Policy Note: CRC Payments Will No Longer Be Recycled to Participants

DECC

As part of the UK government’s spending review, the Department of Energy and Climate Change announced yesterday that it will no longer recycle revenue raised from the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme to project participants, instead reserving the money for public finance.

The CRC was originally designed as a form of energy efficiency competition between large public and private sector organisations. Under the original scheme, all participants were required to purchase carbon allowances to cover their emissions footprints.

Revenue raised from the sale of allowances was to be paid back to participants annually based on their ranking in a league table, a measure of their relative progress against energy efficiency goals. Organisations making the biggest energy efficiency gains would profit under the original scheme, with laggards paying a penalty.

The revised scheme no longer recycles payments to participants, effectively converting the program into a straightforward carbon tax. The government estimates that it will raise £3.46 billion from the CRC through 2015, based on a forecast carbon price of £12/tCO2e through the first phase and £16/tCO2e in the second. Such prices represent a roughly 8% increase in energy prices for affected firms.

Who It Applies To

Full participation in the CRC typically applies to organisations that use at least 6,000 MWhs of electricity annually.

What Has To Be Done

The timing of the CRC phases remains unchanged:

  • September 2010: registration period closes
  • April 2010 – March 2011: first footprint year
  • April 2011 – March 2012: first reporting year

However, the first auction of allowances has been moved from the  beginning of the first reporting year (April 2011) to the end (sometime in 2012). Participating organisations no longer need to forecast their emissions or budget for allowances in 2011. Instead they will simply measure their emissions through the end of the reporting year and purchase a corresponding number of allowances in 2012.

Reporting requirements, reporting timetable, evidence pack, early action metrics, league table ranking system, and auditing requirements remain unchanged at the present time. DECC will likely hold a consultation around future changes.

Impact

The major impact on participants is the greatly increased cost of the program. Previously, some participants stood to gain under the scheme, and no participants had to bear the full price of the carbon allowances. With revenue recycling abolished, all participants will pay a single, higher price per allowance.

Although the league table remains unchanged, its only relevance to participants at the moment is reputational.

The higher cost of allowances and diminished importance of the league table mean that participants should place a higher priority on actual efficiency gains and emissions reductions, rather than early action metrics.

Role of the AMEE Platform

The increased cost of CRC has significantly raised the importance of measuring and reducing the carbon footprint of participating firms. AMEE’s neutral platform aggregates and maintains carbon accounting methodologies enabling anyone to understand, calculate, and share their carbon footprint. AMEE’s Platform service and our network of partners help firms efficiently measure and disclose GHG emissions in order to comply with the CRC.

AMEE contains GHG emissions methodologies specified in the CRC. AMEE houses all of the required ‘intelligence’ (data and algorithms) and provides the infrastructure for storing the appropriate activity data with which to make emissions calculations.

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