Timeline clarifies CRC rules

Ahead of receiving Royal Assent this November, and following our coverage last month, the Department for Environment, Food and Rural Affairs (Defra) and the Carbon Trust have published a schedule for companies that must comply with the Carbon Reduction Commitment (CRC). The CRC is part of the climate change bill which has been marred by complexity and red tape.

CRC will make carbon management mandatory for UK companies spending more than £500,000 per year on energy bills. However, according to research outfit Verdantix, 10% of those will fail to comply because of insufficient energy management and inadequate planning.

Pay up-front
The CRC loosely means companies will be required to pay for emissions before actually emitting anything and, according to how successful they are in making reductions, will be entered into a league table so that it will be easy to compare affected companies’ emissions.

Companies that emit the least carbon will receive the highest level of rebate on their allowances from the government, while those making the most emissions will receive the smallest or perhaps none.

Verdantix has drawn up a recommended timetable for FDs to follow in preparing for compliance with the CRC based on schedules published by Defra, Carbon Trust and the Environment Agency:

• October 2008: Review and respond to the detailed regulations;
• November 2008: ­ Agree an energy/carbon plan from 2009-12;
• December 2008: Check potential to benefit from the early action metric ­ companies implementing energy saving schemes, such as smart meters early, will be awarded an automatic 20% weighting on their position in the league table;
• March 2009: ­ Environment Agency sends companies’ registration packs;
• June 2009: ­ Deadline for companies to submit registration;
• September 2009: ­ Forecast energy use/emissions for 2010/11;
• October 2009: Environment Agency publishes list of CRC-compliant companies;
• April 2010-March 2011: ­ CRC begins, companies to monitor and report emissions;
• October 2010: ­ Companies must complete their buying strategy for CRC allowances;
• April 2011: Sale of CRC allowances;
• June 2011: ­ Surrender CRC allowances to cover 2010 emissions; and
• October 2011: ­ Performance tables published.

FDs could be forgiven for holding back on readying their companies to comply ahead of Royal Assent, but Verdantix has warned that swift action is required to avoid compliance issues. “Finance directors will be starting from scratch and will need time to prepare,” said David Metcalf, director at Verdantix. “This is a new policy and the worst thing you could do is wait for Royal Assent.”

The Environment Agency has said it will fine any organisation that does not have a CRC account ­ used to pay for emissions allowances. Fines would continue and be heavier for companies that then did not have their accounts implemented by the sale of the first set of allowances in April 2011. There will also be fines for failure to report emissions by July 2011. A fine per tonne of CO2 emitted until August 2011 would be levied if a company had not reported by that date.

Defra and the Carbon Trust have said that companies can expect to receive fines of £25 per tonne of CO2 for under-reporting in the first year of the CRC and £70 per tonne for the following years starting 2013.

Companies could also lose their league table rebate and be forced to buy emissions allowances from companies operating under the Emissions Trading Scheme rather than the CRC ­ which would probably be more expensive.