Concept’s Guide to the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme
Get the full story on the CRC Energy Efficiency Scheme: who’s liable, how to comply – and how to get the best out of the legislation.
What is the CRC Energy Efficiency Scheme?
The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme requires large organisations to report and pay for the amount of carbon they emit from electricity and gas use.
What does it mean in practice?
If you’re covered under the CRC, you must:
- Report on energy use
Gather information about your energy supplies, create an ‘evidence pack’ and submit a report to the regulator.
- Pay for carbon allowances
Buy and surrender allowances per tonne of CO2 emissions you generate.
Is it a carbon tax?
In essence, yes. But it’s also supposed to make participants more aware of their energy use, through the reporting feature, which includes the requirement that information about energy consumption is made public.
How can I reduce the amount I have to pay under the CRC?
Improving energy efficiency and using less energy will reduce the carbon footprint of your organisation. This has two benefits:
- Need to buy fewer carbon allowances;
- Save money through lower energy bills, helping to offset the cost of the CRC ‘tax’.
CRC compliance can also provide a starting point for putting in place a carbon reduction strategy, unlocking much greater energy savings.
Find out who’s liable under the CRC.
Who does it affect?
It affects both public- and private-sector organisations that are large, but non-energy-intensive.
How is ‘large’ defined?
To qualify under the CRC, you must use more than 6,000MWh of electricity through settled half-hourly metering per year. (This roughly equates to an annual spend of £500,000 or more on electricity.)
Some public bodies, such as central government departments, are also required to participate in the CRC, even if their electricity use is lower than 6,000MWh.
Give me some examples…
Supermarkets, water companies, banks, hotel chains, large retailers, and local authorities.
What if I’m already covered by other energy legislation?
Energy already covered under the Climate Change Levy or the EU Emissions Trading System is not included in the CRC.
Get to grips with the ins and outs of the CRC.
What Phase of the CRC are we in now?
We are currently in Phase 2, which runs from 1 April 2014 to 31 March 2019.
The qualification year for Phase 2 was between 1 April 2012 and 31 March 2013. We are now in a compliance period.
Who is the CRC regulated by?
The Environment Agency administers the scheme for the UK and regulates the scheme in England. The Scottish Environment Protection Agency, Northern Ireland Environment Agency and Natural Resources Wales regulate the scheme in their own countries.
Does the CRC cover ALL of my organisation’s CO2 emissions?
No, just those from electricity and gas use. CO2 emissions excluded from the CRC include:
- Onward supply
- Domestic accommodation
- Renewable electricity generated on site
Will my energy use be made public?
Yes, but only in a limited capacity. Every year, the Environment Agency publishes a spreadsheet that lists participants’ energy use and emissions. However, this information is no longer ‘ordered’ from best to worst in league table format. (This league table was phased out in 2013.)
The financial aspects
Find out how much you have to pay, when and where.
How can I buy carbon allowances?
Allowances can either be bought from the Government during the fixed-price sale, or traded on the secondary market.
There is a month-long sale period at the start of the compliance year. Then there is a second ‘buy to comply’ sale after the end of the compliance year, where allowances are sold at a higher price.
How much does a carbon allowance cost?
The initial price is £12 per tonne of CO2.
From 2015-2016, the allowance price will increase in line with the retail price index.
Are there any other payments that need to be made?
In addition to carbon allowances, participants must pay £950 to register with the CRC (at the beginning of each new Phase) and £1,290 every year they remain a participant.
Find out what happens if you don’t comply.
Are there penalties if I fail to comply?
Penalties are given for the following reasons:
- Failure to register for the CRC
Immediate fine of £5,000, plus a further £500 per working day for each subsequent working day of delay up to a maximum of 80 working days.
- Failure to disclose full information during registration
£500 per meter not reported in the registration.
- Failure to submit an annual report of energy use
Immediate fine of £5,000, plus a further £500 per working day for each subsequent working day of delay up to a maximum of 40 working days.
- Failure to surrender the correct number of allowances
£40 per tCO2 penalty for each allowance not surrendered by the deadline.
- Inaccurate reporting about energy use
Immediate fine of £5,000, plus £40 per tCO2 inaccurately reported.
Your non-compliance and penalty amount will also be made public.
What margin of error is considered acceptable?
A margin of error of 5% is considered acceptable when reporting energy use.
Will I be audited under the CRC?
You could be. The CRC involves self-certification, but each year, a proportion of organisations will be audited.
An experienced carbon consultant can offer advice on ensuring continued compliance with the CRC, or take over full management of the compliance process.
At Concept Energy, we are closely involved with the CRC, working with a number of our larger and more complex clients. This includes every aspect of the process, from registration, creation and maintenance of Evidence Pack, Footprint and Annual reporting, through to the purchase and surrender of allowances.
We also support our clients in tying CRC compliance to bigger-picture carbon-reduction strategies, in order to reap the greatest energy-saving benefits from the scheme.