DECC makes changes to CRC energy efficiency scheme

The Department of Energy and Climate Change (DECC) has published the final details of the Carbon Reduction Commitment Energy Efficiency Scheme. The scheme, which comes into effect on 1 April 2010, is a new regulatory incentive to improve energy-efficiency in large public and private sector organisations. It will be mandatory for such organisations to take part in the scheme; it has been estimated that participants will save around £1bn pa by 2020 by using cost-effective energy-efficiency measures that have yet to be adopted. Following consultation with businesses and trade bodies, the DECC has made significant changes to the scheme, including: ? requiring organisations to report emissions only in the first year (2010-11), but not to buy allowances, as previously proposed. However, in subsequent years they will have to purchase allowances corresponding to their emissions from energy use, and surrender them by the end of the year; ? in the second year (2011-12), extra weighting will be given to organisations that act early to improve energy-efficiency; ? recognising organisations that use onsite renewable energy, such as wind turbines or solar panels, by publishing the increased carbon savings; ? giving subsidiaries that are sufficiently large to qualify in their own right the option to participate separately from their holding company group; ? changing the name of the Carbon Reduction Commitment (CRC) to CRC Energy Efficiency Scheme.  It has been estimated that, by 2020, the scheme will have delivered emissions savings of at least 4.4Mt CO2 pa. Organisations that typically spend £0.5m a year on electricity, usually those whose annual half-hourly metered electricity use is at least 6,000MWh, will qualify for the scheme. By November, the Environment Agency will publish the qualification and registration guidance for potential scheme participants. The basic timeline for the carbon reduction-commitment remains the same. In phase one, the three-year introductory phase will start in April 2010. An unlimited number of allowances will be available at a fixed price of £12/tCO2. From the second year, participants will have to buy allowances, monitor energy use, report emissions and surrender allowances. They will also receive an annual  revenue recycling payment. In phase two, the government will, from 2013, cap the number of annual allowances and all allowances will be auctioned. Commenting on today’s announcement, Michael Hutchinson, head of the environment group at Mayer Brown, said: “The government’s latest proposals include some obvious crowd-pleasers, such as the decision to drop the requirement to buy carbon allowances for the first year of the scheme. Others, though, will be disappointed, not least the renewable industry, which receives little encouragement under the scheme. Others, such as the private equity and fund management sectors, have had their call for radical changes to the scheme’s coverage rejected, but they will benefit from changes that deal with the treatment of large subsidiaries.” Energy and climate change minster Joan Ruddock said: “The UK is leading the way in tackling climate change and in the move to a low-carbon economy. Organisations and the public sector must play a central role, including all government departments, regardless of size. Large organisations have huge potential to achieve cost-effective energy-efficiency savings. There are clear benefits from positive, immediate action to tackle climate change. Investment that takes place in the next few decades will have a profound effect on the climate in the second half of this century and into the next. “The CRC energy-efficiency scheme will help organisations to become more energy-efficient, to save significant sums of money on fuel bills and to show customers, clients and competitors that they are leaders in tackling climate change.” The CRC has been designed to complement existing government policies. Emissions that are already regulated by a climate change agreement or the EU Emissions Trading System will not be targeted under CRC.