CRC Simplification: Admin costs down, carbon costs up?

Posted by Mark Johnson, Knowledge Leader - Energy and Carbon Regulation on 28 March 2012

The Department of Energy and Climate Change (DECC) has released its long awaited consultation on the simplification of CRC Energy Efficiency Scheme (CRC). They have naturally placed considerable emphasis on proposals for administrative savings to address the biggest criticism of the scheme – its complexity.  But will these meet George Osborne’s requirement for “very significant” savings that will prevent the scheme being scrapped altogether?  

If the headline figures are anything to go by, then the savings do look significant - £250m for businesses by 2030, which works out at about £10,000 per year for each CRC participant.  So how will these savings come about?

The main changes:

•    Limiting registration to half hourly settled meters only, avoiding the need to report Automatic Meter Reading (AMR) consumption at Registration.
•    DECC does not plan to change the qualification threshold but it does say that the emissions from those that drop out will be compensated by increases in coverage by those that stay in (see below).
•    Cutting down the number of fuels from 29 to 4.
•    Scrapping the footprint report, 90% rule and Climate Change Agreements (CCA) exemption rules.
•    Simplifying the EU Emissions Trading System (EU ETS) and CCA exclusions.
•    More flexibility around organisation definitions.
•    Simplification around the supply rules, unconsumed supply, landlord rules and other supply aspects.
•    Scrapping electricity generating credits.
•    Plus, about 40 other detailed changes aimed at making it more straightforward to understand how CRC affects you and what you have to do to comply.

Taken together these are significant changes, although getting used to the new rules will itself require some effort.  The first step for an organisation will be to understand what these proposals mean to them - and if desired to respond to the consultation by 18th June 2012.  But there is a further point not to be overlooked…

A hidden increase in carbon costs?

Under the proposals, participants would have to include some residual supplies of electricity and gas – sources they may currently be able to exclude.  This will increase their carbon costs.  In essence, DECC proposes changes which will mean a smaller number of participants each paying a higher carbon cost.

This points to an important aspect that won’t go away.  Energy use will incur a carbon cost, and those who manage and reduce their energy will make the greatest savings – savings that may far exceed the benefits of simplification.

The consultation can be found here.

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