Carbon Reduction Commitment
Energy Efficiency Scheme
The Carbon Reduction Commitment Energy Efficiency Scheme or CRC Energy Efficiency Scheme (CRC) was UK legislation that came into force on 1 April 2010 and is designed to improve energy efficiency and reduce emissions in large public and private sector organisations.
The scheme aims to reduce ‘non-traded’ carbon emissions by 17 million tonnes by 2027 as part of the Government’s target of reducing carbon emissions by 80% by 2050.
CRC is currently focussed on organisations who are responsible for an estimated 10% of the UK’s greenhouse emissions. As a result only the largest of public and private sector organisations in the UK are currently subject to the scheme.
The threshold above which CRC applies is currently 6,000,000 kWh of electricity per annum where the business has at least one half hourly meter installed. At current electricity prices that’s an annual spend of around £600,000, significantly more than the average business energy customer.
However some organisations are required to participate regardless of whether they meet the qualification criteria or not, these are known as Mandated Participants and include:
- UK Central government departments and those of
- The Devolved administrations
The qualification year is a defined period running from 1st April to 31st March each year.
For eligible parties CRC is mandatory and includes a series of “reputational, behavioural and financial drivers to encourage organisations to put in place energy management strategies and help them to better understand their energy usage”.
Once a business meets the qualifying criteria they must register with the Environment Agency’s CRC Registry or they will face financial and reputational penalties.
Once registered qualifying organisations are required to accurately monitor their energy usage and report this on an annual basis.
The Environment Agency then applies its own ‘emission factors’ to calculate the level of Carbon Dioxide emissions each participant has produced.
Organisations under the scheme are then required to buy ‘allowances’ for each tonne of carbon they produce.
These allowances can either be purchased at a fixed price (set annually) or by trading in a market for such allowances that has developed since CRC’s inception.
Each participating business is required to fulfil a number of steps as part of their qualification and submission process. An organisation must:
- Identify the full extent of their organisational structure as at the end of the qualifying year.
- Identify all the Half Hourly meters operating within this organisational structure.
- Add up the electricity used through those Half Hourly meters in the qualification year
- Subtract from this figure any ‘excluded’ electricity supplies
- Deliver the amount of qualifying electricity used by the organisation.
Failure of an eligible organisation to register for the scheme in timely manner will result in a £5,000 penalty with a further £500 per working day fine until registration is complete, up to a maximum cost of £40,000.
The allowance price in phase 1 of CRC was set at £12 per tonne.
Phase 1 ran from its inception in April 2010 through to March 2014.
Phase 2 is now in operation and runs from April 2014 and through to March 2019 with its first qualification year being 1st April 2012 to 31st March 2013.
CRC allowances for 2014/15 will be priced at £16.40 per tonne of Carbon Dioxide emitted a 37% increase on the prior period.
Reducing carbon emissions not only should produce a net benefit in terms of cost for compliant parties but also should deliver reputational benefits.
The Environment Agency publishes a league table of performance in the CRC scheme and as a result an organisation that is high up in the table can benefit from a halo effect of positive headlines and can potentially resonate with more selective eco-conscious customers.
Following complaints from participants about the confusing nature and high costs of administering the scheme, CRC was simplified in December 2012.
Over the period 2013/14 a number of new and simplified elements of the scheme were introduced, these included:
- A 55% decrease in scheme admin costs (£275m over the 17 years to 2030)
- Reduced overlap with other schemes
- Greater business certainty
The last league table published was for the 2011/12 period and marked the end of the initial phase of the CRC.
The top 10 ranked organisations for the period were:
|Manchester City Council
|Bradford & Bingley
|NHS Blood & Transplant
|Dept. for Communities & Local Govt
Whilst the bottom 10 performers were:
|UK Atomic Energy Authority
|De Luxe Limited
|CRC Management II Limited
|Carlyle Europe Technology Partners
|Rutland Partners LLP
|C Marston & Sons
The Weighted Score is used to define ranking and this is the sum of each metric measured. The metrics measured are the:
- Emissions (Tonnes of CO2) – An organisation’s ‘CRC Emissions’. These are the “CO2 emissions associated with the CRC supplies of a participant for an annual reporting year”
- Early Action Metric (%) – a measure of the “ the proportion of non-mandatory CRC electricity or gas supplies which are measured through voluntarily installed ‘automatic meter reading’ meters or dynamic supply in year 1 and ii) CRC emission coverage by the Carbon Trust Standard or equivalent”
- Absolute Emissions Metric (%) – a measure of the “percentage change in the CRC Emissions of a participant”
- Growth Metric (%) – a measure of the “percentage change in CRC Emissions per unit turnover or revenue expenditure for an annual reporting year”
CRC Phase 2 not only implemented a simplification of the rules and costs of CRC as well as a higher buy-out price but it also saw the advent of a new approach to ‘league tables’.
Phase 2 introduced the CRC Energy Efficiency Scheme Order 2013 which will be produced for the first time in 2015 as part of the 2012/13 reporting period.