Companies based in the UK that consume more than 6,000 MW/h of electricity a year, equating to energy bills of over £500,000, have to register to join the CRC Energy Efficiency Scheme. There’s no opt out and there are severe fines for companies failing to comply, with a £5,000 immediate fine issued with additional penalties depending on the type of severity of the infraction.
Since 2010, when the scheme became mandatory, companies have to measure their CO2 emissions, report their energy usage and purchase allowances from the Environment Agency to cover the carbon emissions that their businesses create.
Where are we today?
The scheme is now in the ‘initial phase’ which runs from 1st April 2014 to 31st March 2019. During this time, affected businesses are expected to do all they can to reduce their carbon emissions, with the annual reporting and purchase of allowances being used to measure performance. Companies must have assessed their carbon emissions needs up to March 2015 and therefore purchased their 2014/2015 emissions allowances by 31st July 2014.
The carbon emission allowances can be purchased by companies for £15.60 per tonne of CO2. This has increased from the £12 per tonne of CO2, paid in the first phase of the scheme, so there is a clear financial incentive for companies to keep their emissions down further in this initial stage.
Companies can purchase additional allowances later in the year, just before they have to submit their annual reports, during a ‘buy-to-comply’ sale of carbon emissions. For many companies, this is an opportunity to shore-up their emissions allowances to take into account any shortfall that may occur during the year so that any non-compliance can be avoided.
However, the downside of purchasing allowances during this window does mean an increased cost at £16.40 per tonne of CO2, making it a less desirable time to purchase emissions allowances. It is therefore important that affected companies know, understand and have accurate figures for their CO2 emissions during the initial allowance purchase window in July 2014.
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