UK: CRC Energy Efficiency Scheme - Where Are We Now?

Last Updated: 18 February 2011
Article by Neil Amner

The deadline for registration as participants and information declarers in the CRC Energy Efficiency Scheme passed on 30 September 2010. Whilst they were rushing to register with the Environment Agency it was becoming clear that the scheme they would participate in would not be as set out at the date of their registration.

Since the Coalition Government took power in May 2010 they have expressed the view that the scheme was unnecessarily complicated. They have announced a number of changes and propose to make further changes. This has resulted in:-

  • In September 2010 the Committee on Climate Change ("CCC") publishing a report suggesting changes that could be made to Phase 2 of the Scheme. [Click here for report]
  • In October 2010 the Government announced in its Treasury Spending Review that:-
    • The first fixed priced sale of the allowance in the introductory phase would be delayed until 2012.
    • Revenues raised from the sale of allowances under the Scheme would no longer be recycled back to participants but instead would be used to support public finances.
  • In November 2010 the DECC and devolved administrations published a consultation on changes to the existing CRC order which included a draft amendment order. The consultation closed in December 2010 and the amendment order is anticipated to be laid before Parliament in the next few weeks so it can come into force on 1 April 2011. The consultation proposed extending the introductory phase until 31 March 2014 rather than 31 March 2013. It also proposed postponing the first sale of allowances in Phase 2 until 2013 / 2014. This is to allow the Government to make further amendments to the Scheme which it wants to result in an overall simplification of it.

    A second consultation to deal with the wider changes should take place later in 2011
  • On 25 January 2011 the DECC published five discussion papers on simplifying the CRC [Click here to access papers]. The purpose is to promote discussion between the Government and participants and the Government says the papers do not set out Government policy. Feedback is sought by 11 March 2011. The five aspects covered by the papers are:-
    • Private Sector organisation rules.
    • Supply of rules.
    • Qualification criteria.
    • Reducing overlap between this scheme, the CCA's and the EU ETS.
    • Timing and frequency of allowances from 2012 onwards.

Although no specific papers have been issued the Government has also said there are a number of other aspects of CRC that could be revisited including Landlord and Tenant relationships and responsibilities, which would be particularly welcome for those involved in commercial property given the lack of official guidance and market consensus to date.

These discussion papers will then lead to a formal consultation paper on the wider changes that the Government wants to put in place to simplify the process.

The Government has also reminded participants that although they intend to simplify the process the participants do require to comply with the existing Scheme in full as set out in the current legislation, which includes reporting, complying and surrendering allowances in the introductory phase.

While the end result of this process may result in a reduced administrative burden on businesses, the burden may be temporarily increased as businesses require keep up to speed on the scheme as it is as at present and the changes as they are brought into force. There is also an increased financial burden for participants arising from the loss of recycling payments. Whatever changes are made there is no proposal, at present, to scrap the scheme, so despite the uncertainty as to the future shape of the scheme affected businesses do require to pay careful attention to the current requirements and the changes as they come into force.

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.

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