CRC Energy Efficiency Scheme: how it works and advice on managing the CRC as a business opportunity.
The CRC Energy Efficiency Scheme (also referred to as the ‘CRC scheme’ or ‘CRC’) is a mandatory carbon emissions reporting and pricing scheme to cover large public and private sector organisations in the UK (excluding state funded schools in England from April 2013), that use more than 6,000MWh per year of electricity and have at least one half-hourly meter settled on the half-hourly electricity market.
The scheme is managed, on behalf of the UK Government's Department of Energy & Climate Change (DECC), by the Environment Agency (in England), by Natural Resources Wales (in Wales), by the Scottish Environment Protection Agency (in Scotland), and by the Northern Ireland Environment Agency (in Northern Ireland).
The scheme is divided into a number of phases, with each phase lasting five years. Currently, the scheme is in its second phase running from April 2014 to March 2019.
The UK government announced in 2016 that the CRC energy efficiency scheme will be abolished following the 2018-19 compliance year.
The CRC comprises three primary elements:
1. Emissions reporting requirement
Participants in the CRC need to measure and report their electricity and gas supplies annually, via the online CRC registry following a specific set of measurement rules. The CRC registry then calculates CRC emissions in tonnes of carbon dioxide (CO2) from the data submitted for each participant.
The CRC scheme applies to emissions not already covered by Climate Change Agreements (CCAs) and the EU Emissions Trading System (EU ETS).
In addition to reporting their electricity and gas supplies, organisations are required to answer a set of corporate responsibility questions and keep evidence with records of their supplies as well as other relevant information.
2. A carbon price
The scheme requires participants to buy allowances for every tonne of carbon they emit (relating to electricity and gas), as reported under the scheme.
Participants are required to buy allowances from the Government or, if available, from the secondary market each year to cover their reported emissions. This means that organisations that decrease their emissions can lower their costs under the CRC. A failure to surrender sufficient allowances will result in a financial penalty.
During phase 2 (which started in April 2014), there are two sales of allowances for each compliance year. The first sale at the start of a compliance year is based on predicted emissions at a lower price. The second is a "buy to comply" sale after the end of the compliance year at an expected higher price.
The price of the allowances for the 2014-15 compliance year was set at £15.60 per tonne of CO2 for the forecast sale and £16.40 per tonne of CO2 at the “buy to comply” sale. All future allowance prices will be published on the Environment Agency's CRC web pages.
3. Publishing of information on participants' energy use and emissions
The energy use and emissions of all participants are published for each compliance year as part of the Annual Report Publication (ARP), which will also report emissions from previous years for all participants.
The sectors targeted by the Carbon Reduction Commitment Energy Efficiency scheme generate over 10% of UK CO2 emissions, around 55 MtCO2. The CRC Energy Efficiency scheme aims to reduce non-traded carbon emissions by 17 million tonnes by 2027. It supports the UK Government's objective to achieve an 80% reduction in UK carbon emissions by 2050.
The CRC Energy Efficiency scheme, which was called the Carbon Reduction Commitment at the time, was announced by the UK Government in the Energy White Paper (May 2007). The need for an incentive in this sector was originally highlighted by the Carbon Trust, in our report The UK Climate Change Programme: Potential evolution for business and the public sector.
Improving your energy efficiency will save you money and improve your organisation's reputation. The CRC further strengthens the business case for doing this.
Position your organisation for maximum savings
There is a clear financial incentive to perform well in the CRC. You will reduce the number of emissions allowances you need to buy if you cut emissions, putting you at a cost advantage to competitors that have not cut emissions.
An opportunity to enhance your business reputation
As well as the financial benefits of achieving emissions reductions, you will also be better positioned to reap the reputational benefits associated with these reductions. The Carbon Trust can help you to do this, including through the Carbon Trust Standard.