With effect from April 2010 the Government is introducing the Carbon Reduction Commitment which will impose energy monitoring obligations on roughly 20,000 of the largest organisations and companies in the UK and will also impose carbon emission trading obligations on the 5,000 largest energy users within that group.  Participation in this scheme is obligatory if you meet the qualifying criteria which are calculated by reference to your electricity consumption.  Broadly if your organisation has an annual electricity bill in excess of £500,000 you are likely to be affected by this.  For a more detailed analysis of how the scheme will operate please click here.
 
The Department of Energy and Climate Change (DECC) has now published its response to the consultation on the Carbon Reduction Commitment.  To download a copy click here.  Some of the key concerns that had been voiced by the industry have been considered, but there has been no change to the fundamental purchase and rebate trading structure, which had been the subject of some detailed criticism. 
 
The first purchase of allowances in April 2011 will be for 1 year, not now 2 years' worth of CO2 credits, recognising cashflow concerns many had expressed.

Large organisations that have sub-groups which would qualify for participation in their own right can now elect to have those individual business entities report and participate separately.  Originally it had been intended that participation in this scheme would be aggregated into the headline group organisation.  This change will be of particular interest to large retail conglomerates, who will now be able to elect to participate in the scheme through their distinct brand entities rather than through the holding company.

A real concern for many was the limited account that the scheme would take of reductions in emissions that had already been made by organisations.  This threatened to unfairly penalise those businesses that had already taken steps to clean up their acts.  The DECC response states that those businesses will now receive greater recognition across not only the first year but also the second and third years of the scheme.  It will still be argued that this does not go far enough.  It could still see businesses electing to not take material steps to reduce emissions until we reach the second phase of the CRC scheme where the price payable for CO2 credits will move off the fixed price of £12 per tonne into market driven, and therefore potentially more expensive, pricing in order to maximise the benefit they gain in achieving emissions reductions.

The Environment Agency will be emailing all businesses that are required to participate at the end of this month.  If you would like any advice or want to discuss how this may affect your business please don't hesitate to contact Martin Smith, head of our CRC group.

Sustainable Business Magazine recently hosted a conference on the CRC at which Niall Mackenzie, head of carbon markets at DECC, gave some hints on some fine tuning that may be made to the CRC order in response to this Summer’s consultation.  To read more about the conference click here.