Carbon Reduction Commitment - How it impacts your organisation
The Carbon Reduction Commitment (CRC) is a new mandatory carbon emissions ‘cap and trade’ scheme that will apply to large non energy-intensive organisations in the UK’s public and private sectors and will come into force in April 2010.
Why is it being introduced?
The CRC scheme is being introduced to encourage carbon reduction within the large non energy-intensive sector, primarily by encouraging energy end-use efficiency. This will help the UK meet its carbon reduction targets under the Climate Change Act 2008 and encourage the UK to achieve a 20% improvement in energy efficiency by 2020.
Who will it impact?
Any organisation with electricity consumption above 6,000 MWh/yr (approx. £500k spends) is likely to be included. This could cover more than 4,500 organisations across the private and public sectors.
How will it work?
There are two parts to the scheme:
Cap and Trade: An emissions trading system under which organisations must purchase allowances to cover their annual energy greenhouse gas emissions (expected to be initially priced at £12/tonne of CO2).
League Table: An annual league table will be published to highlight those organisations making positive progress to in the reduction of their emissions. The revenue accrued from the sale of allowances will be redistributed back to the CRC organisations based on their ranking in the league table – best performers will receive a bonus and worst performers a penalty.
What will organisations have to do?
Measure and track their organisation’s emissions.
Report annually and maintain auditable information.
Increase energy efficiency and undertake emission reduction activities.
Forecast their organisation’s future emissions - to determine how many allowances need to be bought for the coming year.
Purchase allowances from the Government auction each year, and be ready to trade carbon allowances through the secondary trading market if required.
When is it going to happen?
The scheme started in April 2010. All organisations with half-hourly metering systems will be required to register or submit an exemption in 2010. This will entail providing information on their 2008 half-hourly electricity consumption.
How do organisations get ready?
The key is to start early and ensure that the tools and processes to collect the required data are in place with the necessary rigour to meet compliance requirements.
A proactive, well planned and informed approach to CRC will help an organisation to minimise the risk and meetcompliance requirements.