Policy

Energy demand reduction in industry, business and the public sector

Supporting detail:

CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme (or CRC Scheme) is designed to incentivise energy efficiency and cut emissions in large energy users in the public and private sectors across the UK, together responsible for around 10% of the UK’s greenhouse gas emissions. Participants include supermarkets, water companies, banks, local authorities and all central government departments.

Overview

The scheme is designed to target emissions not already covered by Climate Change Agreements (CCAs) and the EU Emissions Trading System (EU ETS) features a range of drivers to encourage organisations to develop energy management strategies that promote a better understanding of energy usage and to take up cost-effective energy efficiency opportunities.

Organisations that meet the qualification criteria are required to participate, and must buy allowances for every tonne of carbon they emit.

The scheme is expected to reduce non-traded carbon emissions by 16million tonnes by 2027, supporting our objective to achieve an 80% reduction in UK carbon emissions by 2050.

As a devolved scheme, DECC has developed CRC policy in partnership with the Scottish Government, the Welsh Assembly Government and the Department of the Environment Northern Ireland.

How the CRC works

Qualification

Qualification for the scheme is based on electricity usage. For Phase 2, organisations will qualify if, during the qualification year, they consumed over 6,000 megawatt-hours (MWh) of qualifying electricity through settled half-hourly meters.

Organisations that meet the qualification threshold must register using the CRC Registry, which is administered by the Environment Agency. Qualifying organisations have to comply legally with the scheme or face financial and other penalties.

A summary of steps to determine whether your organisation qualifies for participation in the CRC and more information on qualification can be found on the Environment Agency CRC web pages.

Compliance requirements

Organisations which participate within the CRC are required to monitor their energy use, and report their energy supplies annually. The Environment Agency’s reporting system applies emissions factors to calculate participants’ carbon dioxide (CO2) emissions on the basis of this information.

Participants must purchase and surrender allowances for their emissions. Allowances can either be bought at annual fixed-price sales, or traded on the secondary market. One allowance must be surrendered for each tonne of CO2 emitted.

The allowance price in the first phase was £12 per tonne of CO2.

In the current phase, participants have the option of buying allowances in advance in the cheaper ‘forecast sale’ at the start of a compliance year, or in a more expensive ‘compliance sale’ after the end of the year.

For the current phase, the following prices apply:

CRC Scheme Year Forecast Sale Price Compliance Sale Price
2014/15 £15.60 £16.40
2015/16 £16.10 £16.90

More information on reporting and allowance sales is available on the Environment Agency CRC web pages.

Management of the CRC Scheme

The Environment Agency administers the CRC Scheme on behalf of DECC the UK as a whole. It runs the UK-wide registry, and is responsible for all matters related to registration, reporting, and allowance sales within the CRC Scheme.

Auditing and enforcement functions are carried out by the Scottish Environment Protection Agency (SEPA) in Scotland, the Department of the Environment Northern Ireland in Northern Ireland, and Natural Resources Wales (NRW) in Wales.

Simplification of the CRC Scheme

Following a public consultation we published proposals to simplify the CRC Scheme in December 2012. These proposals will:

  • radically reduce the administrative costs of participants by 55%, which equates to £275m up to 2030
  • reduce scheme complexity and overlap with other energy efficiency schemes, and provide greater business certainty

The CRC Energy Efficiency Scheme Order 2013 came into force on 20 May 2013, following approval by Parliament and the devolved legislatures.

The majority of the proposals were introduced at the start of the second phase, in 2014 with a few still to come into force by April of 2014.

In November 2013 we consulted on our proposal to deliver the commitment given in the government response on simplifying the CRC Energy Efficiency Scheme to consider how the CRC could incentivise the uptake of onsite renewable self-supplied electricity. In addition, to introduce an exemption to energy supplied to metallurgical and mineralogical processes, which arose from changes to the Climate Change Levy, announced by the Chancellor in the 2013 Budget.

The Government response to this consultation was published on 25 February and The CRC Energy Efficiency Scheme (Amendment) Order 2014 came into effect from 1 April 2014.

Annual report publication

The Environment Agency has published the second Annual Report Publication (ARP) for 2013-14 under the legislation establishing the CRC scheme.

This allows publication of information on the basis of participants’ annual reports, plus details submitted when they registered for the scheme.

The ARP is made up of two parts:

  • spreadsheet of information for each participant
  • a narrative report to provide context and explanation on the content of the spread sheet and accompanying information on the CRC scheme

The report represents the second release in a new format of information drawn from the annual reports of CRC participants. It replaces the Performance League Table as part of the government’s wider simplification of the CRC scheme.

Case studies

Read our case studies to find out how participants in the CRC Scheme are managing their energy use to improve energy efficiency.

Guidance documents

Official guidance on all aspects of complying with the CRC Scheme is available from the Environment Agency web pages.

Appeals guidance

Appeals guidance is available:

Guidance on the CRC repayment mechanism for surplus allowances

DECC has issued guidance on the CRC repayment mechanism for surplus allowances.

The guidance outlines the conditions under which requests for repayment in respect of surplus allowances will be considered, and the process by which participants should make a request. A repayment request form is included to facilitate the submission of repayment requests. DECC will only make payment where a refund request has been able to be verified.