CRC - Government confirms CRC will continue in a simplified form

CRC - Government confirms CRC will continue in a simplified form

Published:

Author: Sophie Wilkinson

The Government's Autumn Statement confirmed that the CRC Energy Efficiency Scheme ("CRC") will be retained in a simplified form, rather than abolished.

From 2013 CRC will be simplified and the Performance League Table will be abolished. The Government has also stated that there will also be a full review of the effectiveness of CRC in 2016 and that the tax element introduced at Spending Review 2010 is a high priority for removal.

The price of CRC allowances will be £12 per tonne of carbon dioxide (tCO2) in 2013/2014 and £16/tCO2 in 2014/2015. From 2015/2016 onwards the price will increase in line with the Retail Price Index.

The Government estimates that the changes will deliver a 55% reduction in costs, saving approximately £272 million for participants.

The changes

The details of the changes are set out in the Government's response to its March 2012 consultation.

In the majority of cases the Government has implemented the changes it proposed in the March 2012 consultation. However the following changes have been made:

  • the number of fuels has been further reduced from the original proposal of four to two (electricity and gas, and gas only when used for heating purposes)
  • the 90% rule (which meant participants had to demonstrate that 90% of emissions were regulated under the EU Emissions Trading Scheme (EUETS), Climate Change Agreements (CCAs) or CRC) will be removed, but there will be a 2% de minimus threshold for gas used for heating so that organisations with a very low gas consumption do not need to report this
  • responsibility for compliance with CRC will transfer from the landlord to the tenant if there is a lease of a building of 30 years or more
  • all state funded schools will be withdrawn from CRC
  • changes to the proposals relating to the way trusts are treated
  • the Performance League Table will be abolished but the CRC administrator will continue to publish energy use and emissions data
  • the deadline for surrender of allowances will be further extended to the end of October to allow more time to complete the allowance sale process

Timescales

The majority of the proposals will be introduced at the start of the next phase of CRC i.e. 1 April 2014

However the following changes will be implemented earlier:

  • reduction in fuels from twenty nine to two
  • 2% de minimus for gas
  • restriction of the circumstances in which Electricity Generating Credits (EGCs) can be used
  • extension of the CRC allowance surrender date
  • abolition of the Performance League Table

The Government intends to lay an Order before Parliament to effect these changes, with the Order coming into force on 1 June 2013.

Updated guidance on the qualification process for Phase 2 is expected later this month, December 2012.

Updated guidance on Phases 1 and 2 of CRC is expected in early 2013.

Comment

The changes make compliance with CRC simpler and cheaper. However some organisations have argued that those that have been through the process of understanding and complying with Phase 1 of CRC would be better off continuing with the scheme as is rather than having to understand and apply the changes.

By leaving CRC open to further review in 2016 it has also been argued that the need for a long term, consistent policy framework is undermined.

The Government has not elaborated on what it means when it says that the "tax element of the CRC introduced at Spending Review 2010 will be a high priority for removal when public finances allow". The statement might mean that there is an intention to re-introduce recycling payments under CRC.

These were payments envisaged under the original CRC scheme where participants were to receive back the revenue generated from the sale of allowances based on their rankings in the Performance League Table.

If this happens another mechanism for recycling payments to be calculated would be needed due to the removal of the Performance League Table.