CRC: New branding and clearer guidelines … sort of

Late last week (7th October 2009), the Government published its report on the final Carbon Reduction Commitment consultation that closed in June. There are some clarifications and a few notable changes. I’ll focus on a few of them here.


1. No payment for the first year of the CRC
It seems the Government is bowing to concern from business about the effect of the CRC on cash flow. Under previous guidance, CRC participants would have been required to purchase allowances in April 2011 to cover their emissions for the 2010-2011 period AS WELL AS the 2011-2012 period. This is no longer the case. CRC participants will only have to purchase ‘forward-looking’ allowances, so allowances for the 2011-2012 period.

This essentially means that the first year of the CRC scheme will be a "dummy run". Sort of. Although participants will not have to purchase retrospective allowances, the first year's performance is still important because the league tables will be based on the first year’s performance and will determine the amount of recycle payments (and penalties).

2. Early action gets a boost and Carbon Trust Standard’s monopoly nipped in the bud
Until the publication of this latest guidance, the Carbon Trust Standard essentially monopolised the early action metric because it was one of only two ways (the other being the installation of AMRs - Automatic Meter Reading Systems) that CRC participants could earn early action credit. That is no longer the case. Participants who achieve equivalent energy efficiency standards will benefit under the early action metric, provided certain criteria are met.

Also, early action gets a boost, with greater credit being given to those who are proactive before the commencement date. In fact, early action will now account for 40% of a participant's overall performance in the second year of the CRC rather than 20%. Since many organisations I advice have been delaying implementing energy efficiency measures for fear of being penalized for being “too energy efficient”, this re-weighting of the early action metric has essentially taken away any rational for delaying action and in my opinion has given the CRC even greater ‘teeth’. Energy Managers and Sustainability managers now have even greater impetus – and a stronger business case to convince their Boards to just get on with it.


3. Public Sector Organisation defined
All public sector organisations are automatically included in the scheme. But it seems the definition of a public sector body isn’t as simple as may first meet the eye. For purposes of the CRC, the government has now defined a public sector organisation as a “public authority” in the Freedom of Information Act 2000 and the Freedom of Information Act (Scotland) 2002 on the basis of their individual FOI/FOI (S) listing, unless they are legally part of another body, in which case they would participate as part of that parent body. Exactly what the practical implications are is something I’m still looking into. If anyone can shed light on this quickly, please get it touch.


And finally….
The CRC has been rebranded. The CRC is now officially the CRC Energy Efficiency Scheme, reflecting the Government's primary aim of incentivising businesses to become more energy efficient (rather than reducing carbon emissions per se, a subtle but important difference).


Other changes refer to the treatment of renewables and further clarification on the definition of principal subsidiaries.

Further guidance will be published by the end of October, while the Order itself is due out around the end of the year.

In the meantime, for more information, visit http://www.decc.gov.uk/en/content/cms/consultations/crc/crc.aspx