Government announces changes to CRC
8 Oct 2009
New proposals address manufacturers’ concerns about the CRC’s impact on their cashflow, says EEF, which had urged the government to reconsider proposals within the scheme that would have restricted the cash flow of companies during the recession.
London - The Department of Energy and Climate Change (DECC) has announced significant changes to the forthcoming Carbon Reduction Commitment (CRC). In its quarterly stakeholder update released yesterday, DECC published its responses to a consultation issued earlier this year which sought opinions on various technical details of the scheme.
After considering feedback from more than 250 stakeholder responses, DECC has made a number of changes to the CRC, including:
- Double sale and recycle scheme abandoned to improve cash flow: The first sale of allowances in April 2011 will now only require participants to purchase for the year ahead, and no longer for the previous year as well. The first year of the scheme (April 2010 - March 2011) will now simply be regarded as a ‘monitoring period’.
- Greater league table weighting of early action metrics: Critics have previously argued that the scheme did not offer sufficient recognition for those organisations which have been more successful in reducing their energy consumption prior to the start of the scheme. In response to this, DECC has decided to reduce the weighting of the early action metrics (installation of AMR and obtainment of Carbon Trust Standard) more gradually. The weighting of the early action metrics on the overall performance score will thus account for 100% in the first year of the scheme (no change), 40% in the second year of the scheme (was 20%) and 20% in the third year of the scheme (was 0%).
- Principal subsidiaries: Large subsidiary companies which would qualify in their own right can now choose whether to participate independently of their organisational group or parent company.
- Renewable energy: The CRC will not provide additional incentives for renewable generation. However, an organisation’s increased use of onsite renewable generation, together with corresponding energy efficiency savings, will now be published alongside the performance league table. According to DECC, this will ‘allow organisations to gain reputational credit for their investment in onsite renewables’.
- Change of name: The CRC will now be known as the CRC Energy Efficiency Scheme. According to DECC, the name change has been introduced to ‘better reflect the primary objective of the scheme, which is the achievement of carbon emission reductions through increased energy efficiency’.
The new CRC proposals have addressed manufacturers’ concerns about the CRC’s impact on their cashflow, believes manufacturers’ organisation EEF, which had previously urged the government to reconsider proposals within the scheme that would have restricted the cash flow of companies during the recession.
Businesses have been very concerned about the impact the CRC would have on cash flow. Purchasing allowances, compliance, registration and annual fees are all extra costs, additional to any money invested in energy-efficiency measures, according to Gareth Stace, head of environment policy at EEF.
“The government’s decision not to seek auction payment from organisations for the first year will give those firms the leeway to use that money to invest in their businesses,” he said. ” We also welcome the indication that the government will publish its final guidelines by the end of this month. We have always insisted that business should have as much notice as possible so they can prepare for the scheme. For each day the guidance is delayed, the cost and difficulty of compliance increases.’
The EEF was also concerned that companies that made early attempts to reduce emissions would be penalised. Under the original proposals, businesses that had made carbon-reduction changes could only benefit from this proactive action in the first two years of the scheme. The government has since agreed to extend the period to three years.
“The government has addressed manufacturers’ major concerns with the CRC,” Stace added. “We support the government’s commitment to increase energy efficiency and reduce emissions in the large, non-energy-intensive sector. However, it is imperative that it works to achieve these objectives without placing unnecessary cost burden on business.”
Further changes to the CRC - including the 136-page consultation document issued yesterday by DECC - can be found in the news section of UPL’s website
