News
Carbon Reduction Commitment makes energy reduction mandatory
1st May 2008
The Carbon Reduction Commitment (CRC) is a proposed mandatory cap and trade scheme targeted at non-energy intensive, large organizations in both the private and public sectors, which should come into force when the UK Climate Change Bill is passed this summer. The CRC is part of the UK government’s overall target to cut emissions by 60% by 2050, compared to 1990 levels; its target group currently accounts for 10% of all UK emissions. The scheme is expected to cut 1.2 million tonnes of carbon per year by 2020 by stimulating energy efficiency efforts.
The CRC is expected to have significant repercussions, particularly in the area of energy management. Organizations that use more than 6,000 MWh of half-hourly metered electricity per year (roughly equivalent to a £500,000 electricity bill), like hotel chains, supermarkets, banks, central government, and large Local Authorities, will fall under the CRC. This should likely amount to around 5,000 organizations, which will have to measure both indirect and direct energy use (but are exempt if already in the EU Emissions Trading Scheme or have a Climate Change Agreement with government). They will then take into account energy efficiency efforts going forward and buy and sell allowances at auction accordingly, to meet caps.
Until recently, energy efficiency measures have been largely behavioural. The CRC is designed to put reputational pressure on firms by establishing a league table, which discloses carbon reduction performance. In this regard, energy carbon footprint measurement and transparency will become key elements of CRC implementation.
dcarbon8 will offer full support to companies affected by the CRC in collecting energy use data and establishing energy reduction strategies, the two areas which are the backbone of the scheme. A board-level understanding of the CRC, its energy management implications, and the opportunities it represents in terms of cost- savings and reputation building, are also vital to maximizing the benefits the CRC can offer. dcarbon8 will offer workshops designed to educate staff members about the scheme and enable energy reduction measures.
All the income from CRC allowance auctions will be recycled back to participants by means of an annual payment. The payment will be weighted according to a participant’s position in the table, which will be determined according to absolute reductions. Organizational growth based on turnover and an ‘early action’ metric will be taken into account. A business can gain early action metric points by signing up to the Energy Efficiency Accreditation Scheme, before the start of the trial period, and rolling out automatic half-hourly metering on its sites beyond the legal minimum.
In 2008 and 2009, firms are expected to assess whether or not they fall under the scheme. In the first trial period of the CRC (2010-2012), meant to be a learning phase, participants will not be given caps, and allowances will have a fixed price, likely to be around £12 per tonne of CO2e. Thereafter, the market price for carbon will be established. Participants will be limited as to the number of allowances they are allowed to purchase and will be able to buy emissions credits from other schemes such as the EU ETS.
dcarbon8 welcomes the CRC as a simple, clear and certain framework for meeting emissions reductions targets in the UK. We look forward to working with organizations to assess their energy usage and implement effective reduction strategies.