The CRC Energy Efficiency Scheme is a UK-wide environmental initiative. The idea is to drive energy efficiency by forcing certain organisations to:
- count and report on their greenhouse gas emissions; and
- purchase, and later surrender, enough "emissions allowances" to cover their annual CO2 emissions.
The Scheme will impact on commercial leases and sale and purchase contracts, as well as the administration and operation of multi-let buildings. The major issue faced by the property industry, and landlords in particular, relates to who is responsible for energy use in a large multi-let building with common parts – the CRC currently makes the counterparty to the electricity supply contract responsible for the energy used under it.
Although the Scheme is regulated in Scotland by the Scottish Environment Protection Agency, by the Northern Ireland Environment Agency in NI and the Environment Agency in England and Wales, it is administered across the UK by the Environment Agency.
Figures published on 11 August 2010 by the Environment Agency show that just over 1,200 organisations have already registered for the Scheme. Organisations which qualify only have until 30 September 2010 to register for this mandatory scheme – and the Environment Agency is expecting an increase in registrations as remaining organisations rush to sign up before that deadline.
Do you need to register?
If your organisation was a party to electricity supply contracts under which it consumed more than 6,000 MWh electricity through half-hourly meters during 2008, it has to take part in the Scheme.
Organisations which are part of a group must participate as a group, with the highest UK parent company responsible for compliance – though subsidiaries which qualify for participation in their own right can choose to take part on their own.
The CRC is largely revenue-neutral, because money you spend on "emissions allowances" is "recycled" back to you six months later – however, a penalty is deducted or a bonus added based on your performance in an annual "league table". The league table ranks participants based on emissions reductions – and a poor ranking could affect your corporate image.
There are also cashflow issues – because of the 6 month gap between buying your allowances and your payments being "recycled" back to you.
Vincent Brown, Head of Semple Fraser's Environment & Pollution Team, has compiled a list of top five tips on dealing with the CRC:
- Check whether your organisation has to comply.
- If it does, calculate how much you need to spend on "emissions allowances" – and whether there's scope to reduce that.
- Assess your contractual and corporate arrangements to ascertain whether or not there's scope to reduce your future exposure under the Scheme.
- Don't leave registration until the last minute – organisations which register late face significant penalties.
- Note that even organisations who don't meet the 6,000 MWh threshold have to provide the Environment Agency/SEPA/NIEA with a list of all of their half-hourly meters settled on the half-hourly market, as well as details of their total consumption of HHM electricity during the calendar year 2008, by end September 2010.
For our detailed briefing on the impact of the CRC on the Property Industry, click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
