The clock is ticking towards the implementation of the Carbon Reduction Commitment in April 2010, which will apply across the UK. Large public and private sector organisations will be caught by the scheme, which aims to give those organisations a reputational and fi nancial incentive to reduce their carbon footprint. Failure to comply could lead to substantial fi nes and even prosecution for those who knowingly mislead the regulator. We look at what the CRC means for those affected and the penalties for non-compliance.

What is the CRC?

  • A legally binding emissions trading scheme, designed to provide a fi nancial incentive for organisations to reduce their energy usage and CO2 emissions
  • Inclusion in the scheme depends on metered electricity usage, but participants must report and purchase allowances for all energy consumption (except transport emissions)
  • Participating organisations estimate their CO2 emissions for each year and then purchase CO2 “allowances” to cover those expected emissions
  • They must then monitor their energy use during the year and actively try to reduce emissions. At the end of each year, they report actual CO2 emissions. A league table of year-on-year CO2 reduction will be published and organisations will get a bonus or pay a penalty, depending on their position in the league table
  • Until 2013, participants buy allowances from the Government at a fi xed price. From 2013, allowances will be sold by auction - market forces will determine the price
  • From 2013 there will be a gradual reduction in the total number of allowances for sale, encouraging an overall reduction in energy consumption
  • Participants can also buy and sell allowances on a secondary market, providing a further fi nancial incentive to reduce energy use
  • The body responsible for energy consumption in a building is the person who has the contract with the energy supplier and pays the energy bills. In a tenanted building, this might well be the tenant(s). Parent companies must calculate all their subsidiaries’ emissions

Who is caught by the CRC?

  • Participation depends on an organisation’s metered electricity usage during 2008. Any organisation with at least one half-hourly electricity meter and which uses at least 6,000 MWh of electricity per annum will have to participate fully in the scheme
  • There are reporting requirements for organisations with at least one half-hourly meter and using more than 3,000 MWh per annum
  • All public sector organisations must participate

Sanctions for non-compliance

  • Financial penalties for failure to meet deadlines (eg failure to register as a participant by September 2010: initial fi ne of £1,000, daily rate of £500)
  • Naming and shaming - publication of non-compliance
  • Knowingly misleading or deceiving the Environment Agency is a criminal offence punishable by up to three years in prison and/or a fi ne of up to £50k

Timetable for implementation

  • September 2009: Environment Agency starts gathering information to assess who will be caught by the scheme
  • September 2010: deadline to register as a participant
  • April 2010-March 2011 - monitor emissions and report them to the Environment Agency in a “Footprint Report”
  • October 2010: League table published. Get initial allowance payment back from Environment Agency, plus/minus a bonus/penalty, depending on league table position
  • April 2011: fi rst sale of allowances. Buy allowances for 2010-2011 and to cover estimated emissions for 2011-2012
  • July 2010: submit Annual Report and surrender allowances for 2010-2011
  • April 2012: the whole process starts again - participants purchase allowances to cover estimated emissions for 2012-2013