UK: The CRC - Making Reform Work For The Public Sector

Last Updated: 11 March 2011
Article by Nicholas Walker

The uncertainty surrounding the future of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) continues. However, amongst this uncertainty there may be an opportunity to make the scheme work better for public sector participants.

The CRC was on the drawing board for a long time before finally coming into force last year. Almost as soon as the deadline for registration passed, at the end of September, fundamental changes were announced in the Comprehensive Spending Review (CSR).

Both parties in the Coalition Government are critical of the complexity of the CRC and, in February, DECC launched five discussion papers on possible reforms. DECC is open to revisiting all aspects of the scheme and has sought views on, amongst other things, "the treatment of public versus private sector participants".

What changed?

The most significant change announced in the CSR was the scrapping of Recycling Payments. The CRC was originally intended to be a 'revenue neutral scheme' – where the net cost of a £12 Allowance (representing one tonne of CO2 emitted) for even the worst performer was to be around £1.20. The changes announced meant that the cost of each Allowance would be £12 to all participants, adding 10% to the cost of energy and operating for all intents and purposes as a carbon tax.

The cost of Allowances is certain to rise above £12 in the coming years – whether or not the cap and trade element of the CRC is retained. What's more, the revenue generated by the sale of Allowances - which at a predicted £1 billion per year is significant - will go straight to the Treasury. The Green Investment Bank was announced at the same time as these changes to the CRC and not hypothecating the funds raised from the sale of Allowances to the GIB is surely a missed opportunity to advance the move towards a low carbon economy.

Drivers for change.

The changes announced in the CSR have transformed the drivers of the scheme from the juicy carrot of revenue and good PR to the gnarled stick of taxation. The initial purpose of the CRC was, primarily, as a mechanism for behavioural change - the best performing participants would have made money from the scheme, as well as enjoying the green kudos of being ranked at the top of the CRC league table. This element of competition, coupled with the increasing costs of buying allowances as the cap and trade element of the scheme kicked in, was to have driven participants to make ever greater carbon savings. The public sector was included in the scheme and, in order to show how it was leading by example, even Government Departments that were too small to meet the qualification criteria were expected to participate. Now that the CRC is, in effect, a tax there is a valid argument that public sector participants should be treated differently from those in the private sector.

Public v Private

During the CRC registration process it became apparent that the scheme's regulator, the Environment Agency (EA), had significantly overestimated the number of participants. The EA explained that it had not appreciated the degree to which many participants were interconnected.

What this means in practice is that private sector participants are, to a greater extent than first anticipated, large organisations which will likely have the budget, access to capital, expertise, manpower and management systems in place to implement an effective carbon reduction strategy and manage their energy efficiency across their whole CRC group. Large participants can also take advantage of their buying power when investing in carbon reduction technologies.

By contrast, the CRC has been unleashed on the public sector in a period of unprecedented cutbacks. My own view is that the changes could hit the public sector particularly hard, placing those with severe budgetary constraints in something of a Catch 22; because a lower annual bill for Allowances requires some investment and, once the extra money has been found for the purchase of Allowances, there may simply be nothing left to invest.

Public sector participants may find life even harder (a Catch 44, if you like) because, even if they do find room in their budget to invest in carbon reduction technologies, they face the added encumbrance of the procurement rules.

If the CRC League Table is retained after the scheme is reformed, there is a danger that it could begin to mimic the Premier League – with the same very rich players occupying the top spots, some medium sized private sector entities in the relative comfort of mid table obscurity and, fighting it out at the bottom, the cash starved public sector. Recycling payments may have been complicated, but they would at least have levelled the playing field across the public and private sectors – all participants would have got back more or less what they put in, plus or minus a little bit depending on the effort they had made to reduce their CO2 emissions.

Level the playing field.

There is quite a simple way to ensure that public sector participants have the means to invest in carbon reduction, perhaps for an introductory period. All that the Government needs to do is give public sector participants Allowances at a discounted rate or, better still, free. There are a number of ways of doing this, for instance:

Public sector participants could be allowed to offset the costs of any carbon reduction programmes/equipment purchased in the previous year against the cost of Allowances; Public Sector participants could buy their Allowances at a 50% discount; Public sector participants could be given a bloc of Allowances equivalent to 75% of their previous years CO2 emissions – leaving a shortfall of 25% and providing an incentive to make real CO2 savings.

There is an argument that this treatment of the public sector is unfair but it is not without precedent in the private sector. When the EU Emissions Trading Scheme (EU ETS) came into force, participants were initially given free Allowances (EUA's) on the basis of their historical emissions (an allocation process known as 'Grandfathering') and in recognition of the fact that participants would be at a competitive disadvantage over their competitors in other parts of the world who did not have to participate in the scheme.

Treating public sector participants differently doesn't, and shouldn't, be permanent but a period of a few years would provide public sector participants with some time to divert the costs of buying Allowances into carbon reduction projects. If the aim of the CRC remains to change the way we, as a society, think about energy and consumption it is a price well worth paying.

The consultation runs until 11 March. Further details can be found 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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions