Carbon Reduction – Does Your Business Need to Register?
Malcolm Poynter, a commercial property lawyer with Charles Lucas & Marshall explains a new Government incentive scheme aimed at making companies more energy efficient.
CRC Energy Efficiency Scheme
The Carbon Reduction Commitment Energy Efficiency Scheme (generally referred to as CRC) came into effect on the 1st April. The Scheme is based on buying CO2 Allowances and is intended to act as an incentive to larger energy consumers to become more energy efficient.
To work out whether the CRC Scheme affects you directly, the first thing to do is to work out the extent of your organisation eg this may include group companies and other legal structures such as joint ventures.
If within the organisation there is one half hourly electricity meter then the Scheme could affect that organisation. A half hourly meter is a form of metering which feeds back data to the electricity supplier on a half hourly basis.
If the organisation consumes in excess of 6,000 mega watt hours of electricity (with some exceptions) then it will need to register and take part in the Scheme. Registration is required by 30th September 2010.
Again, if you have one half hourly electricity meter you will probably need to register and provide information even though you will not take part in the Scheme itself.
The important point to appreciate is that the Scheme is not based on location or building – it is by organisation. Thus a chain of owner occupied shops could result in the overall consumption exceeding the qualification limit, bringing the business within the Scheme.
Currently, qualification is based on the year ending, 31st December 2008 and therefore the organisational structure at that date is the relevant one and the consumption of electricity during that year is the relevant qualification criteria.
It may be your organisation does not receive electricity directly, eg if you are a tenant it is quite common for the landlords to supply the electricity and to recover the cost from the tenants. In those circumstances, even though you may be a small user of electricity, it could be you are affected by the Scheme because your landlord is. The landlord may, for example, seek to pass on costs of the Scheme through the service charge arrangements.
There are special rules for public sector organisations and for franchises.
If the organisation qualifies for the Scheme then it will need to acquire Allowances for electricity to be consumed. At the end of the compliance year the organisation will need to surrender the appropriate number of Allowances to cover the emissions for that period. If you have acquired insufficient Allowances at the outset then you will need to acquire further Allowances on the market, as Allowances may be traded.
A league table will be established based on various criteria as to efficient use of energy within the organisation concerned. The Scheme is meant to be revenue neutral from the Government’s point of view, ie it is not meant as a tax. Monies raised through the sale of Allowances will be repaid to participants in accordance with their ranking in the league table (recycling payments) thus incentivising improved energy efficiency.
Further details are available at the Government website http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx or by contacting Malcolm Poynter on 01635 521212 or malcolm.poynter@clmlaw.co.uk
