DECC pulls the teeth of the CRC
carbon, solar, recycle, climate, renewable
There has been growing uproar from UK business in recent months, as the potential financial implications of implementing the Carbon Reduction Commitment (CRC) became increasingly clear. In response, the UK’s Department for Energy and Climate Change has just announced that the first year of the programme will be a ‘monitoring period’ only, and that no emissions allowances will need to be bought.

The scheme has also been renamed to reflect an increasing focus on energy efficiency – it’s now called the Carbon Reduction Commitment Energy Efficiency Scheme. Large energy users in business and the public sector (those who consume over 6000MWh per year) will be required to take part in the scheme from 1st April 2010.

The UK’s emissions reduction targets are at least 34% on 1990 levels by 2020, and are in large part expected to be achieved through energy efficiency. The CRC is expected to ensure that large organisations play their part. The scheme is mandatory for organisations which consume over a set amount of power, and is expected to eventually save participants around £1billion per year by 2020 through cost effective energy efficiency measures that are not yet being taken up.

Under the programme, all participants must buy allowances to cover their carbon emissions in a given year. Then the revenue from the sale of those allowances is given back to the best performing organisations, adjudicated through the use of a league table. Basically, the more action you take, the more money you make.

In the first year of the scheme, the payments would have been based on the back of early action, such as the installation of automatic metering. Now the first year of the three year introductory phase will only consist of reporting emissions.According to the new guidelines, to smooth the introduction of the scheme and to help ease the upfront costs, organisations will only have to report emissions in the first year (2010/11). In subsequent years organisations will have to buy allowances corresponding to their emissions from energy use, and then surrender them by the end of the year. The only encouragement for early action now is that, in the second year (2011/12), extra weighting will be given to organisations which take action early to improve energy efficiency.

The cost of a new scheme, from the purchase of allowances and the cost of registration and compliance, to the actual cost of implementing energy efficiency measures, could prove significant. At the same time, the CBI has warned that many companies affected by the scheme don’t realise that this is the case.  This makes it understandable that the Government would weaken the stringency of the early days of the scheme, in order to help protect business in a difficult global economic environment.

The reality however is that action must be taken as soon as possible if the UK is to have any hope of achieving its emissions reduction targets, and that weakening the scheme in response to corporate concern sends exactly the wrong signal to those invested in the development of the low carbon economy. The mandated expenditure involved in improving corporate energy efficiency could provide stimulus to parts of the economy, and help the UK develop a foothold in the developing low carbon economy.

More importantly, lessons should be learned from the failures of the EU’s Emissions Trading Scheme (ETS). Concerns about the impact of the scheme on corporations led to the allocation of millions of free allowances to emitters regulated under the scheme. Not only did this result in, effectively, the allocation of free money to many major emitters but, combined with miscalculation of emissions, led to the collapse of the carbon price to less than a euro during the first phase of the scheme.

As the Government continues to undercut each positive legislative or regulatory action with subsequent amendments, if it's not careful, it will lose any hope of being taken seriously on climate change.

Posted via email from Conquering Carbon


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