Sustainability drivers

The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a legally binding energy saving scheme that came into force in April 2010. Government announced in the March 2016 budget that the scheme would be abolished from the end of the 2018/9 compliance year, admitting that it had become a tax rather than an effective tool for reducing carbon emissions.

CRC aims to improve energy efficiency and cut emissions in large public and private sector organisations. Approximately 5,000 organisations should be participating in the scheme, which involves buying and trading carbon credits; these organisations are responsible for around 10% of the UK’s emissions.

Organisations are required to participate in the scheme if they consume and pay the bills of more than 6,000 MWHs (megawatt hours) of half hourly metered electricity a year. If an organisation reaches this level of electricity consumption they will be required to purchase 'carbon credits' for all energy use annually. As a guide, this electricity consumption would equate to an air-conditioned office building of approximately 150,000ft2. 

In the first 2 years, a CRC Performance League Table was published to highlight the best and worst performers for year-on-year carbon reduction. Participants were originally to receive either a monetary reward or penalty from their base carbon credit investment as a result of their position in the league table. However, this recycling of payments was stopped by the Coalition Government in their Comprehensive Spending Review in 2010 and instead these payments are now retained by Government as a levy (although there are ongoing discussions as to whether this will be a tax and collected by HM Treasury – an important point for landlords and tenants as depending on the wording of their leases it may be possible for the monies to be recoverable through the service charge).

Since the disbanding of the league table (under the original scheme) as part of a simplification of the scheme announced in early 2013, the EA is instead publishing participants’ aggregated energy use and emissions data.
Public sector organisations and local authorities are required to participate in the scheme regardless of whether they meet the threshold or not. As a result, public sector organisations will need to form close partnerships and robust reporting structures to ensure penalties are not incurred. In addition, poor data quality with regard to energy and carbon will result in financial penalties, to be published in the press. Fines will continue until the issue is rectified so it is vital that prudent data capture and management processes are implemented.

The government intends to raise the main rates of the Climate Change Levy to cover the lost income from CRC, so there will still be higher tax on higher energy usage, incentivising lower energy use.

Visit the Department of Energy & Climate Change (DECC) for further details.