Carbon Masters


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Dec 10 2012


CRC Saved from the Chop

The Government have today published their response to the CRC simplification consultation, revealing that CRC will be retained with some key changes aimed at ‘streamlining‘ the complex piece of legislation. The changes are estimated to reduce administrative time by 55%, which equates to an adminstrative cost ladies herbal viagra saving for participants of £272 million up until 2030.

There are 45 different proposals for changing the CRC scheme that the Government has responded to, which shows just how complex this simplification process has been. I don’t intend to cover all of these proposals but this blog will highlight six key changes that have been implemented and gives an initial reaction.

1. CRC Performance League Table to be Scrapped – DEFRA originally proposed in the consultation to retain reputational driver

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created by the League Table but remove the metrics used to decide on League Table position from legislation so that the metrics could be changed ongoing. The fact that this was supported by 79% of those that responded to this part of the consultation makes today’s decision somewhat confusing. The abolition is only likely to have very minor administrative reduction for participants, but will certainly reduce the

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amount of administration time for the Environment Agency (who judging by ongoing delays to this

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year’s League Table are clearly struggling to meet this part of the contract). Scrapping the League Table also gives the Government a chance to abolish one small unpopular part of the scheme, thereby showing decisive action without throwing out the whole scheme (which is now a significant revenue source). The League Table is certainly not above criticism and has a number of flaws – it arguably doesn’t do enough to reward pioneering companies who reduced their emissions years ago and it doesn’t do enough to create a sector-by-sector comparison. However, research has shown that financial drivers are not enough and that reputational drivers are needed too to encourage emission reduction. The League Table offered a unique and unprecedented insight into how companies compare in terms of their emissions.

2. State-funded Schools in England withdrawn from CRC – this change has been implemented in direct response to feedback from local authorities who felt they had a limited influence over schools’ energy use and that current funding arrangements for the payment of CRC allowances made it difficult to incentivize schools to reduce their energy consumption. There was a lot of support for the idea of implementing an alternative scheme with schools that better meets their individual needs. The Devolved Administrations are currently assessing the best option for maximising energy efficiency in their school estates and will determine if continued CRC participation is the best mechanism to achieve this goal.

3. Number of emissions sources included in the scheme from 29 to 2 – the CRC originally covered 28 different fuels plus electricity consumption. In the consultation, DEFRA’s suggestion to reduce the

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number of fuels covered to 4 was met with overwhelming support from organisations who pointed out that a disproportionate amount of time is spent calculating emissions tiny usage of kerosene, gas oil etc. The Government have decided to go slightly and reduce the coverage to electricity and gas only, which account for 93% of CRC emissions. There is a small risk that this will encourage fuel-switching as not having to pay CRC allowance costs will actually mean other more carbon intensive fuels such as diesel and gas boots and cialis oil will effectively reduce in price. However, this idea had a lot of support from participants at the CRC consultation event I attended in Manchester, who had far greater problems getting consumption data from suppliers for other fuels than for electricity and gas.

4. Removal of 90% rule – Previously organisations only had to cover 90% of their emissions from the 29 fuels covered. In theory, not reporting the remaining 10% of emissions meant that organisations could exclude very small emissions sources which take a disproporationate amount of time to calculate. In practice, many organisations had to calculate these emissions anyway, in order to work out if they were small enough to be excluded. With this feedback in mind, emissions coverage has been increased to 100% but with a 2% de-minimis threshold for organisations with very low gas consumption.

5. Emissions factors aligned with DEFRA/DECC Emissions Factors used for Company Reporting, which are updated annually. We fully support this change which will make it much easier to use CRC data for other reporting purposes.

6. Switch from Cap and Auction to two fixed price sales – the removal of the cap-and-auction element from the second phase the scheme has been long anticipated but has now been formally announced. In order to encourage carbon forecasting and reward those who stick within their forecast carbon emissions, an alternative of two fixed price allowances is being introduced. There will be one forecast sale at the beginning of the year, and one buy-to-comply sale after the end of the reporting year. The idea behind this is that the forecast sale price would be lower than the price at the buy-to-comply sale so that participants are incentivised to forecast, but that either way there is business certainty about the price. Banking between years within the same phase will also be allowed. In light of the various challenges with cap and trade, it will be interesting to see whether this new approach will encourage forecasting and action to reduce carbon emissions, or whether the results will be the same as they would be for a straightforward carbon tax.

Any feedback or comments welcome.

About Carbon Masters

Carbon Masters is a carbon management consultancy which helps organisations in the public and private sector to measure, manage, reduce and report their carbon emissions.



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