Until 24 March 2014 the Environment Agency is consulting on draft proposed guidance on the application of penalties for contraventions of carbon related laws.  Covering sanctions for non compliance with the EU ETS, the CRC Energy Efficiency Scheme (the “CRC”) and Climate Change Agreements, the guidance establishes the approach that the Environment Agency intend to take and the basis for their decision making.  This update addresses the approach to the application of civil sanctions for non compliance with the CRC.

The CRC:  proposed staged increases

The range of civil penalties are unchanged.  The consultation relates solely to the draft guidance and not on any amendments to current sanction provisions.  The ability to impose the most severe penalty has always been available dependent on circumstances. The difference, for specified non compliances,  is the proposal  that there be a standard enforcement approach differentiating between monetary penalties depending on the compliance year in which the non compliance occurs. This approach suggests that as the scheme becomes more established more shall be expected from participants.  This may be at odds with some participants’ views of the scheme which is that due either to complicated and potentially changing contractual arrangements and corporate or investment structures the adage that after a period of time compliance should be easier is not necessarily true. This is particularly so for those who may not have needed to participate in the First Phase of the CRC but will be obliged to participate in the next phase (known as the Initial Phase starting from April 2014) or those who have increased supply responsibilities due to the simplification changes such as some operators. The consultation paper suggests that the highest penalties should be applied to non compliances in the Initial Phase, an approach which may appear inequitable to newcomers. However, discretion on application of penalties remains.

Please click here to see a table which outlines the proposed approach.


The Environment Agency have the discretion to waive, impose or modify a civil penalty where it is considered appropriate, unless the legislation provides that a mandatory penalty applies.  In exercising discretion, consideration will be given to all public interest factors such as whether there was intent to non-comply with the law, whether or not the circumstances leading to the non compliance could reasonably have been foreseen, the nature of the non compliance, financial implications such as whether profits are made or costs avoided, any deterrent effect, any previous history, the attitude of the offender and personal circumstances. For these reasons it is important that any organisations that consider that they may not be in compliance take legal advice so that the best outcome may be achieved.  This is particularly relevant for organisations who may have not registered recently for the Initial Phase. 

DECC guidance

The statutory guidance relating to civil penalties under the CRC published by DECC in April 2011, and found here, remains in force.  The draft guidance is supplemental guidance on the Environment Agency's intended approach.

Criminal offences

Separate enforcement and sanctions guidance applies to the limited criminal offences available which include making a false, misleading or reckless statement and failing to comply with an enforcement notice.

Click here to view the consultation documents or to submit your comments.