CRC may go as DECC sets out its options for change

2nd March 2011

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Plans to further simplify the Carbon Reduction Commitment Energy Efficiency scheme (CRC) could see it either merge with other climate-change policies, such as the existing Climate Change Levy or possible mandatory greenhouse-gas reporting, or even disappear altogether.

DECC, which has issued separate “informal” discussion papers outlining options for simplifi cation in fi ve areas (see box below), says that it welcomes views on fundamental change to the scheme.

However, under the enabling legislative framework – Climate Change Act 2008 – any modifi cation that does not include a market for trading allowances would see the abolition of the scheme.

Although the energy and climatechange department stresses that the papers are not government policy, just options for consideration, some businesses have criticised the possibility of closure.

“We have been promised simplification of the CRC and its abolition would be the ultimate blunt instrument to achieve this,” comments Stuart Bowman, director of energy and sustainability, at consultancy hurleypalmerflatt.

Following the changes made to the CRC in the Comprehensive Spending Review last November, Bowman says that participants urgently need clarity not more radical alterations: “Our recent research found that, even for those taking a best-practice approach, CRC compliance would currently cost £430,000 for an organisation with a £1 million annual energy spend.

"With substantial sums of money in play it’s time to stop the confusion and agree a way forward.”

Abolishing the scheme is only one option, however. Others include aligning the scope of both existing qualification criteria – the presence of one or more half-hourly electricity meters (HHMs) settled on the half-hourly market and annual consumption of at least 6,000MWh of electricity – to focus on settled HHMs only.

DECC says that such a move would simplify the process for assessing qualification and enhance the administrator’s ability to verify registration accuracy.

To maintain participation levels, it would also mean lowering the current 6,000MWh threshold, bringing smaller organisations into the scheme.

DECC says that any future formal legislative proposals would be subject to public consultation and that its intention is that these would come into force through affirmative Orders in Council before registration for the second phase of the scheme begins in April 2013.

The deadline for responses to the papers is 11 March.

Simplifying the CRC

The five priority areas highlighted by DECC:

  • Private sector organisational rules.

  • Review of supply rules.

  • Qualification criteria.

  • The overlap between schemes – especially between the CRC, climate-change agreements and the EU emissions trading scheme.

  • Timing and frequency of trading allowances from 2012 onwards.

Further areas where change may be needed:

  • The reputational incentives of the scheme.

  • Definition of transport used in the scheme.

  • Treatment of public versus private sector participants.

  • Treatment of heat.

  • Landlord/tenant relationships/responsibilities.

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