The Department of Energy & Climate Change has this month issued updated guidance on the new CRC Energy Efficiency Scheme ("CRC Scheme"), a new UK mandatory emissions trading scheme which is expected to be phased in from April 2010 and aims to reduce carbon dioxide emissions through energy efficiency. The guidance is based on policy in the draft CRC Energy Efficiency Scheme Order which was laid before Parliament on 19 January 2010 can be accessed if you click here.

The CRC Scheme will be one of a few mechanisms already operating in the UK for the purpose of meeting domestic targets on climate change. The scheme is a proposed mandatory cap and trade scheme that will apply to emissions (not covered by climate change agreements or the EU Emissions Trading Scheme) from large public and private sector organisations whose metered electricity use is above 6,000MWh per half hour. Failure to comply with the scheme may result in a fine.

So, what does this new legislation mean for those organisations involved in PFI/PPP projects?

It will depend very much on the terms of your contract. Broadly speaking, where the public authority is responsible for entering into contracts with the utility provider, the public authority is responsible under CRC.

Where the private sector is responsible for contracts with the utility provider, the impact of the Scheme will depend on whether responsibility for procuring utilities has been stepped-down to FM sub-contractors or retained at SPV level. Where it is stepped down, parent organisations of FM companies will need to consider their position. Where it is retained at SPV level, guidance states that where a shareholder has more than a 50% stake in a project company, it is that shareholder's ultimate parent that must report anything supplied to the project company as part of its qualifying total. Where a project company does not have a parent with a greater than 50% controlling stake, the SPV will itself be required to participate as an individual CRC organisation where the inclusion threshold is exceeded.

Despite the release of guidance, the potential impact of the Scheme on PFI/PPP projects is still not at all clear. The Scheme has raised concerns among private contractor stakeholders to the extent that we understand PUK has been commissioned to examine 15 to 20 PFI contracts to determine responsibility in a random sample. In the meantime, we await legislation coming into force and (hopefully) some further guidance in the context of PFIs.