Last reviewed 5 November 2013

A new CRC Energy Efficiency Scheme Order (SI 2013 No. 1119) came into force on 20 May 2013. The Order revokes the earlier CRC Scheme Order, but allows for certain provisions that will continue under Phase 1. The revisions aim to make the CRC qualification, monitoring and reporting process easier for registered participants. John Barwise reports.

The CRC Energy Efficiency Scheme, often referred to as CRC, is a mandatory, UK-wide trading scheme introduced in April 2010 by the previous government. The scheme is designed to incentivise large and medium-sized organisations in the public and private sectors to reduce their carbon emissions by introducing cost-effective energy efficiency options.

The scheme is split into phases. The first phase of the scheme runs from April 2010 to the end of March 2014. Organisations that met qualification criteria in Phase 1 will have to participate in Phase 2, and all participants will need to register for Phase 2 between November 2013 and March 2014. After Phase 2 there will be four further phases, each of five years, and a final phase of four years starting in April 2039.

The revised CRC scheme aims to reduce complexity and simplify administration, which the Government claims will significantly reduce the costs for scheme participants.

The basic principles and requirements of CRC remain the same. Each year participants will have to monitor and report their energy supplies, which are used to calculate their emissions of carbon dioxide (CO2). Participants can offset these emissions by purchasing and surrendering “allowances”, where one allowance represents one tonne of CO2. The allowance price for 2013/2014 remains unchanged at £12 per tonne but will rise to £16 in 2014/2015 and will increase yearly in line with the retail price index.

The main changes to CRC will commence at the start of Phase 2, but the following are some of the key changes that also apply in 2013/2014 under Phase 1.

  • Reportable energy supplies are reduced from 29 to 2 — gas (used for heating purposes only) and electricity.

  • Reporting of 100% of relevant electricity and gas supplies — previously 90% of emissions were covered, including the EU Emissions Trading Scheme, Climate Change Agreements and CRC schemes.

  • Footprint reports, previously needed under the 90% rule, will no longer be required.

  • Exclusion of domestic gas supplies with an annual quantity of 73,200kWh or less.

  • Exclusion of electricity supplies from domestic sources.

  • Introduction of an organisation-wide 2% de minimis threshold for gas where consumption is less than 2% of the overall electricity consumed in the first reporting year of the relevant phase.

  • Restriction of the circumstances where you can claim Electricity Generating Credits (EGCs).

  • Abolition of Performance League Tables, although the Environment Agency will continue to publish data on participants’ energy use and emissions.

Most of the major changes to the CRC scheme will apply with the start of Phase 2 in 2014. The early release of the revisions is intended to give participating organisations time to adjust to the new regime. Major changes under Phase 2 include the following.

  • Registration deadlines will be two months before the beginning of a CRC phase — for Phase 2 the deadline is 31 January 2014.

  • Qualification criteria — the 6000MWh threshold will still apply in Phase 2, but only settled half-hour meters will count towards the qualification threshold. Under Phase 1 other types of half-hourly meters and dynamic supply counted towards qualification.

  • EGCs — these were previously awarded for energy generated from renewables that do not receive either Renewables Obligation Certificates or Feed-in Tariffs, but have been removed from Phase 2. The Government argues that CRC is aimed at improving energy efficiency to reduce emissions and not for offsetting schemes.

  • Self-supplied electricity relating to gas and electricity generation, transmission or distribution is excluded.

  • Disaggregation — currently participants with undertakings can only disaggregate certain parts of their organisation structure. Under Phase 2, participants will be able to disaggregate any undertakings in their group, provided it is not the highest UK undertaking.

  • Allowances — supply rules are in place for annual reporting and surrender of allowances. From next year, allowances will be sold in two fixed price sales — one forecast sale at the beginning of the year and one “buy-to-comply” sale after the end of the reporting year.

  • Landlords are responsible for the supply where they receive or pay for the supply and pass it on to their tenant. Tenants are responsible for the supply if they receive their supply from someone other than the landlord.

  • Data retention — participants are currently required to retain data for seven years from the end of a phase. In Phase 2, this will be reduced to six years from the end of the compliance year to which the data relates.

Emissions factors for Phase 2 will be set each year in line with national greenhouse gas emissions factors. A separate emission factor will be set for self-supplied electricity.

Guidance on the revised CRC scheme, together with other minor changes, is available from the Environment Agency.

Overall, the scope of the revised CRC scheme is more clearly defined and the proposed changes in Phase 2 will make it much easier to administer. Reducing the number of fuels covered by the scheme from 29 to just 2 (electricity and gas for heating) will be welcomed by all CRC participants. But critics in both public and private sector organisations argue that the compliance scheme is still too complex and that a conventional environmental tax regime, coupled with a coherent and transparent reporting obligation, would be more appropriate. The CRC scheme will be reviewed again in 2016.