CRC Energy Efficiency Scheme -- Final Changes

Please note: The content of this article is in the process of being updated to reflect the latest CRC scheme design. Updated content will be posted shortly. The Department of Energy and Climate Change (DECC) website contains complete details on program requirements and design.

CRC Energy Efficiency Scheme Poised for Launch

As part of the process of soliciting feedback, the UK government has recently completed final preparations for the launch of the CRC Energy Efficiency Scheme, now ready to emerge in April of 2010. The scheme has been under discussion for some time now, but it is sobering to hear that a significant number of the affected organizations are still floundering in the dark.

The CRC Energy Efficiency Scheme is mandatory for those organizations that use more than 6000 MWh of electricity, which roughly equates to about £0.5m in annual energy bills. 5000 or so businesses must comply and should clearly note that the terms for qualification determine an analysis of 2008 consumption figures. 2009 was the year for preparation and those companies that are still behind are taking significant risks.

As part of the process of soliciting feedback, the UK government has recently completed final preparations for the launch of the CRC Energy Efficiency Scheme, now ready to emerge in April of 2010.

Although the CRC Energy Efficiency Scheme officially commences in April of 2010, the succeeding cycle, incorporating three key phrases, will be just a precursor of what is to come. Eventually, the scheme will operate on an auction basis, with organizations being forced to trade carbon emission allowances within a capped market, with clear ramifications for those companies not able to achieve efficiencies.

CRC Energy Efficiency Scheme -- the Final Draft?

When the CRC Energy Efficiency Scheme was first proposed, it was known as the Carbon Reduction Commitment and this name has now been officially changed during final consultations. Originally, the government had proposed that organizations purchase their annual carbon emission quota each year, with the first purchase due in April 2011 relating both to 2010 and 2011 emissions. This effectively doubled the cash commitment at that point in time, but this suggestion has now been abandoned.

The CRC Energy Efficiency Scheme is intended to be revenue neutral, with organizations receiving back the funds allocated toward the purchase of carbon allowances. However, to make the scheme work, companies will be compared and inefficiencies tabled. Those who over perform will receive bonuses in addition to their refund, while those who fail to perform will receive penalties.

Certainty in Business Positions with the CRC Energy Efficiency Scheme

A survey in April of 2009 suggested that 60% of businesses affected by the CRC Energy Efficiency Scheme had done little to prepare and many suggested that they would not commence action in earnest to reduce their carbon emissions until the scheme really cranked up in 2011. This is a mistake, as there are benefits for early actors. Within the first phase, organizations that sign on to the Carbon Trust Standard or install automatic smart meters will figure highly on the initial league table and enjoy significant returns over those who don't.

It seems inconceivable that some of these major organizations could be unaware of the importance of taking early action. There could be very considerable financial implications for the organization that is unable to achieve optimum efficiencies, quite apart from the lack of "common sense" decisions associated with saving money in the first place. Any attempts to reduce energy use can only benefit the company's bottom line.

It is unlikely that any further changes will be made to the CRC Energy Efficiency Scheme by the British government and in April 2010 companies must officially register their participation as part of the first phase. The year commencing April 2010 is known as the "footprint year" and energy use during this period will form the basis for calculations in subsequent periods.

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