Defra hints at green tables

The government’s drive to meet its 60% reduction target by 2050 has fuelled
the introduction of a raft of new carbon-busting schemes for companies, most
recently topped by the Carbon Reduction Commitment (CRC).

An emissions tax of sorts, CRC will apply to all companies using
6,000KWh/year of half-hourly electricity, or those whose electricity expenditure
reaches £500,000 a year or more. The CRC will oblige eligible companies to pay
for their emissions ahead of actually emitting anything. Companies will then be
able to claim a rebate the following year. Similarly, if companies emit more
than expected, they will receive a bill to that effect the following year.

Following Royal Assent and consultation with the Department for Environment,
Food and Rural Affairs (Defra), the scheme will be implemented in 2010, although
the first rebates or penalties will not kick in until 2013. Appointed overseer
of the scheme, Defra has suggested incentivising it by publishing a league table
of companies in descending order of emission improvement ­ the company at the
top of the table will have made the greatest reduction in emissions, and will
therefore be eligible for the highest rebate. This means companies could receive
‘recycled’ performance payment every October incorporating a bonus or penalty
calculated on their performance within the league table. It is expected that
around 10,000 companies will become part of the scheme, according to
Businessgreen.com.

Companies will be asked to submit a calculation of their annual energy use by
taking a sample from their October 2009 to April 2010 bills, in order to
forecast a proposed allocation. However, advisors suggest companies start on
preparing estimates sooner than that. “Companies should start measuring their
energy use in January 2009 which will allow for a more accurate forecasting,”
says KPMG’s Ben Wielgus, part of the accountancy firm’s carbon advisory group.
“Energy use fluctuates and the time frame given does not take into account that
companies are likely to use more energy in winter and less in summer.”

As part of the scheme, companies must:
• Calculate total organisation-wide energy use emissions;
• Purchase fresh carbon emission allowances at the start of each compliance
year;
• Monitor, assess and manage emissions through the ‘emissions year’, April 1 to
March 31; and
• Report emissions and surrender allowances.
The decision whether to allow companies to buy and sell surplus emission
allowances, much like the Emissions Trading Scheme for Europe, is yet to be
debated.

Useful links
Go to
www.defra.gov.uk,
click on ‘C’ in the search index then click on carbon reduction commitment