Carbon Reduction Commitment

What is the Carbon Reduction Commitment?

The Carbon Reduction Commitment ('CRC') is a new carbon trading scheme which will force commercial and public sector senior managers to focus on reducing their organisation's energy consumption – both to protect reputation and their bottom line.

From April 2010, the scheme will apply to organisations:

  • in the private and public sectors, operating in the UK;
  • who are billed for more than 6,000 mega watt hours of electricity (approximately £500,000) per year through half hourly electricity meters.

How will it affect your organisation?

If your organisation falls within the scheme:

  • you will need to monitor, report and forecast energy consumption across your entire organisation;
  • you will need to buy carbon allowances to match consumption you forecast for the year ahead and surrender allowances according to your actual consumption in the year just ended;
  • you be placed in a public 'naming and shaming' league table which rewards those who perform well and penalises those who do not.

What should your organisation do to prepare?

In September 2009, the Environment Agency may send you a qualification pack, asking you to confirm if you are caught within the scheme. To prepare, you need to:

  • identify what your 'group' is for CRC purposes;
  • appoint someone to take responsibilities for your group's CRC compliance;
  • work out your energy consumption - initially to establish if you are caught by the scheme (based just on half hourly metered electricity use) and subsequently to work out how many allowances you will need to buy (based on total energy use of all types);
  • start looking for opportunities across your organisation to reduce energy consumption or to introduce low carbon energy sources and implement the most cost-effective ones first; and
  • consider whether you should try to qualify for one of the 'early action' metrics.

How can Nabarro help?

We can help you:

  • understand how the Carbon Reduction Commitment will affect your company or organisation – whether you are a local authority responsible for schools and trading entities, a diverse corporate structured in business divisions or a fund manager grappling with the implications on your investment portfolio;
  • manage the impact and maximise the opportunities arising from the CRC – whether you are considering an organisation-wide strategy or a facility-specific project;
  • understand the impact of the CRC on group re-organisations as well as on share and asset sales and purchases and structure these accordingly – helping you to avoid the pitfalls and realise the potential 'upside';
  • procure energy efficiency and low carbon energy solutions – whether through energy performance contracting or negotiating with an ESCO;
  • manage the impacts of the CRC on your leases – whether as a landlord or tenant and how best to reconcile the CRC drivers with standard lease provisions;
  • manage the impacts of the CRC on your PFI contracts – understanding the implications for existing contracts and negotiating new ones.

Please contact us if you require further advice.

Additional help can be found:

  • for local authorities, on the LGA website – a joint LGA/Nabarro publication: "Cutting through the green tape II – preparing for the carbon reduction commitment";
  • on the DECC website – draft guidance;
  • from the Environment Agency – via their CRC helpline.
Our latest alerts, briefings & reports
  • CRC Energy Efficiency Scheme (CRC): Overview  
The CRC is due to commence in April 2010. Is your organisation ready? View full briefing
  • Carbon Reduction Commitment: It's all in a name  
The various Government departments involved in the delivery of CRC have published the formal response to the CRC consultation. View full briefing
  • Carbon Reduction Commitment - what does it mean for your group?  
If you have an half hourly electricity meter registered to you the Environment Agency will send you a qualification pack for the Carbon Reduction Commitment (CRC) in September 2009. View full briefing
  • Carbon Reduction Commitment: fund managers get ready  
After many years of gestation, the carbon reduction commitment (or CRC) will be with us in April 2010. The CRC is a mandatory carbon trading scheme for large non-energy intensive organisations in the UK. Organisations obliged to participate in CRC will have to buy carbon allowances in respect of emissions attributed to energy consumed by their operations. Qualifying funds and fund managers will be obliged to participate in the scheme. Regardless of current environmental performance, the CRC is something that, if ignored, may impair your fund's financial performance. However, if you respond wisely to your CRC obligations it should help you to find energy (and hence cost) savings, increase profitability and demonstrate green credentials. This briefing sets out some steps you can take now to prepare for the CRC. View full briefing
  • Cutting through the green tape II: preparing for the carbon reduction commitment (CRC)   
The Carbon Reduction Commitment (CRC) is the UK’s first mandatory carbon trading scheme. It will involve the participation of up to 20,000 large business and public sector organisations. Participation in CRC will be a legal requirement for all organisations whose annual UK half-hourly metered electricity consumption was at least 6,000 Megawatt hours during the 2008 calendar year. View full briefing