UK: Do You Know The Amount Of Carbon Emitted By Your Business?

Last Updated: 8 December 2008
Article by Indeg L. Kerr and Siobhan Hayes

Why you need to know now

In 2010 the top 5,000 or so companies in the UK will have to buy "allowances" to cover the carbon emissions of their group in the UK. The Government are setting up a Carbon Reduction Commitment ('CRC') Scheme. The Climate Change Act came into force last week containing just a broad outline of the Scheme.

Draft Regulations with much needed details are to be published in February 2009 but consultation about the Scheme has already taken place so there are some things that we know big businesses need to start doing now and to prepare for emissions trading!

This client alert is aimed at those organisations who have not yet considered the CRC in relation to their UK business. It is a brief introduction. We can help you with more detailed information once the Regulations are available.

Who will be in the Scheme

The business sectors that will be involved in the CRC Scheme are the large financial corporations and institutions, multiple retailers, supermarkets, hotel chains and large office occupiers. The public sector will also have to comply.

Some industries are high intensity energy users and already have to comply with the EU's Emissions Trading Scheme ("ETS"). The CRC will catch low intensity energy users who use a significant amount of electricity in 2008 some of which is supplied through a half hourly meter. If you have at least one half hourly meter and expect to pay over £500,000 for electricity this year you are likely to be in the Scheme - for more information see below.

UK parent companies will be responsible for the compliance of the whole of their UK group and franchisors for their franchisees – more below.

The Scheme (in brief)

Electricity use now governs whether the Scheme will apply to you but if it does the Scheme will cover gas, electricity and other fuels (other than transport fuel) used by the organisation.

In late 2009 the affected organisations will have to report on their electricity usage for 2008 and gear up for compliance with the Scheme in 2010.

In 2010 those organisations in the Scheme will have to collect information about almost all the energy they use as this shows what their carbon emissions are. They will have to buy allowances to cover every tonne of carbon emitted and deal with the reporting requirements to be set up by the Scheme. The first requirement to buy allowances will arise in 2011.

The next phase of the Scheme is to reward those organisations which improve their energy efficiency overall and penalise those that do least well. A league table of the Scheme members' energy efficiency performance will be drawn up. The incentives will be a refund of part of the cost of the allowances and the penalty will be a surcharge.

There is an initial simplified start to the CRC Scheme for the first three years so that businesses can gain the expertise they need in monitoring energy consumption and forecasting their emissions to buy the necessary allowances. They will have some time to create the management strategies they will need and after that in 2013 emissions trading will come into full effect. This is being called a cap and trade scheme.

Who will be in the CRC Scheme?

If you have half hourly meters for your electricity supplies and your UK group uses over 6,000 kilo watt hours (kWh) in 2008 (estimated cost being over £500,000) you will fall within the Scheme. In the UK (but excluding Northern Ireland) half hourly meters are installed by the electricity suppliers when you are a significant user of electricity. If you do not know whether you have half hourly meters (and the definition of half hourly meters is likely to be a bit convoluted) then you can ask your electricity supplier. Although electricity use in Northern Ireland will count towards your supply calculation it is metered differently to the rest of the UK and a different test will apply.

If only some of your electricity supply comes from half hourly meters but your overall consumption for 2008 is going to be more than 6,000 kWh then for now the only safe thing is to assume you will be within the Scheme.

Earlier this year, the electricity suppliers sent information to all those organisations receiving half hourly bills inviting them to log their contact details so you may already be involved.

A registration pack should be supplied to organisations with half hourly meters in July 2009. The Scheme begins in April 2010.

The ETS will not double up with the CRC Scheme but how overlap is to be avoided will be determined by the detail of the Regulations.

Which UK Company in the Group will have to comply?

Not all corporations operate a simple group structure where there is a parent with a series of wholly owned subsidiaries. If they do then the ultimate UK parent will have to comply for the whole of the UK group.

Joint venture companies will be treated as separate entities for CRC if no party owns more than 50% but a shareholding of 51% or more will put the joint venture company into the CRC group of its majority shareholder.

Companies may share an electricity supply and you will need to know who signed the electricity supply contract. That counterparty to the supply contract will be the relevant company for CRC purposes. The Government are proposing that a UK franchisor will have to comply for its UK franchisees. Again we need details from the draft regulations to understand how that will work in practice.

The company complying will need to keep separate records for its subsidiaries (or franchisees).

How will this affect landlords and tenants?

Many occupiers receive their electricity supply via their landlord by paying a fair proportion of the landlord's electricity supply through a service charge. It is not possible to predict how the Scheme will work within existing service charge clauses; how to deal with any refund received by the landlord for energy efficiencies made in the year where CRC costs were paid by the tenant in the previous year, let alone the complications of how to deal with assignments of leases part way through the Scheme years.

The Government report on the consultation anticipates CRC costs being passed on to tenants and refund payments going into a separate fund designated for energy efficiencies but that does not give us any clues about how the energy efficiencies of a large group of companies can effectively be translated down to individual occupiers.

Will it be sensible for landlords to help as many of their tenants as possible to sign up directly for electricity rather than have a central supply and recharge the costs? We can only try to work this out when we see the detailed Regulations.

What should be done now?

  • Work out if you are likely to fall within the CRC Scheme. Contact your supplier now if you do not know whether you have any half hourly meters.
  • If you have a complex group structure, work out now how it works for the Scheme
  • Set up effective reporting from subsidiaries to head office (or from franchisees to the franchisor) covering electricity this year and later all fuel sources (other than transport)
  • Start to consider your long term energy management strategy
  • Remember that all this compliance might lead to lower fuel consumption and significant savings for your organisation as well as a modest refund of the allowances you have to purchase
  • If your stress levels are rising at the thought of all this take some comfort from the fact that the Scheme is not a revenue generating exercise by the Government. The refunds to the most energy efficient organisations will make the Scheme revenue neutral!

The small print

The Government have committed to the CRC in the Climate Change Act. This alert is based on the consultations to date but we need to see the detail of the Regulations to work out the detailed consequences for us and our clients.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.