CRC revenue recycling axed

Although the chancellor made no mention of it in his speech on the Public Spending Review, the revenue recycling element of the CRC has been dropped. In a press release issued by the Department of Energy and Climate Change, it was announced that the revenue would instead be used to support the public finances. The statement suggests that it will be invested in projects including "spending on the environment", although the £1bn it is predicted to raise would be a welcome contribution to the budget deficit.

This effectively converts the CRC to a stealth carbon tax and throws into doubt the validity of the early action metrics designed to earn a higher place in the league tables and a higher incentive payment.

Carbon Reduction Commitment User Guide issued

Defra has today released a user guide for the Carbon Reduction Commitment, which will operate from April 2010. The Carbon Reduction Commitment is designed to tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading System. It aims to help reduce the country’s carbon footprint to deliver the ambitious emissions reduction targets set in the Government’s Climate Change Act. It is a domestic cap-and-trade scheme for public and private sector organisations that use more that 6,000MWH of energy per year – equivalent to an energy bill of about £500k – and have half hourly metering.

Originally it was stated that only 5,000 or so organisations would be impacted, but this has now been revised to 20,000 – so many who considered themselves to be exempt could now fall into the programme when it begins in April 2010.Under the scheme, companies must purchase allowances depending on how much carbon they intend to emit – initially at a fixed price predicted to be £12 per tonne. Eventually the total number of allowances available to purchase will be capped, to provide a mechanism to drive down energy consumption, and the carbon price will float. Savings of £1bn in energy costs by 2020 are projected for the participants, but those who don’t curb their emissions will be hit by penalties including monetary fines and a poor ranking in the scheme’s league table. Those who top the league tables will receive financial incentives.

The Carbon Reduction Commitment will be phased in between 2010 and 2013 and although capping will not apply until allowance auctioning starts in 2013 it is widely accepted that adapting early to the legislation offers both financial and reputation benefits. You can opt-in to updates from Defra here.

Renewable energy doesn't count in carbon reporting

The UK government plans to change reporting criteria for businesses so that they will no longer be able to claim carbon savings gained by using renewable energy. As a result, many organisations which currently claim to be "carbon neutral" could find themselves with a large carbon deficit to deal with. Several large companies are lobbying against the move, including BT which has been using the carbon contribution from buying renewable energy to help towards its ambitious target to cut carbon by 80% by 2020.

Currently about 5% of UK grid electricity is generated from clean hydroelectric and wind sources, and in 2005 the government said companies buying such renewable electricity tariffs could report them as producing zero emissions. However, environmental campaigners and energy experts have called into question the benefits of green tariffs. The Carbon Trust has indicated that concerns over green tariffs are similar to those over carbon offsets: transparency, double counting and additionality – ie whether they cut carbon emissions over and above what would have happened anyway.

Hence the move by Defra, which could prove costly for larger businesses, which from 2010 will have to participate in the Carbon Reduction Commitment. The cap and trade scheme will not just impose levies on companies with above-average carbon emissions, it will also rank them in a league table, causing potential embarrassment for organisations which have previously earned a reputation for carbon busting.

A consultation will now take place on this subject, but it's likely the controversy will continue for some time. In the meantime, organisations which are serious about cutting carbon should focus on reducing energy use rather than relying on the potential carbon benefit of renewables.