CARBON REDUCTION COMMITMENT

It will be apparent from the description below (taken from the Keep Britain Tidy Website) that East Sussex County Council will be affected by this legislation.
However it should be easy for them to achieve significant reductions in energy use. This table shows how poor is the current energy performance of East Sussex Schools - Click here
 

The following is copied from the Keep Britain Tidy Website
http://www.keepbritaintidy.org/Expertise/CSGN/Members/News/carbonreduction/Default.aspx

WHAT IS THE CARBON REDUCTION COMMITMENT

Main points
- The Carbon Reduction Commitment (CRC) is a new legally binding climate change and energy saving scheme.
-  The scheme begins in 2010 although some preparations need to be made in 2009.
-  This paper sets out the main provisions and how it will impact on local authorities both financially and operationally

1. Introduction
The Carbon Reduction Commitment (CRC) represents the first mandatory carbon trading scheme in the UK.  The aim is to reduce the level of carbon emissions by approximately 1.2 million tonnes of CO2 per annum by 2020. It forms part of the Climate Change Bill commitment to aim for an 80% reduction in CO2 emissions by 2050.  It covers both the public and private sector, and is designed to encourage large non-energy intensive organisations in the UK to reduce their CO2 emissions.

Although the scheme doesn’t officially start until April 2010, local authorities will need to make preparations during 2009 to ensure that they comply with the requirements.

2. What is the Carbon trading scheme?
Carbon trading allows the Government to regulate the amount of emissions produced overall by setting the overall cap for the scheme but gives the flexibility of determining how and where the emissions reductions will be achieved.

Participating organisations are allocated allowances with each allowance representing a tonne of the relevant emission, e.g. CO2.  Emissions trading allows organisations to emit in excess of their allocation of allowances by purchasing allowances from the market or if emitting less than the allocation of allowances these can be sold as surplus allowances.

Emissions’ trading gives the flexibility to meet emission reduction targets according to their own strategy; for example by reducing emissions on site or by buying allowances from other companies who have excess allowances. The environmental outcome is not affected because the total amount of allowances allocated is fixed.

3. Criteria for inclusion in the Carbon Reduction Commitment (CRC) scheme
The initial phase of the CRC will be compulsory for organisations whose annual half-hourly metered electricity use in the UK was above 6,000 Mega Watt hours (MWh) during the year 2008.  As a guide, this includes organisations spending more than £500,000 a year on electricity in the UK.   

4.  Affect on local authorities?
Local authorities will be responsible for:
• Calculating their emissions responsibility under the scheme;
• Purchasing allowances to cover their emissions;
• Monitoring and reporting their annual energy consumption (including electricity, gas and other fuel types) excluding transport emissions;
• Surrendering sufficient allowances to cover their stated emissions;
• Keeping an evidence pack which provides an audit trail to demonstrate how energy use was calculated.

The local authority would be defined as the ‘carbon reduction commitment participant’, and the legal and financial responsibility for participating in the scheme falls onto the local authority.  Therefore the local authority will face both a financial and reputational risk if they do nothing. 

All state-funded schools that fall within their geographical area in the local authority portfolio are included, meaning school emissions would form part of the local authorities overall carbon footprint.  A duty will be placed on schools requiring them to supply the local authority with annual energy use data.  The guidance states that the aim is for local authorities to work with schools and provide energy management advice and resources.  It is estimated by some larger county councils that schools and colleges could amount to up to 75% of carbon emissions of a local authority under CRC.

The guidance is clear that PFI schools will participate as individual CRC organisations and that these schools will be included within local authority’s sources. Further clarity still needs to be provided in the guidance for on how outsourced contracts are dealt with, especially where there has been a change in management type and the local authority has chosen to outsource or bring its services back in house or move to another vehicle such as a joint venture or a trading vehicle. 

Additionally, it is likely that further clarity in guidance will be needed for transport, particularly where vehicles are only ‘fixed’ for a certain period of time.  For example,  construction vehicles and where vehicles are used for the transport of ‘people or goods’ and also used to deliver services such as refuse collection or grounds maintenance where a vehicle is transporting the operative from the depot to the area of work and is then used to carry out tasks.

5. How will it work?
The main aim of the CRC is to encourage greater energy efficiency and therefore deliver a reduction in CO2 emissions.  The more energy efficient an organisation becomes the fewer emissions it will generate and the fewer allowances it will have to buy under the scheme.

Local authorities will have to identify their total half-hourly energy consumption for 2008 to first calculate whether or not they exceed the threshold.  The first year of the scheme will be April 2010 to March 2011 and during this time, participants will need to monitor all energy sources and use this data to prepare a Footprint Report to submit by the end of July 2011.

In April 2011, local authorities will have to purchase carbon allowances at a fixed price of £12 per tonne at the end of the first year, for both the previous year and the forthcoming year. This means in April 2011, they will need to buy sufficient allowances to cover their actual emissions for 2010/11 and their forecast emissions for 2011/12. However, the first year of the scheme will be the only time that allowances can be bought to cover their previous year’s emissions.  

The CRC timescale is shown in the diagram below: 

 

 

Whilst local authorities may purchase several years allowances they cannot be banked beyond the end of March 2013 therefore these can only be used in that particular phase of the CRC scheme.  The Government will recycle all money raised from the sale of allowances back to local authorities with the first recycling payment taking place at the end of October 2011.  The amount of payment received back from the Government will depend on performance in a league table and will involve either a penalty or a bonus.

The aim of the bonus and penalty scheme is to act as an incentive to reduce emissions.  Therefore, if organisations perform well, the money they get back should exceed the cost of buying allowances.  There may be cash flow implications for local authorities from April (purchase of allowances) to October (recycled payments made), while they wait for the revenues to be recycled.  There are no requirements for organisations to reinvest bonus payments to reduce energy by investing in green technology or services.

The CRC league tables will rank local authorities in the scheme in terms of performance on the following:

• Absolute emissions - percentage reduction in carbon emissions compared to the previous year;
• Growth - percentage reduction in other carbon emissions per unit of turnover;
• Early action – early action initiatives made to reduce their carbon emissions prior to April 2013.  The first league table will be based solely on these.

The league tables will be publicly accessible and the scheme will also publish responses to three questions:
 
• Does your organisation disclose long-term carbon emission reduction targets?
• Does your organisation disclose carbon emissions performance against these targets?
• Do you have a named director with responsibility for overseeing carbon performance?

Therefore to do well in the CRC, participants will need to:

• Implement automatic meter readers prior to March 2011;
• Sign up to the Carbon Trust Standard;
• Establish comprehensive monitoring and targeting mechanisms;
• Collect and record procedures ;
• Assign responsibilities and ownership for energy reduction tasks;
• Carry out regular reviews of data collection;
• Reduce emissions within the scheme;
• Proactively develop a strategy to identify and implement future energy savings.

In the first 3 years, allowances will be at a fixed price but from April 2013, allowances will be bought through auction and the Government will cap allowances. Over time, the number of available credits will diminish which is likely to drive up the price. 

Therefore in early years, solutions such as greater insulation and low energy alternatives will prove effective in meeting the requirements of the CRC.  However, it will be necessary for local authorities to look at longer term measures that may need investment in the infrastructure for future years.   

The CRC will place an onus on the participating local authorities to record and report their own emissions to the scheme.  However, 20% of all participants will be audited annually.  All local authorities will be required to produce evidence packs in case of an audit and these will consist of records covering structure, data and special events.

6. Next steps
Defra is issuing a user guide to provide local authorities with information on what needs to be assessed as to whether a local authority qualifies for the scheme and to guide through the registration process. Defra has also consulted on the CRC regulations.
 
During the summer, the Environment Agency will contact all UK billing addresses with half-hourly meters (HHM) providing them with registration packs. In 2010, all organisations with a HHM will need to provide information on their total half-hourly electricity consumption for 2008 together with a list of half-hourly meters, assisted by their electricity supplier.

7.  Comment
The CRC should have obvious benefits in terms of:

• Reducing carbon emissions in the UK and therefore greenhouse gases impacting adversely on the environment;
• An opportunity to identify and reward best performing authorities both in terms of financial payments and recognition from the league tables;
• Having reduced their carbon emissions, local authorities should secure long-term financial benefits from reduced energy costs.

The new legal requirements will have implications on local authorities in terms of the records that need to be kept, the need to monitor and report energy consumption, the need to purchase allowances to cover emissions and then wait 6 months for recycling payments and also the implications in terms of the demoralising and financial effects of being lower in the performance league table.

The CRC will also need to be taken into account in determining future project decision making.  It may be necessary to consider CO2 in determining whether extra allowances need to be purchased to cover extra emissions in order to comply with the CRC.     

The Carbon Reduction Team based at Department of Energy and Climate Change (DECC) may need to be pro-active in assisting organisations through the early stages of the scheme, particularly in relation to reminding organisations of the deadlines rather than resorting to enforcement.  It would also be useful if DECC could provide examples which quantify the potential financial impact this could have on local authorities even if these need to be theoretical until the baseline for performance is known.