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Carbon reduction commitment explained

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The CRC Energy Efficiency Scheme (CRC) is a new regulatory incentive to improve energy efficiency in large public and private sector organisations. Buderus' commercial sales manager, Mike Southall, explains how it works and which organisations will be affected:

Public and Private Sectors

CRC will affect large organisations in both the public and private sector. Organisations that meet the qualification criteria, which is based on how much energy they were supplied in 2008, must participate in CRC.

All organisations that had at least one half hourly meter (HHM) settled on the half hourly market in 2008 will be required to do something under the CRC.

Around 20,000 public and private sector organisations will need to participate in some way. The majority of these will simply be required to make an 'information disclosure' once every few years that tells the administrator about their energy usage.

Energy bills

An organisation qualifies as a full participant in CRC if at any point during the qualification period it had at least one HHM settled on the half hourly market, and its 2008 annual energy supply through all HHMs was at least 6,000 MWh.

This equates to an annual energy bill of approximately £500,000 a year, including electricity, gas and/or oil usage.

These 5,000 organisations will have to monitor their emissions and purchase allowances from the Government for each tonne of CO2 they emit. So the higher their carbon emissions the more allowances they will have to buy, thus creating a direct incentive for these organisations to reduce their emissions.

The costs

Allowances will be sold by the Government at the start of the annual reporting year. Participants do not have to purchase allowances for the first annual reporting year of each phase, but they will have to report their emissions.

During the introductory phase, allowances will be sold at a fixed price of £12 per tonne of CO2.

Following the initial sale period, participant organisations can buy or sell allowances by trading on what will be known as the secondary market.

This enables organisations that have reduced their energy supplies more than they expected to sell some allowances, while those that have higher emissions than anticipated can purchase extra allowances.

The Timings

The scheme is divided into set time periods known as phases. The first phase is the introductory phase and runs for three years. Subsequent phases each last for seven years. The first two years of these phases are preparatory, and overlap with the previous phase.

Each phase has:

  • A qualification period, during which organisations must assess whether or not they qualify to make an information disclosure or must participate fully in CRC.
  • A registration period, where organisations must either submit their information disclosure or register as a participant with the administrator.
  • A series of compliance years, which run from April to March like financial years, during which participants must take some action to comply with CRC. There are a three compliance years in the introductory phase, and seven compliance years in all subsequent phases.
  • A footprint year, where participants must monitor their total emissions from energy supplies and determine what emissions must be included in CRC. This is the first compliance year of each phase.

Organisations must report their actual emissions by the end of July after each annual reporting year and surrender allowances to cover to their reported emissions.

Then in October, three months later, they will receive a revenue recycling payment, based on their performance in the previous year.

For the introductory phase:

  • The qualification period is the calendar year 2008.
  • The registration period is April-September 2010.
  • The footprint year is April 2010-March 2011.
  • In the first annual reporting year 2010-2011 there will be no sale or surrender of allowances.
  • The first sale of allowances takes place in April 2011-March 2012.

For more information about how the CRC might affect you, contact Buderus on 0330 123 3004*.

*Calls to 03 numbers cost no more than a national rate call to an 01 or 02 number and must count towards any inclusive minutes in the same way as 01 and 02 calls. These rules apply to calls from any type of line, including mobile, BT, other fixed phone line or payphone. Calls from mobiles and some other networks may vary. Calls to and from Bosch Thermotechnology Ltd may be recorded for training and quality assurance purposes