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Major changed to CRC on the way

Source: Public Sector Executive May/June 12

Adam Hewitt reports on the Government’s response to the criticisms of rules on carbon reporting.

The Government is consulting on its plans to ‘simplify’ the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, which should drastically cut administration costs for the businesses and public sector organisations that must comply with its rules.

The CRC was heavily criticised by Chancellor George Osborne in the Budget, when he said: “The Carbon Reduction Commitment was established by the previous government. It is cumbersome, bureaucratic and imposes unnecessary cost on business. So we will seek major savings in the administrative cost of the commitment for business. If those cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax.”

The Department of Energy and Climate Change’s (DECC’s) own proposed changes are aimed at retaining the “energy-saving and reputational benefits” of the CRC whilst reducing the bureaucracy of taking part in the mandatory scheme, according to DECC. It estimates that by 2030, the changes will save £250m for businesses, and £50m for public sector organisations, with total savings in the region of £330m for the more than 2,000 organisations affected.

Administration costs will be cut by about two-thirds, according to DECC, by shortening the CRC qualification process, reducing the number of fuels covered from 29 to four, reducing the amount of reporting required, reducing the length of time participants will have to keep records, removing the requirement on facilities covered by Climate Change Agreement or EU Emissions Trading System installations to purchase CRC allowances, adopting new emissions factors for the CRC, and removing the detailed metrics of the Performance League Table from legislation and placing them in government guidance.

Businesses had been lobbying against some of the requirements of the CRC. In its consultation paper, DECC acknowledges the criticism of the scheme, saying: “Since the scheme began in April 2010, a number of aspects of the policy have been criticised by stakeholders.

“In particular, stakeholders have argued: the rules of the scheme are too complex, difficult to understand and costly for participants to administer; aspects of the scheme overlap with other climate change/energy efficiency policies (e.g. EU ETS, CCAs and greenhouse gas reporting); the scheme forces organisations to participate in ways which do not accommodate their natural business/energy management structures and processes.”

Climate secretary Ed Davey said: “We have listened to businesses’ concerns about the CRC and have set out proposals to radically cut down on ‘red tape’ to save businesses money. The benefits of the scheme are clear though. It will deliver substantial carbon savings helping us to meet carbon budgets, and it encourages businesses to take action to improve their energy efficiency.”

Many business leaders, including the CBI, said they still wanted the CRC scrapped rather than reformed, however. Many have criticised some of the ‘reputational’ aspects of the scheme and ‘league table’, saying it unfairly punishes organisations that did a lot of work to cut emissions before the scheme was even dreamt up. When the first league table was published in November 2011, more than 800 organisations came joint bottom, meaning they had not taken sufficient action on monitoring or cutting their energy use.

The CRC also covers most large public sector bodies: any organisation with at least one half hourly meter settled on the half hourly market that uses more than 6,000MWh/annum of half hourly metered electricity. Public and private organisations of this size together produce about 12% of UK carbon emissions.

DECC ran two consultation events on the changes, in London and Manchester, in May. The deadline to contribute to the consultation is June 18.

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