A new scheme

The Carbon Reduction Commitment (CRC) will apply mandatory emissions trading to large commercial and public sector organisations, including local authorities, with annual electricity use above 6,000MWh/year. Schools will be counted within local authorities' electricity use. CRC will only apply to organisations that are not part of the EU Emissions Trading Scheme.The Environment Agency administers the scheme.

How will the CRC operate?

Introductory phase - April 2010 to March 2013

• The scheme will begin operation in April 2010 and have an introductory phase for the first three years.

• Organisations will only qualify for CRC if their mandatory half-hourly metered electricity consumption is greater than 6,000MWh/year. This corresponds to annual electricity bills of approximately £500,000.

• Qualifying organisations must register during the first 6 months of the scheme, between 1st April and 30th September 2010.

• During the first "footprint" year participants must monitor all energy use and submit a Footprint Report by the end of July 2011.

• During the 2nd and 3rd years of the introductory phase allowances will be sold at the fixed price of £12/tCO2. This will allow participants to become familiar with participating in a trading scheme.

Full implementation from April 2013

• From April 2013 there will be a Government imposed cap on the number of allowances, and all allowances will be sold each year via an auction.

• The Committee on Climate Change will draw on the information gathered during the introductory phase to set the cap.

• Participants will be required to purchase sufficient allowances either from the auction, the secondary market, or via the safety valve to cover their annual energy use and CO2 emissions.

• Renewable / green energy imported via the grid will be included within organisations' CO2 allowances. Credit will not be given to carbon offsetting schemes.

Sources of advice

• There are several important guides to the CRC from DECC including:-
  • The CRC User Guide
  • Guidance on the Early Action Metric
• The scheme is administered by the Environment Agency - their CRC web pages cover how to register, how the scheme is administered and the CRC help desk
• From the Local Government Association:-
  • Cutting through the green tape II: Preparing for the Carbon Reduction Commitment
  • CRC Website
• Preparing for the Carbon Reduction Commitment, London Energy Project. The guide sets out a route map for authorities to meet the CRC requirements.

Examples

The Local Government Information Unit has operated Carbon Trading Councils, simulated carbon trading for local authorities, since 2008. This gives councils an opportunity to learn about trading in a safe environment before the introduction of CRC. See:-

• Council Trading Councils - Taking Stock for a review of their experience so far
• Invitation to join the LGIU's new virtual project Carbon Trading Public Sector 2010-11