Special Report

Avoiding confusion

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Special Report: The Carbon Reduction Commitment


Because the Carbon Reduction Commitment is a complex regulation, there are several areas where confusion and misunderstanding arise. The following seem the most important:

  • Subsidiary firm or parent? Organisations forming part of a larger group must come together as one entity, both when deciding if they qualify for the CRC and when participating and buying allowances. There are ‘grouping’ rules for government departments and agencies, joint ventures such as PFIs, franchisees and franchisors, schools and councils and colleges and universities. There are also special rules for company subsidiaries who use enough electricity to qualify them for the CRC in their own right.
  •  Buying two years of allowances at once: The first double sale of CRC carbon allowances in April 2011, will cover emissions in the financial year just past (2010/11) and to come (2011/12), with a double recycling payment due six months later. In subsequent years, organisations will just be buying allowances for the year ahead.
  • It is not just about electricity use: Qualification for the CRC depends on an organisation’s electricity use through half-hourly meters, but the number of carbon allowances that must be surrendered depends on the qualifying organisation’s total non-transport energy use from electricity and fossil fuels. But energy consumed in conveying people and goods onsite, including forklift trucks, lifts and escalators, is included. Licensed vehicles are generally excluded.
  • Landlord or tenant? For any given half-hourly meter, the government is proposing that the electricity used in 2008 should be attributed to the legal counterparty to the agreement with the electricity supplier in deciding whether that organisation qualifies for the CRC. The counterparty is usually the landlord. Organisations are likely to find the meters in buildings they own count in deciding if they fall under the CRC, but those in buildings they rent do not.
  • Why do ‘green electricity’ tariffs not reduce an organisation’s emissions? All electricity used by CRC participants is assumed to have come from the same generic source and a grid average is used to calculate the associated CO2 emissions. This is to prevent CO2 reductions achieved by renewable energy producers – and monetised in the form of Renewable Obligation certificates (ROCs) – from being counted twice.
  • Figure 2: Emissions included in the CRC
    Figure 2: Emissions included in the CRC
    Which emissions are covered by the scheme?
    Emissions covered by climate change agreements (CCAs) and the EU emissions trading scheme (EU ETS) are excluded (see figure 2, p 6). An organisation may leave up to 10% of its CRC emissions out of the scheme if they are not associated with so-called ‘core’ sources – gas and electricity supplied through half-hourly meters or certain other heavy-duty meters.
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