may be minimised by undertaking two early actions:

• Installation of voluntary Automatic Metering (AMR)
• Achieving Carbon Trust Standard (or equivalent) certification

Penalties

The UK Government intends to “name and shame” the worst companies to add incentive to the changes. All organisations will be ranked and an annual performance league table published using these three metrics:

• Absolute metric: the relative change in absolute emissions
• Growth metric: the change in emissions relative to revenue
• Early action metric: Taking voluntary steps early to reduce emissions

Company Directors will be responsible for signing-off the footprint report and ensuring full compliance with the regulations. Additional penalties includes civil and criminal penalties for non-compliance. For example, a failure to register will attract a fine of £5,000, plus £500 per day.

The report must be delivered before 1st October 2010

Fines

1st October 2010 £5,000
23rd December 2010 £30,500

From April 2013

• The number of allowances available will be gradually reduced
• Organisations will be required to bid for all allowances
• Auctioning of carbon allowances begins, with costs rising to an anticipated £85 per tonne

CRC Timescales

Carbon Reduction Tax Timeline