UK: Carbon Counsel

Last Updated: 29 February 2008
Article by Anita Lloyd

The Clean Energy and Sustainability Group at Eversheds suggest some practical tips for preparing for a new carbon trading scheme that the government assesses will affect between 4,000 and 5,000 businesses and organisations in the UK and will be introduced from January 2010.

Introduction

Following two rounds of consultation in 2006 to 2007, the government is set to introduce a new carbon trading scheme the Carbon Reduction Commitment ("CRC") - under the powers to be granted when the Climate Change Bill is enacted later this year.

The scheme is a result of the government looking for ways to achieve its self-imposed target to reduce the UK's carbon emissions by 20 per cent by 2010 and the new UK targets of 26 per cent to 32 per cent by 2020 and 60 per cent by 2050 which will be mandated in the Climate Change Bill when enacted. Analysis has highlighted that a number of organisations are not caught by existing Climate Change Policy measures, such as the EU Emissions Trading Scheme (EU ETS) and the Climate Change Levy Agreements (CCAs). The analysis has found that large commercial and public sector organisations account for about 14 million tonnes of carbon (MtC) emissions (approximately 10 per cent of the UK's emissions) and could cost-effectively save 1.1 MtC per year by 2020. In addition, the government's Updated Energy Projections indicate that without measures to target this group of organisations, emissions will increase by around 11 per cent by 2030.

The government's response to the consultation that took place last summer, information on the coverage and policy design of the scheme including the allocation of allowances, monitoring and reporting requirements and the design of the performance league tables, is anticipated in late February 2008 and a further consultation on the details of the CRC Regulations is expected in summer 2008.

Key Features of the New Scheme

Exactly what is it?

The CRC will operate as a cap and trade' scheme with the government setting an overall scheme cap within which organisations must purchase and surrender allowances to cover their annual CO2 emissions. An introductory phase of the CRC, which will have a fixed price sale of allowances rather than an auction, is proposed to take effect from January 2010 with the first capped and auctioned phase starting in 2013. The cap will be decreased steadily over subsequent phases.

The scheme proposes both a carrot and stick approach to incentivise participants to reduce their carbon footprint. Following annual reporting of emissions the government will publish a performance league table. Organisations that reduce their emissions will rank towards the top of the annual performance league table and organisations that fail to do so will be placed lower down the tables and will, it is hoped, be incentivised by the negative publicity associated with being carbon inefficient.

The CRC is intended to be revenue neutral and recycle revenue back to participants. A payment will be made back to participants based on their average annual emissions since the start of the scheme and a bonus or penalty payment dependant on their position in the league table.

What will it involve?

Each year organisations covered by CRC will need to:

  • forecast their emissions for the coming year based on consumption in previous years and energy efficiency or other carbon abatement strategies
  • purchase the necessary allowances from the auction at the start of the year - although it should be noted that participation in the auction is not compulsory, an organisation could decide to buy allowances solely on the secondary market or through the safety valve to the EU ETS
  • monitor and manage emissions during the year
  • depending upon actual emissions, buy or sell allowances in the secondary market
  • report on actual emissions and surrender a sufficient number of allowances via the online registry.

Who is covered?

The CRC will target large non-energy-intensive organisations with an annual electricity consumption from mandatory half hourly meters (ie 100 kw meters if in England, Scotland or Wales, or 70 kw if in Northern Ireland) of over 6,000 MWh between 1 January 2008 and 31 December 2008. At current electricity prices this equates to an annual electricity bill of over approximately £500,000. Once an organisation is within the ambit of the scheme all of its energy use emissions from all sources (electricity, gas, other fuels) will be covered.

The types of organisation affected are likely to include supermarkets, hotel chains, banks, large offices, hospitals, universities, central government departments and large local authorities.  Any type of organisation with the requisite energy consumption will be caught to the extent its activities are not already covered by EU ETS or CCAs. Organisations with more than 25 per cent of their energy use emissions covered by CCAs will in fact be completely exempt from CRC. It should be noted that only the organisation within a group that has a CCA is exempt, not the entire group. There is no equivalent exemption for those affected by EU ETS, probably because the government only estimates that 5 per cent of CRC participants will have a proportion of their emissions covered by EU ETS. These participants will still be covered by CRC for electricity use and any direct energy use emissions not covered by EU ETS.

The highest UK parent organisation of a group of companies or organisations will be liable for the obligations imposed by the scheme. This is likely to be more complex to determine for public sector organisations than for companies, given the different layers of organisation that often arise.

DEFRA are proposing a three stage approach in order to identify organisations covered by the scheme, which will involve a communication of data between electricity suppliers, various subsidiary organisations with responsibility for electricity bills, the parent company for CRC purposes and the CRC Scheme Administrator (the Environment Agency).

What you should be doing now

  1. Work out if your organisation is covered by the scheme. During February and March this year, the major energy suppliers will be mailing out leaflets on behalf of DEFRA to all their customers who have half hourly meters. You should check with your facilities or accounts teams (those likely to receive the half hourly meter electricity bills in the first instance) to see if they have received one of these leaflets and to determine what your organisation's energy consumption for 2007 was as this will give a good indication of the consumption for 2008.
  2. If your organisation is covered, find out who are the relevant individuals within the various parts of the organisation and any subsidiaries who are responsible for energy consumption and who can assist in data collection including any necessary dialogue with your electricity or fuel suppliers.
  3. Set up a working group to arrange for data collection for your organisation and liaising with the CRC Scheme Administrator regarding registration of the group with the scheme.
  4. Work out what opportunities exist within the group as regards energy efficiency or other carbon abatement measures.
  5. Start to develop an emissions trading strategy.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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