Why the CRC Scheme Won’t Make Firms Energy Efficient

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Since April 2010 the Carbon Reduction Commitment (CRC) Scheme has been in effect, as part of an ambitious strategy by the UK government to reduce carbon emissions by 80% by 2050. Analysts have already complied statistics that suggest the CRC Scheme could reduce CO₂ emissions by up to 11.6m tonnes per year by 2020.

However, it has been suggested that companies may continue using the same inefficient equipment – as long as they can meet government requirements, and avoid financial penalties.

Carbon Emissions Statistics

The latest statistics on CO₂ were release in March 2012 by the Department of Energy and Climate Change (DECC). Some key findings included:

• UK greenhouse gas emissions had fallen by 7% during the first year of the CRC Scheme, from 590.4 million tonnes to 549.3 million tonnes.

• Carbon dioxide (CO₂) accounts for about 84% of the total UK greenhouse gas emissions in 2010, although the level of CO₂ emissions fell by 8% in 2011 from 495.8 Mt to 456.3 Mt.

It is also interesting to note that the main decrease in CO₂ has been attributed to a reduction in residential gas use: perhaps this is a result of rising energy prices, rather than a shift towards a greener attitude.

Which types of fuel are included?

CO₂ is one of a basket of six greenhouse gases which are part of the CRC Scheme:

1. carbon dioxide (CO₂)

2. methane (CH4)

3. nitrous oxide (N20)

4. hydrofluorocarbons (HFCs)

5. perfluorocarbons (PFCs)

6. sulphur hexafluoride (SF6)

Who does the CRC Scheme affect?

CRC Scheme is mandatory for any organization in the UK that used more than 6,000MWh of electricity via half-hourly meters in 2008: this does not apply to non-energy-intensive organizations.

Performance tables display those who are managing their levels of emissions well, and also those who aren’t. This has added an extra dimension to the need to meet the regulations as organizations that fail to meet standards will be publicly exposed.

Additionally, companies are under financial pressure to perform: previously, an organization could sell unused carbon credits to those in danger of exceeding the limits, thus rewarding good performance. However, the Chancellor has now decided that organizations which fail to meet regulations will see payments for excess emissions go into the public purse, prompting many to label the CRC Scheme as a ‘carbon tax’.

How does the CRC Scheme work?

The CRC Scheme currently works by allowing companies to purchase carbon allowances at a rate of £12 per ton of CO₂ (TCO₂). In April 2013 however, this will change to a carbon allowance auction, which could potentially limit the ability of smaller businesses to meet their carbon allowance requirements.

This will also coincide with the public league table, against which organizations will be given a bonus or penalty payment. The first table, released in 2011, can be found on the Environment Agency’s website.

CRC Criticism

Originally, the scheme was criticized for using an overly-complicated calculation method, as well as being seen as a stealth tax introduced by the government. An article on The Environmentalist has quotes from Steven Norris, a former MP and president of the Data Centre Alliance, saying that even if the scheme is simplified, organizations will still continue to use the same systems they currently have in place to meet the required levels of emissions – this is despite the intention that the CRC Scheme will save businesses money by making them more energy-efficient. Companies like Slaters Electricals have a range of energy efficient transformers have a range of energy efficient transformers which can be used to decrease the level of energy usage of an organization, thereby reducing the number of MWh used.

It remains to be seen whether criticism will grow or recede when the next phase of the CRC begins in 2013.

Article by James Mechan.

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About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

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