Clients must now take urgent action to analyse their 2008 energy use and organisational structure to determine whether they meet the qualification criteria for the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) – the UK’s new, mandatory carbon emissions trading scheme which comes into force on 1 April 2010.

The CRC aims to push energy efficiency up the corporate agenda. The Government estimates that the CRC will apply to around 20,000 private and public sector organisations. Around 5,000 organisations are required to be full participants in the scheme – these will include large energy users such as major landlords, hotel chains, banks and large retailers. The remaining 15,000 organisations are required to disclose information about their electricity usage to the Environment Agency.

The Government believes the CRC should attract sustained senior management attention to carbon and energy issues. To achieve this, the scheme employs both financial and reputational drivers. Organisations which are full participants will have to monitor their energy use and purchase allowances from the Government for each tonne of carbon dioxide they emit. A key part of the scheme is the annual publication of a CRC league table showing good and bad performance in reducing emissions. Revenues from the sale of allowances will be recycled back to participants and, importantly, the amount received is tied to participants’ ranking in the public league table.

An organisation must register as a full participant in the CRC if, during 2008, it had at least one half hourly electricity meter supplied on the half hourly market and the total half hourly electricity supplied across the organisation was equal to or more than 6,000 megawatt hours. An organisation which, during 2008, had at least one half hourly electricity meter settled on the half hourly market but which consumed less than 6,000 megawatt hours of electricity must make an information disclosure.

Participating organisations must register between 1 April and 30 September 2010. The first purchase of allowances takes place in April 2011. Non-compliance will lead to fines.

Please see our e-bulletin available on our website for more details http://www.herbertsmith.com/NR/rdonlyres/3D377909-7FF9-46AF-8985-64C4DDA91E25/10647/CarbonReductionCommitmentintro170309.html.