Simulation excercise finds most companies CRC-unready
26 Nov 2009
Newcastle, UK - In advance of the new Carbon Reduction Commitment (CRC) legislation, regional development agency One North East commissioned energy consultancy TNEI Services to run a 12-month simulation of the CRC Scheme to give organisations in the region a head start and allow them to get CRC-ready.
One of the key aims of the project, only the second of its kind in the UK, is to reduce the risk of North East businesses incurring unnecessary penalties, associated with the CRC, which comes into effect in April next year with qualifying organisations required to buy carbon allowances to cover the emissions they produce.
Around 30 organisations in both the public and private sector which will be affected by the CRC are involved in the year-long simulation. The project is providing participants with a simulation of the CRC processes from energy and carbon data collection and reporting and the compilation of performance league tables to experiencing virtual carbon trading days. The aim is to demonstrate through tools and practical engagement what will be required under the new legislation and to help get organisations CRC-ready.
“As part of our support for regional businesses we identified the opportunity to assist organisations to be better prepared for the new legislation that will come into force next year,” said Kate Hatton, One North East leadership specialist. “The CRC presents major challenges for organisations with high-energy bills. By taking part in our simulation, organisations can gain practical experience of the legislation, get access to free expert advice and pro-actively cut their carbon dioxide emissions.”
Lessons learnt from the simulation are helping participating organisations prepare for the legislation and identify “quick wins” that will improve their position in the carbon performance league table when it goes live next year. The simulation is also highlighting for the wider business community the major issues that need to be addressed, the likely pitfalls and how they can be avoided.
What is clear is that a significant number of organisations are still unprepared for the rigours of monitoring and reporting energy use and do not have the ‘CRC Team’ in place to both plan and deliver the energy savings required, or with the purchasing power to secure carbon allowances at a reasonable cost, said One North East.
Feedback from the first ‘Trading Day’ focused on the need to appoint a CRC Team to take joint responsibility for their organisation’s compliance spanning senior management, finance, energy management and possibly the legal department because of the serious liabilities involved in the CRC.
One of the most serious issues was how to account for the money required to buy the carbon allowances, which in some cases would amount to nearly half a million pounds and recognising the impact this will have on an organisation’s cash flow and profitability.
Throughout the process participants are being encouraged to think about developing ‘Carbon Strategies’ to ensure that they benefit from ongoing measures to reduce their emissions and also that they appreciate the intricacies of carbon markets and the risk management requirements.
The simulation launched earlier this year with a number of training days for participating companies and their staff. Energy managers at TNEI provided companies with a mentoring system to offer advice on energy monitoring and reporting and early action to reduce unnecessary energy use.
Helen Nisbet, Project Manager for the CRC Simulation at TNEI explained: “The companies participating in this simulation have shown a foresight and understanding that this legislation needs to be considered seriously. Credit should be given to them for preparing for the full impact of the CRC and their early action will stand them in good stead for the real thing.
“We would urge all other companies and organisations that may be affected by the CRC not to underestimate the resourcing issues of measuring, managing and reporting carbon emissions. Ultimately there will be both financial and resourcing costs that need to be budgeted for.”
TNEI intends to maintain close contact with the participating companies following the CRC’s official launch next year to monitor how they cope when the legislation comes into effect.
