A new UK-wide mandatory emissions trading scheme, the CRC Energy Efficiency Scheme is now in force and requires large businesses and public sector organisations to not only report on their emissions but also to purchase allowances to emit carbon dioxide (CO2).
The CRC, which came into force on 1 April 2010 and will be phased in over three years, applies primarily to organisations with annual electricity bills of approximately £500,000.
Businesses which have been informed they are being considered for inclusion, identified as consuming at least 6,0000 MWh of electricity through their meters during 2008 (emitting around 3,333 tonnes of CO2), must register before 30 September 2010 as there are fines for failure to do so. If an organisation has a half-hourly electricity meter but consumed less than 6,000 MWh, it won’t qualify as a participant but will qualify as an "information declarer" and will therefore need to register a simple information disclosure.
The CRC applies to companies, groups of companies, JVs, PFIs, PPPs and franchises who meet the qualification criteria. Where companies form part of a larger group, they will participate together as a single participant in the CRC under the highest parent company. Where the parent company of a group is based outside the UK, but the group is responsible for energy supplies in the UK, the CRC may still apply. A group of companies may be able to benefit from the rules relating to the disaggregation of large subsidiaries and will consequently participate in the CRC as separate participants.
Some public sector organisations have to participate in the CRC regardless of whether they meet the qualification criteria, such as central Government departments. Other public sector organisations, such as Local Authorities, will have to participate in the CRC only if they meet the qualification criteria.
Once the CRC is operational, participants will need to monitor and submit reports on their annual energy consumption and emissions, and purchase allowances from the Government for the CO2 they emit. At the end of each year, they must then surrender enough allowances to the administrator of the CRC to cover the amount they emitted during that relevant year. The first main sale of allowances happens in April 2011, covering projected emissions for April 2011 to March 2012.
The Government will then recycle the revenue raised from the sale and auction of allowances back to participants after a six-month period. The highest-ranking organisations in a published annual performance league table, which shows all participants ranked according to the energy cuts they make over time, will receive the greatest re-distribution and financial reward back from the scheme.
Failure to comply with the requirements of the CRC may amount to a criminal offence. Organisations could be prosecuted for making false or misleading statements, for example. Civil penalties, such as a fine, may also be applied in circumstances where organisations have failed to register for the scheme, failed to submit a required report or failed to surrender enough allowances for the relevant year.
For further information on the CRC or the regulation of other Environmental or Renewable Energy Schemes, contact Michelle Craven on 01332 378 664 or by email at michelle.craven@nelsonslaw.co.uk
CRC Energy Efficiency Scheme Now in Force
