Computatis - Cost effective Carbon Accounting

1. Key Changes to the CRC EES to Date, and Anticipated Future Change

• April 2011 - Extension of the Introductory Phase including removal of ‘information disclosure’ requirement (removed CRC obligation of approximately 12,000 organisations)
• March 2012 - Consultation on simplifying the CRC Energy Efficiency Scheme which proposed the below key changes yet to come into effect:
  • One-Stage Qualification Test: based on 6,000 MWh criterion – this will likely increase eligible participants due to the proliferation of AMRs and half-hourly meters
  • Improved Supply Rules: in the case of energy procurement through third parties, ensure that CRC responsibility resides with the party most able to improve energy efficiency. This will include:
    • Removing the payment criterion from the supply definition
    • Reducing the number of CRC-eligible fuel types
    • Remove exemption from CRC any Electricity Generating Credits
    • Exclude electricity meters profile classes 01 and 02 by default
  • More Coherent Policy Framework: This will include:
    • Removal of all energy supplies to CCA/EU ETS from CRC EES
    • Elimination of the Footprint Report requirement
    • Mandated reporting on 100% of electricity, gas, gas oil and kerosene
    • Removal of the distinction between core and residual
    • Alignment of CRC and GHG emission factors
  • Flexible Organisational Rules: Remove concept of Significant Group Undertaking, allow any undertaking/subsidiary of a corporate group to disaggregate and participate separately (N.B. Parent group must continue with CRC obligations)
  • Reduced Reporting Burden: Removal of the Footprint Report, only one Annual Report required, reduce retention time for records to 6 years
  • Simple Allowances Trading Scheme: These changes include:
    • From 2013, participants could delay surrendering their allowances until the end of September
    • Two fixed-price sales, one forecast sale, and one buy-to-comply
    • Emergence of a secondary market for allowances
    • Removal of the allowances cap
  • Future Review of Performance League Table: to be removed from the legislation and placed within a Guidance document, then effectiveness as a reputational driver reviewed.

2. What is the Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES)?

The CRC EES is a UK-wide mandatory emissions reporting and reduction scheme, operative since April 2010. The scheme aims to encourage energy efficiency and a resulting reduction in greenhouse gas (GHG) emissions. Both public and private organisations that fall within the mandate of the scheme are required to report on their emissions, and purchase and surrender carbon allowances.

A Performance League Table of all participating organisations (PLT) is published annually. This is quantified by a weighted score (the sum of the below criteria, multiplied by the weighting for each metric):

• Early Action Metric: use of automatic meter readers (AMR) and accredited carbon management schemes
• Absolute Metric: annual percentage change in overall CRC emissions
• Growth Metric: percentage change in CRC emissions per unit turnover (private sector), or revenue expenditure (public sector).

A high-ranking performance on the PLT is a valuable asset for an organisation’s public image.

3. What Organisations are Subject to the Scheme?

CRC EES covers large, non-energy-intensive organisations:

• Consuming more than 6,000 MWh of energy annually through settled half-hourly meters (approximately £500,000 annual energy spend); and
• Not regulated by the European Union Emissions Trading Scheme (EU ETS); or
• That have less than 75% of emissions already regulated by Climate Change Agreements (CCA).

At present over 2000 organisations take part in the Scheme. The qualifying criteria may enforce wider participation following Phase 2 of the Scheme (April 2012 – March 2013).

4. How Does the CRC EES Affect my Business? Reporting and Verification Requirements:

If you conform to the above criteria then your organisation will be subject to Phase 2 of the Scheme, regardless of whether you qualified for Phase 1. You will need to:

• Measure your annual energy consumption
• Measure your annual CO2 emissions from that consumption (Computatis can do this for you)
• Compile an evidence pack of all your consumption data (including invoices and meter readings etc.), any structural changes to your organisation, and any written policy commitment to reduce your consumption, in order to prepare for Environment Agency (EA) Audit
• Submit a report to the EA and purchase your resulting emissions allowance.

5. Civil Penalties and Criminal Sanctions for Offences Under the CRC Order

Civil Penalties: Under the CRC civil penalties are potentially unlimited and so could run to hundreds of thousands of pounds or more. Clicking this link will open a pdf document describing the situations in which penalties may be applied and details of the way they are calculated.

Criminal offences: The following acts, instead, constitute criminal offences and will consequently be responded to through warning, formal caution and prosecution:

• Obstruction of an authorised person
• Knowingly or recklessly make a statement which is false or misleading in a material particular
• Failure to comply with an enforcement notice
• Failure or refusal to provide facilities or assistance or to permit any inspection reasonably required by an authorised person
• Prevent any other person from appearing before an authorised person or answering any question to which an authorised person may require an answer
• Impersonation of an authorised person
• Refusing to allow access to an EA Officer or other administrator where access is required in order to monitor compliance.

6. Key Dates

• September 2011 onward: Audit of first 5/6 years of Scheme by the EA/Scottish Environment Protection Agency/Northern Ireland Environment Agency, acting as CRC EES regulator
• April 2012 – March 2013: Third Accounting period for Phase 1
• April 2012 – March 2013: Qualification year for Phase 2
• April 2013 (expected): New legislation to simplify the CRC EES
• April 2013 – March 2014: Fourth and last Accounting period for Phase 1
• April 2013 – March 2014: First Accounting and Registration year for Phase 2
• April 2014 – March 2015: Second Accounting year and First Allowances surrendering year for Phase 2.

To access the comprehensive CRC Timeline, please see the EA’s Website.

7. Phases

The Scheme is composed of three Phases running until 2024. Every ‘CRC year’ runs from 1st April to 31st March of the following year.

Phase 1: This is comprised for four compliance years as follows:

• Year 1 (reporting-only year): 1 April 2010 to 31 March 2011
• Year 2 (reporting + allowances buying): 1 April 2011 to 31 March 2012
• Year 3 (reporting + allowances buying): 1 April 2012 to 31 March 2013
• Year 4 (reporting + allowances buying): 1 April 2013 to 31 March 2014.

In the Footprint Report for 2010-11, organisations had to establish that 90% of their emissions fell within a regulated scheme (EU ETS, CCA or CRC EES). It also established which ‘Core’ emissions would be regulated by default, i.e. any gas meters measuring annually >73,200 kWh, and all half-hourly electricity meters. It also quantified which additional emission sources, if any, would be included within the assessment as ‘Non-core’, creating a Residual Measurement List. These nominated sources became the basis for reporting over the next 3 years for each organisation. ‘Allowances’ were introduced (meaning an allowance to emit GHG) and priced at £12/tonne. Each participating organisation is liable to pay for their allowances in the form of a tax to the Department for Energy and Climate Change (DECC) based on their Annual Report emissions.

Phase 2: This will be comprised of six compliance years, preceded by one qualification year. Any organisation with a half-hourly meter or AMR will be assessed for qualification in 1st April 2012 - 31st March 2013. If they qualify they will be subject to Phase 2 of the Scheme. Organisations already participating will be assessed for Phase 2 qualification in 2014 under the same criteria for Phase 1 qualification (although this may change).

Please note that DECC and Defra are currently undertaking a comprehensive review of CRC EES. The likelihood of a simplified qualification system under revised regulations is therefore high, although the baseline figure of 6,000 MWh is set to remain. The idea of two yearly sales of fixed price allowances has also been tabled. The first sale will be at a lower price, whilst the second will be retrospective and therefore more expensive. For more information see: Simplifying the CRC Energy Efficiency Scheme: Next Steps.

• Year 1 (reporting-only year): 1 April 2013 to 31 March 2014
• Year 2 (reporting + allowances buying): 1 April 2014 to 31 March 2015
• Year 3 (reporting + allowances buying): 1 April 2015 to 31 March 2016
• Year 4 (reporting + allowances buying): 1 April 2016 to 31 March 2017
• Year 5 (reporting + allowances buying): 1 April 2017 to 31 March 2018
• Year 6 (reporting + allowances buying): 1 April 2018 to 31 March 2019.