Relief from the mandatory scheme will reduce the administrative burden on non-energy intensive companies.

The Carbon Reduction Commitment (CRC) — which first came into operation on 1 April 2010 — will be abolished at the end of the 2018-19 compliance year, pursuant to the CRC Energy Efficiency Scheme (Revocation and Savings) Order 2018 (SI 2018/841) (the Order). The CRC is a mandatory carbon emissions trading scheme that applies to large UK business and public organisations.

The CRC was aimed at increasing energy efficiency and reducing carbon emissions from large non-intensive energy users. These emissions are thought to constitute around 10% of greenhouse gases (GHGs) in the UK. The scheme applied to organisations that, over the course of a year, used more than 6,000 megawatt-hours (MWh) of certain electricity and had at least one half-hourly meter settled on the half-hourly electricity market.

Both private and public sector companies were subject to the CRC. In each compliance year a participant organisation had to:

  • Collate information about its energy supplies
  • Submit a report about its energy supplies
  • Buy and surrender allowances equal to the CO2 emissions it generated
  • Tell the Administrator (the Environment Agency) about changes to an organisation that could affect that organisation’s registration (designated changes)
  • Keep records about its energy supplies and organisation in an evidence pack[i]

Key features of the Order:

  • Organisations must submit their last report by July 2019 and surrender their allowances for the last time in October 2019.
  • The Administrator must maintain a CRC Registry until March 2022, after which all CRC accounts will be closed and trading of allowances will not be allowed. The Administrator will also be obliged to keep a record of information on the Registry until March 2025.
  • For the time being, the relevant regulatory authority (enforcement of the CRC is devolved to the environmental regulators of England, Wales, Scotland and Northern Ireland) will retain the authority to monitor and enforce compliance of participants for all phases. However, from the end of February 2022, the Administrator will no longer have the power to penalise participants by ordering the purchase and surrender of allowances. From the end of March 2022, the Administrator will no longer have the power to penalise participants by denying them access to the Registry.
  • Participants in the current phase must inform the Administrator about a change of address until April 2025.
  • Those who qualified for the current phase must keep their records up to date until the end of March 2025. Those who qualified for the previous phase must do so until the end of March 2021.
  • Applications for refunds will be available for those who have surrendered surplus allowances into the cancellation account until the end of March 2025. For those with allowances in a compliance account at the end of March 2022, they are able make an application for a refund until the end of March 2025.

Conclusion

The CRC was met with criticism, suggesting that the scheme added an administrative burden to non-energy intensive companies such as large offices and hotels.

The Climate Change Levy (CCL) will be increased from April 2019 to compensate and to “cover the cost of CRC abolition in a fiscally-neutral reform.” The CCL is a tax on energy such as natural gas, electricity, petroleum etc., delivered to non-domestic users in the UK. Industry stakeholders hope that the CCL will alleviate some of the complex administration required under the CRC.

This post was prepared with the assistance of Olivia Featherstone in the London office of Latham & Watkins.