The future of the CRC. Carbon reporting, legislative changes and better transparency

The future of the CRC. Carbon reporting, legislative changes and better transparency

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The future of the CRC. Carbon reporting, legislative changes and better transparency

Introduction

The Carbon Reporting Efficiency Scheme is a mandatory carbon emission reporting and pricing scheme which was introduced for the first time with the 2008 Climate Change Act in order to encourage public and private companies and business across the UK to reduce their CO2 emissions and help the UK meet the Government’s 80% carbon reduction goal by 2050.

It was designed to cover organisations who spend £500,000 on and use 6MWh electricity per year and includes reporting and allowances requirements.

The requirements are:

1)      Emission reporting requirement: any business who meets the listed criteria needs to gather and submit evidence on their company’s energy usage (electricity and gas) annually, using the online CRC registry and applying a specific set of measurement rules. Furthermore, it will need to provide other requested relevant information and answer some specific corporate responsibility related questions.

2)      Purchase: businesses falling under the CRC scope need to purchase an energy allowance based on the CO2 emissions they generate from the Government or from the secondary market, in order to cover their reported emissions.

3)      Transparency: all the information submitted by those who align to the CRC scheme will be published each year as part of the Annual Report Publication (ARP).

The Carbon Reporting Efficiency Scheme covered emissions not already covered by Climate Change Agreements and the EU Emissions Trading System.

The simplification

A consultation was launched in 2012 and it was recognised that the scheme was overcomplicated and that there was a significant overlap with other UK and EU regulation schemes.

In 2013, the CRC Efficiency Order was introduced to decrease administrative costs, reduce overlap and simplify the reporting requirements.

Two years later, the 2015 Energy Efficiency Review looked at the CRC as a part of “the business energy landscape” and lead to the abolition of the CRC and the expansion of another scheme: the CCL (Climate Change Levy).

The future of the CRC. What is going to change?

Nothing will change until 2019. A further consultation on simplified energy and carbon reporting will be held later this year.

What we know so far is that from April 2019 the purchase of energy allowance won’t be compulsory anymore, and that the CCL rates will be adjusted in order to make the abolition of the Carbon Reduction Efficiency Scheme neutral.

The Climate Change Levy

The Climate Change Levy has a much wider reach than the CRC as it covers organisations who use up to 1.2 MWh of electricity per year, and its aim is to encourage them to switch to cleaner and more sustainable energy sources.

Even though this goal could be easily questioned as the CCL scheme does not include renewables among the sources that give businesses the possibility to avoid CCL payments, electricity, gas and solid fuel consumption can benefit from tax reduction if:

-          they won’t be used in the UK

-          they are supplied to or from certain combined heat and power (CHP) schemes registered under the CHP quality assurance (CHPQA) programme

-          they won’t be used as fuel

-          they’re used in certain forms of transport

-          the electricity was generated from renewable sources before 1 August 2015.

Further details about the Climate Change Levy will be disclosed after the next governmental consultation.

In the meantime, to find out more about environmental taxes, reliefs and schemes for businesses visit https://www.gov.uk/green-taxes-and-reliefs.

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