The Carbon Reduction Commitment: How Will it Affect you?

What Is It?

The Carbon Reduction Commitment (CRC) is designed to help organisations to focus attention on their energy efficiency and to plan long-term strategies for reducing their carbon emissions. It will affect all companies with energy bills in excess of  500,000 per year. If you are one of the 10,000 companies that fall into the category, you will need to comply with the new legislation, in order for Government to monitor energy usage and help them to keep to their existing commitments to reduce greenhouse gas emissions. However, if 25% of your energy emissions are covered by the Climate Change Levy and Agreements (CCA) you will be exempt from CRC.


What Happens Next?

You will be contacted by Defra and invited to register. They will explain in detail how the scheme works and what steps you need to take. You will need to have a half-hourly meter fitted and to report your total energy usage to Defra. If there are a number of companies within your organisation, the highest parent organisation will be responsible for reporting energy consumption across all of the subsidiary sites. If the meters show you exceed 6,000 MWh you will be included in the CRC scheme.


The scheme is split into stages, with energy usage initially monitored over a 3-year period and subsequent stages lasting for 5 years. The scheme works as a ‘cap and trade’ system, where organisations are required to purchase and surrender allowances in proportion to their carbon dioxide emissions. In the first 3 years there will be unlimited fixed price allowances available for purchase. The total emissions will be capped during the 5 years following this stage and a decreasing number of allowances will be sold at annual auction.


What’s In It For Me?

Over the course of the monitoring stage, you will be required to submit data reports to Defra, under guidelines you will be issued with. These will include Structural Reports, Data Reports and Special Event reports. From the evidence gathered you will be given a league table position in relation to other companies participating in the scheme, creating a base line for the CRC. Your position on the league table is important because it demonstrates your Corporate Social Responsibility and which companies are taking their carbon emission responsibilities seriously. Your position in the league table also affects the amount of recycled revenue that will be returned to you as a company. The higher up the league table you are, the more you receive back.


What If I Don’t Comply?

Participants must collate and retain an ‘evidence pack’ to show reported energy use across all of the organisations within their company. Approximately 20% of companies will be chosen to undergo an audit each year. Failure to comply with reporting requirements, accurate recording of information, or paying for allowances will be met with relatively heavy fines, due to the ‘light touch’ nature of the scheme. Fines will be approximately  25 per tonne of CO2 emitted. For an organisation who meets the threshold of 6,000 MWh of electricity fines could amount to  64,500. It is vital therefore that companies build energy efficiency into their business models and contact Defra for advice if they fall within the threshold for inclusion within the scheme.


This post was written on behalf of MHA lighting, a producer of energy saving lighting products.

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A marketing executive working on behalf of Energ Group to fulfil the marketing ambitions of the 8 divisions held in Energ Group. This includes the awareness of them being at the forefront of renewable energy sources such as energy from biomass, geothermal, solar thermal among many more energy possibilities.

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