Carbon Reduction Commitment
What is the Carbon Reduction Commitment Energy Scheme?
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a mandatory emissions trading scheme covering large non-energy intensive industry sectors. Those companies covered by the CRC will be required to purchase carbon allowances equivalent to the level of carbon they expect to emit from fixed energy points including electricity, gas, gas oil, petroleum and heat. Transport emissions are not included.
Who qualifies for the CRC scheme?
The CRC covers large business and public sector organisations such as Government departments, local authorities, banks, retailers, universities, water companies and hotel chains. Inclusion in the CRC is measured on electricity consumption. If an organisation's meters collectively exceed 6,000 MwH during, iit will qualifies for the scheme.
The CRC following the Spending Review 2010
Following the Comprehensive Spending Review 2010, revenue from CRC allowance sales is fed into the Treasury to support public finances (including spending on the environment) rather than recycled to participants as laid out by the previous Labour government.
Changes to the CRC from 1 June 2013
Following the Autumn Statement, the CRC will be simplified from 2013. Instead of replacing the CRC with an environmental tax which was suggested as an option in Budget 2012, Government will retain the scheme including the following changes from June 2013:
- The number of fuels that require to be reported has been reduced to two – electricity and gas, the latter only when used for heating purposes
- The Performance League Table will be abolished but aggregated participants’ energy use and emissions data will still be published
- 100 per cent of energy usage should be reported and the requirement to prove that at least 90 per cent of emissions removed. Instead a 2 per cent de minimis threshold for gas (heating) will be introduced so that organisations with very low gas consumption do not need to report this
- Equipment such as lifts, conveyor belts and other on site mechanisms are covered by the CRC, however energy usage from extra long conveyor belts that transport materials between a CRC participant and an offsite facility for onward transport via rail or inland waterway to reduce road freight emissions will be exempt from the scheme.
In phase two of the CRC which begins in April 2014, changes will include:
- Two fixed price sales, one forecast and one retrospective to enable participants to choose which sale to purchase their allowances from so they can decide how to manage their cash-flow. There will be no auctioning of allowances
- The 6,000MWh threshold for entry into the scheme will be retained
- Qualification for phase two will be based on electricity measured by settled half hourly meters only, ending the requirement for footprint reports
- Organisations covered entirely by Climate Change Agreements will not need to register for qualification
- Emissions factors for the CRC will be aligned with those used for greenhouse gas reporting
The Government will review the effectiveness of the CRC in 2016, including whether the CRC remains the appropriate policy to meet industrial energy efficiency and carbon reduction objectives. DECC reports that the tax element of the CRC introduced at Spending Review 2010 will be a high priority for removal when the public finances allow. The forecast allowance price remains unchanged at £12 per tonne of carbon dioxide in 2013-14 and £16 per tonne of carbon dioxide in 2014-15. From 2015-16 onwards, the allowance price will increase in line with the retail price index (RPI).
Updated guidance for Phase 2 qualification is expected to be published by the Scheme administrators (Environment Agency) by the end of 2012. Updated guidance for Phase 1 and Phase 2, including the changed reporting requirements for 2012/13 reports, will be published in early 2013.
HM Treasury has conducted a short consultation to review the energy tax landscape for UK businesses. This includes a proposal to scrap the CRC and replace with an updated Climate Change Levy. FTA's response has called for simpler carbon reporting and regulation for businesses to reduce financial and administrative burden.
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