Legislation

You are here: Home > Legislation > Carbon Reduction Commitment

Carbon Reduction Commitment

What is it?

A mandatory climate change and energy saving scheme

Who does it affect?

Large public and private sector organisations consuming more than 6000MWh

Details?

Links:

www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx

www.environment-agency.gov.uk/business/topics/pollution/98263.aspx

The CRC is a mandatory energy efficiency scheme aimed at improving energy efficiency and cutting emissions in large public and private sector organisations. These organisations are responsible for around 10% of the UK’s emissions.

The scheme provides a financial incentive to reduce energy use by putting a price on carbon emissions from such use and also provides the opportunity for participants to make savings on energy bills through improved energy efficiency. In CRC, organisations buy allowances equal to their annual emissions. The overall emissions reductions achieved by the scheme will be determined by the emissions ‘cap’ on the total allowances available to CRC participants. Within the overall limit, individual organisations can determine the most cost-effective way to reduce their emissions. This could be through buying extra allowances or investing in ways to decrease the number of allowances they need to buy.

All the money raised through the allowances will be recycled back to participants, according to how well they perform. The scheme features an annual performance league table that ranks participants on energy efficiency performance. Together with the financial and reputational considerations, the scheme encourages organisations to develop energy management strategies that promote a better understanding of energy usage.

The scheme is designed to tackle CO2 emissions not already covered by Climate Change Agreements (CCAs) and the EU Emissions Trading Scheme.

Organisations are eligible for CRC if they (and their subsidiaries) have at least one half-hourly electricity meter (HHM) settled on the half-hourly market. Organisations that consumed more than 6,000 megawatt-hours (MWh) per year of half hourly metered electricity during 2008 qualify for full participation and need to register with the Environment Agency, who is the administrator for the scheme .

Organisations that do not meet the 6000MWh threshold will have to make an information disclosure of their half hourly electricity consumption during 2008, which they submit once per phase. It is estimated that initially around 5,000 organisations will qualify for full participation, including supermarkets, water companies, banks, local authorities and all central Government Departments. Qualifying organisations will have to comply legally with the scheme or face financial and other penalties. A further 15,000 will have to make an information disclosure.