Carbon Reduction Commitment

"The Carbon Reduction Commitment (which was recently renamed the CRC Energy Efficiency Scheme) is a mandatory carbon emissions trading scheme to cover all organisations using more than 6,000MWh per year of electricity (equivalent to an annual electricity bill of about £500,000).
All energy other than transport fuels will be covered, such as electricity, gas, fuel, oil .

It will cover all emissions not currently included in the EU Emissions Trading Scheme or Climate Change Agreements, from up to 5,000 large organisations."

How it works

“Each year, the CRC will require participating organisations to purchase and submit sufficient allowances to meet their annual emissions covered by the scheme. The scheme will start with a reporting year from April 2010, with the first sales of allowances held in April 2012.

During the introductory phase, all carbon emission allowances will be sold at a fixed price of £12 per tonne of carbon dioxide. From April 2013, allowances will be auctioned by the government, with fewer available each year.

Revenues from the sale of allowances will be recycled back to organisations within the scheme. Each organisation will be repaid in proportion to their historic emissions with a bonus or penalty depending on the extent to which they have reduced their emissions compared with other organisations within the scheme. This has now been changed to reflect the change of the scheme to a source of revenue for the Treasury in lin with the October 2010 Spending Review.

In the event of excessive allowance prices within the CRC, a "Safety Valve" mechanism allows EU Emissions Trading Scheme (ETS) allowances to be purchased via the Environment Agency for use in the scheme.”

BACKGROUND

“The sectors targeted by the Carbon Reduction Commitment scheme generate over 10% of UK Carbon Dioxide (CO2) emissions, around 55 MtCO2. The Carbon Reduction Commitment scheme aims to reduce carbon emissions from these organisations by at least 4 million tonnes of carbon dioxide per year, by 2020.

The Carbon Reduction Commitment scheme was announced by the Government in the Energy White Paper (May 2007). The need for an incentive in this sector was originally highlighted by the Carbon Trust, in The UK Climate Change Programme: Potential evolution for business and the public sector.”