Regulations setting out how the Environment Agency will sell allowances under phase 1 of the CRC Energy Efficiency Scheme (CRC) came into force on 24 May 2012.
The Environment Agency issued guidance on the 2012 sale and surrender of allowances in April 2012, which applies now that the regulations have been published.
Phase 1 of CRC runs from 1 April 2010 to 31 March 2014. The first year of CRC was reporting only but allowances need be purchased for emissions relating to the remainder of the phase.
Under the regulations, the first sale of allowances for emissions relating to 1 April 2011 to 31 March 2012 will take place between 1 June and 31 July 2012.
The second sale will relate to emissions for the period 1 April 2012 to 31 March 2013, and the third sale will relate to emissions for the period 1 April 2013 to 31 March 2014.
Mechanics of the 2012 sale
- sales in phase 1 are retrospective, so participants know how much CO2 they emitted when they buy allowances
- the cost of allowances is £12/tonne of CO2
- there will be no administration fee
- compliance account representatives for participants will undertake allowance transactions on the CRC registry
- compliance account representatives should be appointed and should enrol at the Registry as soon as possible
- an order for allowances equal to emissions from 1 April 2011 to 31 March 2012 needs to be submitted via the CRC registry between 1 June 2012 and 31 July 2012
- payment for allowances ordered needs to be made to the DECC bank account and cleared before 31 July 2012
- the Environment Agency will issue allowances either between 1 June 2012 and 31 July 2012 or, if it does not have sufficient time to process the request, between 13 August 2012 and 7 September 2012
- allowances equal to emissions need to be surrendered before 28 September 2012 (the surrender deadline is 31July 2012 by law but has been extended by way of regulatory position statement)
- if insufficient allowances are surrendered, enforcement action may be taken, including civil penalties
- if too many allowances are purchased they can be banked in the compliance account (for the next compliance year but not between phases) or sold in the secondary market
- if too many allowances are surrendered, the surplus will be held in a cancellation account. They will automatically count towards the next year's surrender obligation but will not be returned to compliance accounts and are not tradeable
Steps to take now
The guidance recommends that a compliance account representative should be appointed and enrolled now.
The Environment Agency has to validate the representative and send out a PIN letter. In addition, each representative is required to purchase a digital certificate so that their identity can be verified each time they access the CRC registry.
It can take up to four weeks for digital certificates to be issued. The representative then needs to enrol with the registry.
Orders for allowances are encouraged as soon as possible after 1 June 2012.