The Department for Energy and Climate Change (DECC) opened its third consultation on the Carbon Reduction Commitment (CRC) on the 12 March 2009. The consultation is set to run until 4 June and is the last chance for industry to have its say on the emissions trading plan.

The Government held two previous consultations on draft CRC plans in 2006 and 2007.

WHAT IS THE CRC?

The CRC is a new mandatory emissions trading scheme that aims to improve energy efficiency and reduce the amount of carbon dioxide (CO2) emitted in the UK. Organisations that meet the qualification criteria, which are based on how much electricity they consumed in 2008, will be obliged to participate in CRC. Non-domestic organisations (businesses and government organisations) with electricity usage metered half-hourly (HHM) and consuming at least 6,000 MWh in 2008 will qualify.

The CRC is a key part of the Government’s strategy to achieve emissions reductions under the Climate Change Act 2008. It aims to cut emissions by up to 4.4 Mt CO2 a year by 2020.

HOW WILL THE SCHEME WORK?

Participant organisations will be required to monitor their emissions and purchase allowances, auctioned by Government, for each tonne of CO2 they emit. The more CO2 an organisation emits, the more allowances they must purchase, intending to create a direct incentive for the reduction of emissions.

The better an organisation performs in terms of reducing its emissions, the higher it will appear in the annual performance league table Government will publish, showing the comparative performance of all participants. There are important reputational issues at stake, as ranked performance tables will be made public. Also, organisations will receive a refund on their allowance expenditure, enhanced or reduced depending on their position in the league table. The size of the potential bonuses and penalties will increase as the scheme progresses.

Participants must register by 30 September 2010 for the first three-year introductory phase. They must provide a one-off “footprint report” on energy use and emissions, enabling monitoring. In the introductory phase, allowances will be sold at a fixed price of £12/tonne CO2. But in the second phase, which begins in 2013, allowances will be auctioned and the number available will be capped.

The consultation covers the draft Carbon Reduction Commitment Order which is scheduled to come into effect in April 2010 and details developed since the second consultation was published. Such details include the criteria for determining the CRC participants, emissions coverage (emphasising that there will be no administrative emissions overlap between CRC and the EU Emissions Trading Scheme and the Climate Change Agreements), possible exemptions from the scheme and the logistics of obtaining allowances, revenue recycling and performance in the league table.

A Draft CRC User Guide, has also been published and can be viewed by clicking here. The User Guide aims to provide organisations that will participate in CRC with guidance on how to prepare for the scheme and the actions that participants need to undertake. The User Guide is still a draft document that will be revised over the course of 2009 to incorporate any changes that may occur following the consultation.

THE TIMETABLE

The User Guide also provides a timetable for implementation of the CRC as summarised:

Click here to see table.