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Taken from the Guardian website 31/03/2010

What is the CRC Energy Efficiency Scheme?

The CRC Energy Efficiency Scheme is a new, mandatory, energy-saving and carbon emissions-reduction scheme for the UK. It will see big companies compete against one another to cut their energy bills fastest, in a bid to rank highest in a league table where the leaders will be financially rewarded.

Why is it being introduced?

The Department of Energy and Climate Change developed the CRC (Carbon Reduction Commitment) to help deliver the UK's pledge to reduce greenhouse gas emissions by at least 80% from 1990 levels by 2050.

It should also help to ensure security of energy supply in the UK. Analysis suggests the CRC could reduce CO2 emissions by up to 11.6m tonnes per year by 2020.

Who will the CRC affect?

All public and private sector organisations that used at least one half-hourly electricity meter during 2008 qualify for CRC and will have to register for the scheme. It will involve approximately 20,000 large organisations.

About 5,000 of these organisations qualify as scheme "participants". Participants are identified by their 2008 electricity consumption: any organisation that consumed at least 6,000 MWh of electricity through all of its meters during 2008, equivalent to an electricity bill of £500,000, – around 3,333 tonnes of CO2 – will need to monitor its energy consumption and purchase allowances from the government of £12 each for every tonne of carbon dioxide it emits.

These organisations will also appear in an annual performance league table, ranked on the energy cuts they make over time.

If an organisation has a half-hourly electricity meter but consumed less than 6,000 MWh, it qualifies as an "information declarer" and will only need to register a simple information disclosure. It will not have to carry out annual reporting, purchase allowances or be involved in league tables.

How does the scheme work?

The CRC Energy Efficiency Scheme will be phased in over three years. Once fully operational, participants will be required to monitor their emissions and purchase allowances for each tonne of CO2 they emit at the beginning of each reporting year. The first main sale of allowances happens in April 2011, covering projected CO2 emissions for April 2011 to March 2012.

The scheme is revenue-neutral overall, meaning all money raised from the main sale is re-distributed back to participants, with the highest-ranking organisations in the league table receiving the greatest financial reward.

What are the benefits of the scheme for those who take part?

Participants successful in reducing energy consumption will not only save money on energy bills but will need to purchase fewer allowances and will receive greater financial rewards through revenue recycling. These savings should be well in excess of the costs of participation.

In addition, participants that perform well will also be placed higher in the performance league table, which will be published annually by the Environment Agency, boosting their reputation as an energy-conscious organisation.

How much will the scheme cost participants?

During the second and third year of the CRC's introductory phase (2011/2012 and 2012/2013), one allowance, which equals one tonne of CO2, will cost £12. However, after the three-year introductory phase, from 2013/14 the total number of allowances will be capped and these allowances will be auctioned, rather than sold at a fixed price.

As a result, the cost of buying allowances is likely to become higher, making it financially more attractive for CRC participants to reduce their CO2 emissions by introducing energy-saving measures.

Who will run the scheme?

The Environment Agency is the lead UK administrator for the scheme and will run the CRC registry. The agency is also the scheme regulator for England and Wales and is working with organisations to help them understand their obligations and will provide as much guidance and information as is possible.

The scheme will be audited and enforced by the agency in England and Wales. The Scottish Environment Protection Agency will fill this role in Scotland, and the Northern Ireland Environment Agency will do the same in its area.

When is it happening?

Registration for the scheme opens tomorrow. If a company qualifies it will have to register via an online registry before 30 September 2010.

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