It is central to the UK’s strategy for improving energy efficiency and reducing carbon dioxide (CO2) emissions, as set out in the Climate Change Act 2008. It has been designed to raise awareness in large organisations, especially at senior level, and encourage changes in behaviour and infrastructure.
It will operate as a ‘cap and trade’ mechanism, providing a financial incentive to reduce energy use by putting a price on carbon emissions from energy use. In CRC, organisations buy allowances equal to their annual emissions. The overall emissions reduction target is achieved by placing a ‘cap’ on the total allowances available to each group of CRC participants. Within that overall limit, individual organisations can determine the most cost-effective way to reduce their emissions. This could be through buying extra allowances or investing in ways to decrease the number of allowances they need to buy.
All the money raised through the allowances will be recycled back to participants, according to how well they perform. The scheme features an annual performance league table that ranks participants on energy efficiency performance. Together with the financial and reputational considerations, the scheme encourages organisations to develop energy management strategies that promote a better understanding of energy usage.
The scheme is designed to tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading Scheme. The scheme will cover large public and private sector organisations, who are responsible for about 10 percent of the UK’s emissions. This will affect around 20,000 organisations and yours could be one of them.
Organisations are eligible for CRC if they (and their subsidiaries) have at least one half-hourly electricity meter (HHM) settled on the half-hourly market. They also qualify if their total half-hourly electricity consumption exceeded 6,000 megawatt-hours (MWh) during 2008. This is equivalent to total half hourly electricity bills of approximately £500,000 per year. While the scheme officially started in April 2010, many organisations will not have made preparations to ensure that they comply with all legal requirements and fully participate in it.
Furthermore, as the CRC is a carbon trading scheme, there will be a requirement to purchase allowances for the CO2 emitted – initially at £12 a tonne. An ability to accurately estimate future emissions and reduce them will have significant financial and reputational benefits – there will be heavy financial penalties for non-compliance and a publicised league table of performance.
Initially, it is estimated around 20,000 organisations will qualify, including supermarkets, water companies, banks, local authorities and all central Government Departments. Qualifying organisations will have to comply legally with the scheme or face financial and other penalties.
Website for Department of Climate Change – http://www.decc.gov.uk/
Source DECC 2010
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