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Introduction
The focus on climate change within the UK is developing an increasing momentum following the enactment of the Climate Change Act 2008 last year. The key aims of the Act are to improve carbon management and help the transition towards a low carbon economy and to demonstrate UK leadership internationally through the setting of legally binding carbon reduction targets (reducing greenhouse gas emissions by 2050 by at least 80% compared to the 1990 baseline) and establishing carbon budgeting and emissions trading schemes. In order to initiate the implementation of those requirements, the draft Carbon Reduction Commitment Order was published last month and lays out the operation of the mandatory emissions cap and trading scheme which will operate from April 2010.
The Carbon Reduction Commitment (CRC) scheme covers all organisations with half hour meter reading and who used more than 6 000 MWh of electricity during the qualification period, 2008.
The scheme’s key features
The Carbon Reduction Commitment scheme is design to drive large scale consumers of electricity, gas and fuel oils to reduce their use of such resources in order to reduce UK plc’s carbon emissions. in order to achieve this aim, the scheme has the following key features:-
1. Key milestones
The key milestones are as follows: 2008 – Qualification period with initial information gathering being completed; April 2010 – registration for the scheme and the start of the Introductory Phase/First Compliance Year; 2010 – ongoing developed of databases, evidence pack and forecast; April 2011 Sale of allowances; July 2011 – Footprint (baseline) report and annual report required; surrender of allowances; October 2011 Recycling payment penalty or bonus issued
2. Stringent data management and reporting requirements
Every year, an organisation will need to provide an Annual Report (in April 2011, a baseline footprint report will also be required) of their performance for the preceding year which is used to purchase and surrender allowances. In addition, a detailed evidence pack annually detailing structure records, data records, special event records, metric data and records to support exemptions.
The league table performance is based upon three metrics 1. an absolute metric, which simply reflects the relative change in an organisation’s CRC emissions 2. an early action metric, which takes into account energy saving measures an organisation put in place before the start of CRC2 3. a growth metric, which takes into account the fact that a growing organisation may have an increase in its absolute emissions by measuring change in emissions intensity. This metric therefore gives credit to organisations that are expanding in an energy efficient way. |
3. Scoring mechanisms used for league tables, publication and bonus/penalties
HM Government believe that the most effective manner to drive businesses to reduce carbon emissions is to financially penalise carbon emitters who are not reducing those emissions and to “name-and-shame” those companies via league tables. Throughout the scheme, performance metrics have been set, predominantly the on-going absolute and relative (to turnover) reductions which are made. These metrics are used to calculate league table positioning, comparison against other organisations and to establish revenue recycling bonuses or penalties.
4. Early action performance metrics based upon Carbon Trust Standard Certification (CTSC) and half-hour utility metering.
As part of the first years scoring mechanism, 50% of the score will be based upon whether an organisation’s relevant emissions are being managed via CTSC management arrangements with the other 50% being based upon the percentage of relevant emissions being metered on a half-hourly basis (the higher percentage, the higher the score).
5. Allowance auctioning and capping
Once the organisation has determined their carbon emissions, allowances for those emissions must be purchased for the forthcoming year based upon the previous years values. (In April 2011, both the 2010/2011 and the forthcoming 2011/2012 allowances must be purchased). Currently, these allowances will be set at £12 per tonne for the first auction in 2011 where there will be unlimited allowances. After 2011, allowances will be capped and therefore, it is considered probable that the price of allowances will rise. Point Carbon estimate that this price could rise to £25 per tonne by 2012.
6. Exemptions, Group and Joint Ventures
All transport emissions and those emissions where an organisation does not have the contractual relationship with the utility supplier are currently outside the CRC emissions (they may be captured through the CTSC). 50:50 joint ventures are considered to be separate entities and are therefore required to register and comply with CRC independently.
Carbon Trust Standard Certification
The Carbon Trust has established itself as one of the leading organisations supporting business to manage their carbon footprint and to make long-term organisational changes to encourage the transition to a lower carbon operational model. As part of the Carbon Trust’s portfolio of incentives, the Trust has developed The Carbon Trust Standard to provide an opportunity for carbon footprint reducing organisations to benchmark their reduction, data collection methodologies and management systems against a recognised standard. As part of the CRC, having the Carbon Trust Standard Certification for all relevant emissions contributes 50% of the performance score in the introductory year.
Relevant emissions
The CTSC initially only requires emissions from electricity, gas and owned vehicles to be considered. The CRC requires a smaller component of the carbon footprint to be reported and managed.
Allowances, penalties and business planning
In April 2011, the first auction of allowances will take place requiring organisations to purchase allowances (initially at £12 per tonne) to cover all their relevant emissions for both the previous 2010/2011 year and to forecast their future requirement for 2011/2012. After this, organisations will be require to purchase (or “surrender”) allowances every year on the basis of a costed allowance schedule. Potentially, unrequired allowances should be able to be traded on secondary markets. The prices of these allowances will increase as the number of available allowances is capped and the purchase of the allowances need to be considered as part of the business planning cycle. Civil penalties are severe for mis-reporting (£40/t); inadequate record keeping (£5/t); and for late reporting (£0.05/t/working day for reporting <40 days late, £0.10/t/working day for reporting late >40 days late and failure to obtain appropriate allowances £40/t) and sit alongside criminal offences.
Viaticus Limited can work with you to undertake footprint mapping, reduction and management in order to meet the requirements of the CRC and CTSC. We are particularly experienced and skilled at developing carbon management strategies, governance and assurance regimes and data validation.