planning and environmental law update
Carbon Reduction Commitment
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC)
- formerly the Carbon Reduction Commitment - is the first
mandatory emissions trading scheme and is due to begin in April
2010. The Government aims to reduce carbon emissions in the UK by
60% compared to 1990 levels and to increase energy efficiency. The
scheme is designed to act as a financial incentive to reduce carbon
emissions, with organisations buying allowances equal to their
annual emissions.
The CRC will be compulsory for organisations, public and
private, whose electricity consumption in 2008 exceeded 6,000MWh on
half hourly metering (equates to an annual bill of approximately
£500,000). The scheme affects organisations as a whole - the parent
company will be the CRC participant for its group. However,
following recent amendments, subsidiaries that are large enough to
qualify in their own right may opt to do so separately from their
organising group. State funded schools will be covered by the CRC,
however, they will be included as part of the local authority and
not as individual organisations.
Under the CRC, there are penalties for exceeding the carbon
allowance, but there are also bonuses for the best performing
organisations. There will also be penalties for failing to register
by September 2010, which will increase for each day the company
fails to register.
The sale of allowances will begin in April 2011; these will be
for the following year’s carbon emissions. At the end of the first
year of trading, organisations will be able to trade any allowances
they have left on the open market, thus providing a financial
incentive not to use the full carbon allowance. This will also
provide a disincentive to exceeding the allowance, as the price of
the additional allowances will be governed by the rules of supply
and demand.
Eventually, there will be a cap on the total number of
allowances available each year to ensure that carbon emissions are
reduced overall. In order to deal with this, organisations will be
able to trade their allowances. These will be sold at the market
rate so will provide a further financial incentive to reduce carbon
emissions and increase energy efficiency.
Undoubtedly, this scheme will have an impact on the demand for
energy efficient commercial buildings. The more energy efficient
the buildings occupied by bodies subject to CRC, the more
allowances they will have to trade on the open market and the more
money they will be able to make. Energy efficiency in commercial
buildings may even attract a premium in their valuation if energy
savings can be proven in comparison to other similar buildings at
the point of sale.
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general interest and information. It contains only brief summaries
of aspects of the subject matter and does not provide comprehensive
statements of the law. It does not constitute legal advice and does
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