As part of the Spending Review the UK government yesterday
(Oct 20th 2010) announced changes to the CRC Energy
Efficiency Scheme which will have significant impacts for
participants.
The changes effectively mean that the scheme is now a carbon tax
which will be used to support public finances. Our interpretation
of the changes are as follows:
1. The recycling payment has been scrapped. Revenue from the
Scheme will not be returned to participants, but will instead be
retained by the Government and used to support public finances.
2. The first sale of allowances has been moved back and is
likely to take place around June 2012. These allowances will then
be surrendered in July 2012 to cover retrospective emissions during
the 2011-2012 period.
3. The requirements to submit footprint and annual reports and
maintain an evidence pack remain unchanged.
4. The regulator still plans to carry out audits starting in
this initial year (2010-11).
5. The League table will be retained but this will function
purely as a reputational driver. Our understanding is that the
three metrics (early action, absolute and growth) have been
retained but the financial incentive to attain the Carbon Trust
Standard or equivalent is clearly reduced.
6. DECC is currently looking at the requirement for legislative
changes and a formal consultation will take place in due
course.
There are other points that still need to be clarified including
whether whether or not a secondary market fwill still
be required for trading of allowances. If future sales of
allowances continue to cover prior year emissions then participants
will know how many allowances they need to buy so this would tend
to preclude the need for a secondary market. However, if future
year sales revert to the previously planned system where
participants forecast future emissions and purchase allowances
to cover then this would support the need for a secondary
market.
What is clear is that the changes present a clear financial
signal for participants to reduce absolute CO2 emissions. It is now
even more critical that organsations adopt a carbon strategy and
implement robust and effective business processes to reduce
emissions and minimise the associated financial exposure.
Contact the carboncheck team to find out how we can help you
mitigate your financial and reputational risk.
Click
here to view the DECC press release