Carbon Guerrilla - Cost effective Carbon Accounting

What is the Carbon Reduction Commitment Energy Efficiency Scheme (CRCEES), previously known as the Carbon Reduction Commitment (CRC)?

The CRCEES is a mandatory emission reporting and reduction scheme introduced in the UK in April 2010. Its aim is to improve energy efficiency and cut carbon emissions. It encourages large private and public sector organisations to generate cost savings through reduced energy bills.

Performance league tables will be published annually; they will reveal how well participating organisations have complied with CRCEES, reduced their emissions and used renewable energy sources.

High-ranking participants stand to benefit by enhancing their reputation, given that media interest in the tables is predicted to be intense.

How does the CRCEES affect my business?

If your organisation consumes more than 6,000MWh of electricity via half-hourly meters annually (approximately £500,000 in annual energy spend), then you will need to comply with CRCEES legislation.

Key Dates

• Qualifying organisations must have registered by 30th September 2010
• First Accounting period April 2010 to March 2011
• Reporting Deadline 29th July 2011 for Footprint and Annual Reports

Which industries are covered by CRCEES?

CRCEES will affect larger, non-energy-intensive organisations consuming more than 6,000MWh of energy annually. This scheme is designed to capture emissions that currently fall outside existing initiatives, like EUETS and CCA. Initial calculations will be based on the amount of electricity used via half-hourly meters in the qualifying period of 2008.

Which organisations are excluded from the CRCEES?

Organisations are excluded from the CRCEES if:

• Emissions are regulated under the European Union Emission Trading Scheme (EUETS)
• More than 25% of their emissions are covered by Climate Change Agreements (CCA)

Exemptions must have been declared by 31 July 2010.

However, an online information disclosure must be submitted by organisations:

• With half-hourly meters and energy consumption below the 6,000MWh threshold in 2008
• With subsidiaries with more than 25% of their emissions covered by Climate Change Agreements (CCA).

What are reporting and verification requirements under the CRCEES?

Qualifying organisations must:

• Forecast energy use for the year ahead
• Purchase allowances
• Measure annual energy consumption and calculate carbon emissions
• Submit detailed report to the Environment Agency along with matching allowances
• Appear in annually published performance league tables, although revenue fro allowances will not be recycled anymore (See Spending Review 20th October 2010)

Phases

Introductory Phase - April 2011 to March 2013 Reporting Requirements

Footprint Report

For Phase 1 (the Introductory Phase), the footprint year commenced 1 April 2010 and ended 31 March 2011. You must submit your footprint report for Phase 1 by the last working day in July 2011 (29 July 2011).

You will need to submit a footprint report for each CRC phase. In Phase 2, the footprint year and annual reporting year starts in April 2013. The footprint report for Phase 2 is due by the last working day in July 2014 (31 July 2014).

Please note that you will need to keep your first footprint report for the whole time you are a participant in the CRC and for 7 years after that.

Annual Report

For Phase 1 (the Introductory Phase), the first annual reporting year runs from 1 April 2010 to 31 March 2011 and you need to have submitted your annual report by the last working day in July 2011 (29 July 2011).

We advise you to begin the process of gathering information well ahead of the deadline. For example, you will need energy bills or supply statements covering the whole period and you may need to contact your suppliers to obtain this information.

There are four annual reporting years in Phase 1:

• Year 1 (reporting-only year): 1 April 2010 to 31 March 2011
• Year 2: 1 April 2011 to 31 March 2012
• Year 3: 1 April 2012 to 31 March 2013
• Year 4: 1 April 2013 to 31 March 2014

Changes to the CRCEES

The changes announced to the Carbon Reduction Commitment Energy Efficiency Scheme mean that the scheme is now a tax; there will be no recycling back of allowances. The softener is that companies won’t have to start paying until Spring 2012, and this will be retrospective.

As a recap DECC confirms that:

• First report will be for the 2010/11 year, due by the 29th July 2011, there will be no payments required for this reporting year
• The 2011/2012 emissions allowances at £12 per tonne will require payment alongside the 2011/2012 Annual Report (to be submitted between 1st April 2012 and 31st July 2012)
• The revenue recycling scheme has been cancelled; — it is now a straight tax
• There are no changes planned to the £12 per tonne charge throughout Phase 1
• The Performance League Table will still exist, for reputational purposes
• A formal stakeholder consultation process about the CRCEES simplification has been undertaken.  The results of this process will clarify:
  • payment of allowances for 2012/2013 emissions; — issues such as reverting to upfront allowance payments would mean a double payment in Spring 2012
  • allowance trading; — if all emissions payments become retrospective then payment will be written against known tonnes of emissions, so there will be no requirement for the top-up, safety valve and trading elements of the scheme

What this means for CRC Participants:

Reducing carbon in absolute terms will be critical in minimising this tax bill

Organisations will want to have solutions that provide the numbers (CO2 and costs) and that can predict final years costs (taxes) — this can be done on Carbon Guerrilla

Landlords and Tenants — especially the latter will want to have transparent costs

CRC floor price is set at £12 per tonne yet how CRC will play out over the three levels of carbon price in the market, the CCA, EUETS and EUA needs clarifying — see our glossary for definitions — the latter two will need to be linked to CRC somehow to provide a floor price

The costs are absolute, the ready reckoner table below provides indicative costs for commercial property and manufacturing

Estimated costs of Carbon Allowances based on Building Size and Sector

Subsequent phase (April 2013 to March 2018)

From April 2013, the UK Government is likely to cap all emissions; this action will help the UK meet its target of reducing CO₂ by 2020 by at least 26%.

Penalties for non-compliance will be significant.

How are the performance league tables calculated?

A performance league table will be published annually and ranking will determine those who have reduced their energy consumption the most.

How can my organisation improve its score in the league table?

• You can reduce your absolute CRC emissions compared to previous years; this is calculated using the absolute metric
• You can reduce your CRC emissions relative to your turnover (or revenue expenditure for public sector organisations). The impact of an organisation’s growth or decline on emissions can be taken into consideration using this growth metric
• During the introductory phase, you can demonstrate good energy management prior to the beginning of the scheme. This early adoption metric is based on two factors:
  • How much automated metering (AMR), you installed voluntarily before 31 March 2011
  • How much of your emissions are covered by a Carbon Trust Standard or Energy Efficiency Accreditation Scheme.

Performance will be assessed against a five year rolling average. In the beginning, comparisons will be against the years since the scheme started, but after that, comparisons will be against the five previous years.

My organisation is required to make an information disclosure. What do I have to do now?

If your organisation has:

• Half-hourly meters and energy consumption below the 6,000MWh threshold in 2008
• Subsidiaries with more than 25% of their emissions covered by Climate Change Agreements (CCA)

You are required to make an information disclosure, detailing your actual half-hourly metered electricity consumption, to the Environment Agency. Disclosures must be submitted by 30 September 2010.

You will also be required to reassess your consumption in the qualification period of each of the subsequent phases to see whether it has increased above the 6,000MWh threshold. If this is the case, you will be required to participate fully during that phase, and any further phases where your electricity consumption through half-hourly meters exceeds 6,000MWh.

Click here to go to the Environment Agency’s website to register.