In its spending review the Government announced two changes to the CRC Energy Efficiency Scheme which fundamentally alter the nature of the scheme.

Recycling payments

Instead of the scheme being "revenue neutral" and the net costs of allowances being recycled to participants, the revenue generated from the sale of allowances will now be retained by the Government. The Government estimates that this will amount to £1billion by 2014-2015.

As each allowance will initially cost £12 and an allowance is needed for each tonne of carbon consumed, the costs of CRC will increase significantly for each participant.  The British Property Federation are urging the Government to provide more details as participants are already making provision for this scheme.  In the meantime any landlord participant that had decided not to deal with CRC in its leases because of the relatively low costs involved might want to reconsider.

Sales of allowances

The first allowance sales for 2011-2012 emissions will take place in 2012 rather than 2011.  Although not yet clear, it appears that the need to buy allowances in advance and to predict future energy consumption has been removed.  It may be that the Government's assertion that this will simplify the scheme may prove correct.

A consultation on simplification of CRC is anticipated and therefore further change is expected.

For links to previous law-now articles on CRC, click on Articles below:

The CRC Energy Efficiency Scheme

CRC - Results of the Working Party Consultation Published

The Carbon Reduction Commitment - a guide for landlords and tenants

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/10/2010.