Effective from 1st April 2010, the CRC Energy Efficiency Scheme is a key component of the Government’s climate change bill and requires organisations with an annual energy consumption of approximately 6,000 MegaWatt Hours, or an energy bill in excess of £500k, to report their energy related carbon emissions.
Although initially it will apply to those participants who have registered under the scheme, those that use large amounts of energy and to Government departments, it is expected that the threshold will shortly be reduced and will therefore apply to a broader range of organisations.
Registration packs will be issued shortly. If your organisation is informed by DEFRA that it is being considered for inclusion within the scheme you must register between 1st April 2010 and 30th September 2010 as there are fines for a failure to register or disclose information.
Organisations who must participate in the scheme will have to monitor and report on their energy emissions, and purchase annual energy use allowances to cover both actual and anticipated annual CO2 emissions. In general terms, the more CO2 that an organisation emits the more allowances it has to purchase, acting as an incentive to reduce emissions.
The first allowances will need to be purchased in April 2011 from the CRC administrator (which, for England and Wales, is the Environment Agency) to cover anticipated emissions for 2011/2012. In future, allowances will need to be purchased in April to cover emissions for the subsequent 12 months.
For the first three years, there will be a fixed price for the allowances of £12/tonne CO2 emissions. After three years, the number of allowances will be capped and a secondary market will emerge under which users will be able to trade carbon allowances. Within five years, allowances are likely to rise substantially to £50 each.
The impact of CRC on the landlord and tenant relationship is another factor to consider. Where a property is subject to a lease, whoever is liable for these allowances will depend on who pays the energy bills. If the tenant pays the bills, the CRC obligation rests with the tenant or tenant group. However, where the landlord provides the energy and recharges the cost, or provides common services, then it is the landlord or landlord group that has to comply with CRC obligations. In such circumstances, landlords may wish to receive a financial contribution from tenants towards the cost of allowances purchased under CRC. Tenants may also wish to obtain the benefit of any recycling payments received by the landlord. Landlords will have to work out the best way of measuring each tenant’s energy use to help them with the apportionment process. Landlords may also seek to pass the costs to tenants of administering CRCs.
Carbon Reduction Commitment (CRC) Energy Efficiency Scheme
