ABC of CRC

 A  What is the CRC?

The CRC forms part of the Climate Change Act 2008 and is aimed at medium energy users in the commercial, public and light industrial sectors. Participants will have to predict their annual energy use and buy carbon allowances equivalent to their emissions. They will also submit performance data which will determine their position on a league table, to be published annually.

The cost of allowances will be refunded (‘recycled’) subject to a bonus or penalty determined by their league table position. Participation is mandatory for organisations which consumed over 6,000mWh electricity through a Half Hour Meter in 2008. Organisations using between 3,000 and 6,000mWh will probably have to make an information disclosure.

All subsidiaries and parents are included in the term ‘organisation’ although some of these may be eligible to participate in their own right.

In the first trading year (2011/12) emissions allowances will be available at a fixed price and in unlimited quantities. Thereafter, the quantity will be capped and reduced year on year, with the price determined by market forces. The revenue raised will be recycled, with the cost of allowances refunded to participants plus or minus a bonus or penalty, depending on their performance.

B  How is it measured?

Performance is to be measured by requiring participants to report on their activity against a range of ‘metrics.’ It will be published in a league table, the position in which will determine a participant’s recycling bonus or penalty; +/- 10% in year one, 20% in year two and so on, up to 50%. Initially, these metrics take account of ‘early action’; the extent to which an organisation’s portfolio has achieved Carbon Trust status and the proportion of energy measured by Automatic Meter Reading (AMR). In subsequent years the metric will also reflect improvements in energy performance both historic and relative to other participants in the scheme, adjusted for changes in the organisation’s size.

Reports will be submitted in an ‘evidence pack’ incorporating details of:

• corporate structure
• data records (eg utility invoices)
• ‘special event’ records to explain anomalies and unusual events (exceptional power usage or meter changes)
• data for the metrics and exemptions
• energy credits.

Although participation is mandatory for qualifying organisations it presents an opportunity to take a proactive approach and capitalise on energy management, reputational and financial opportunities. Equally, participants may opt for a basic ‘compliance-only’ approach.

By April 2011, participants should have predicted their emissions for the coming year for which they must then buy allowances.

This will be recycled in October 2011 +/- the bonus or penalty as determined by its position on the CRC league table. The sum at risk therefore lies in the range +/-10% increasing to +/- 50%  by year 5.

A participant’s position will reflect its performance relative to other participants, measured by the extent to which it has met the Carbon Trust Standard (CTS) and has voluntarily installed automatic meters to measure its energy use (AMR).  In year 1, up to half of the 10% recycling bonus/penalty will be awarded for each metric.

C  How is it assessed?

Assessment against the Carbon Trust Standard is undertaken by an independent consultant. It provides an objective measure of carbon performance by examining, carbon footprint measurement, carbon management and carbon reduction. The metric will reflect the proportion of the energy use covered by CTS.

AMR refers to billing meters capable of measuring the amount of electricy or gas used on at least a half hourly basis, and making this information available to the customer. To count towards the early action metric, with certain exceptions, AMR must have been installed voluntarily. The metric will reflect the proportion of energy use measured through AMR.

Note that in subsequent years this bonus/penalty will increase as, no doubt, will the cost of carbon trading.

Documentary proof that an organisation has considered and met its obligations must be submitted in an Evidence Pack.  This includes utility bills, organisational structure records, special events (unusual events such as a meter replacement or portfolio changes) and any exemptions (eg relating to CCA or EUETS).

top