Carbon Reduction Commitment consultation

24 November 2009

Early in October the Government released its long awaited response on the now re-titled 'Carbon Reduction Commitment Energy Efficiency Scheme'(CRC EE). The Response has made some significant changes to the scheme, providing clarity on some issues and further confusion on others.

The change of most immediate significance is that organisations caught by the CRC EE will not need to purchase allowances for the 2010/2011 year. Organisations will still need to register by September 2010 and fulfill all reporting requirements for the 2010/2011 year. For budgeting purposes this change will mean that the predicted costs to organisations at the April 2011 sale will now have been cut in half, as only one year worth of allowances (for the 2011/2012 year) will be purchased at that sale.

Another significant change is the ability to disaggregate Significant Group Undertakings (subsidiaries that in their own right meet the 6,000 MWh of half hourly metered electricity use in 2008 threshold). This will allow SGUs to participate in the CRC EE Scheme in their own right including being listed as a separate entity in the league table, purchasing allowances, receiving separate recycling payments and being legally responsible for compliance with the CRC EE Scheme. For those organisations covered by the CRC EE Scheme it will be important to consider whether disaggregation could provide any benefits under the scheme.

Also key is that the definition of a 'supply' under the CRC EE is to be updated from the previous 'counterparty to the energy supply contract' concept. This definition is to be broadened so that it covers a wider range of supply arrangements and there is greater clarity on the types of supply that will be included in the CRC EE. Organisations will need to analyse their supply arrangements against the updated definition to review which supplies they will be responsible for under the CRC EE.

The Response included a significant amount of changes that we have not been able to mention here. The updated CRC EE Order is to be publicly released in December this year and DECC is aiming for it to proceed through the Parliamentary process and pass into law by March 2010. If you would like any assistance on CRCEE, or would like to receive updates on further changes please contact Lucie Drummond on +44 (0)117 307 6906 or lucie.drummond@burges-salmon.com.