The Carbon Reduction Commitment (CRC) is a new mandatory emissions trading scheme covering large non energy intensive businesses and public sector. It forms part of the Climate Change Bill that was introduced into Parliament on 14 November 2007, announced in the 2007 energy ‘White Paper’ passed into law on 26th November 2008. All energy consumers with (HHM) half Hourly Metered energy consumption using 6000 MWh (equivalent to £500,000- 2008 energy prices) will have to comply. Even if your bill is lower than this, you may still be required to register.

The scheme will involve approximately 5,000 organisations and will deliver at least 4Mt of CO2 savings by 2020 through improvements in energy efficiency. This will help reduce the country's carbon footprint to deliver the ambitious emissions reduction targets set in the Government's Climate Change Act by delivering emissions reductions cost-effectively, saving both participants’ money and enabling sustainable growth, yielding a benefit to participants of £1 billion by 2020.

Around 20,000 organisations may be affected by the scheme and yours could be one of them. Failure to comply with your obligations will result in penalties including monetary fines. Although electricity suppliers will be sending letters to all their qualifying customers (you may have already received one), it will be your responsibility to respond and manage your carbon emissions, not your supplier.

What will organisations have to do?

• Measure and track their emissions.
• Report annually and maintain auditable information.
• Increase energy efficiency and undertake emission reduction activities.
• Forecast organisation’s future emissions - to determine how many allowances need to be bought for the coming year.
• Purchase allowances from the Government auction each year, and be ready to trade carbon allowances through the secondary trading market if required.

As with any trading scheme there will be winners and losers and the additional costs could be substantial. Participants will be rewarded for their improvements in energy efficiency by receiving a revenue recycling payment. Performance in the scheme will be made public, adding a reputational incentive for participant organisations

Although industry analysts believe the initial £12 per tonne cost of carbon in the scheme may not be enough to persuade businesses to start cutting their emissions, the prospect of much higher prices from year three means that smart companies cannot afford to bury their heads in the sand.

“Supermarket chain Tesco has said that even the first year of the scheme could end up costing it £40 million”.

Many organisations will have to introduce new energy management systems and procedures in order to comply with the legislation. A senior executive (Financial Director etc) will need to take responsibility for compliance and there will be significant financial penalties for non compliance. Any Organisation with half hourly electricity meters needs to act now.

Exemptions check list

• Find out if you have any HHM settled on the half hourly market.
• Find out if you used less than 3,000MWH of energy
• Check whether your organisation, or any part of it, already has a Climate Change Agreement (CCA).