DEFRA consults on emissions trading scheme

Detailed proposals for the UK’s carbon emissions trading scheme for non-industrial organisations were issued for consultation on Tuesday

The Carbon Reduction Commitment (CRC), outlined in the Energy White Paper in May, is a mandatory cap and trade scheme that will cap carbon dioxide emissions from large businesses and public sector organisations.

These are collectively responsible for emitting around 14 million tonnes of carbon each year. Without further measures, their emissions are projected to rise by 11% by 2030 compared to 2010 levels.

The CRC will be an auction-based scheme for organisations using more than 6,000 MWh per year from mandatory half-hour meters, equivalent to an annual electricity bill of around £500,000. These will include large retailers, hotel chains, hospitals, universities, central government departments and large local authorities.

In last year’s consultation paper on the CRC – then called the energy performance commitment – DEFRA proposed a 3,000 MWh/year threshold and predicted 5,000 organisations would be covered by the scheme. It now says that doubling the threshold is “not expected to result in a substantially lower number of organisations being involved”, and claims that 4,000 to 5,000 organisations could still be caught.

Organisations with more than a quarter of their energy use emissions in climate change agreements would be completely exempt.

The cap will gradually be reduced and a performance league table published to encourage participants to cut emissions. All allowances will be auctioned and the revenue redistributed to participants in proportion to their average annual emissions since the scheme’s start, with a bonus or penalty depending on their position in the league table.

The scheme will come into effect in 2010, beginning with a three-year introductory phase, during which allowances will be sold at a fixed price.

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