The Carbon Reduction Commitment

1

• The Carbon Reduction Commitment
• Introduction to CRC Seminar
• For Trade Associations and Representative
  Organisations
• 07 October 2008
• Ian Trim
• Senior Policy Adviser, CRC

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Overview What is the CRC?

• Mandatory auction based emissions trading scheme
• targeting energy use emissions outside of CCAs
  and EU ETS from up to 5,000 large business
  public sector organisations
• Covers organisations with HHM electricity use gt
  6,000 MWhr in 2008
• Cap and trade
• Certainty of environmental outcome through the
  cap participants decide where reductions take
  place
• Revenue neutral to the Exchequer
• Auction revenue recycled to participants
• As simple a scheme as possible

3
Why Target CRC Sector? The Climate Change Bill

• Places UK goal of a 60 reduction in carbon
  emissions against 1990 levels by 2050 on a
  statutory footing
• Establishes an independent Climate Change
  Committee to advise Ministers on carbon caps
• Contains broad enabling powers for new trading
  schemes the Carbon Reduction Commitment (CRC)
  program will make use of these powers

4
Why Target CRC Sector? The Policy Gap
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The Gap

• Business supermarkets and other retail banks
  landlords hotel chains restaurant chains IT
  firms airports water light manufacturing
• Public sector Large local authorities central
  government departments hospitals universities
• Business leaders called on the UK Government to
  address the gap in our current policies with
  strong new policy instruments to focus on the
  large, non-energy intensive users of energy in
  the commercial and public sectors.

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Why Target CRC Sector? Spreading the burden

• We are seeing diminishing returns in these EU
  ETS industries (from emissions reductions
  attempts). In the commercial and SME sector there
  is much more scope to make quicker progress
• Matthew Farrow, Head of Environment,
  Confederation of British Industry (CBI)
• November 2005

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The policy development process

• Pre Budget Report 2004 Launched HMT / DEFRA
  review into innovation in energy efficiency

Dec 2005 CT report EEIR report
Nov 06 Jan 07 1st Consultation
July 2006 Energy Review
Consultation around most effective measure to
deliver committed savings
Commitment to reduce sector emissions by 1.2 MtC
/ year by 2020
EEIR published at Pre Budget Report 2005
8
The policy development process
May 07 Energy White Paper
July 07 Oct 07 2nd Consultation
March 08 Government Response
Decision to implement CRC
Detailed consultation around implementation
proposals
To date, 12 major stakeholder workshops across
the UK
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Why CRC?

• Provides mix of incentives and drivers
• Financial Incentives
• Social Responsibility / Reputation
• Legal Driver
• Provides flexibility for participants
• Provides certainty of environmental outcome
• Exists as part of a broader policy package
• Voluntary support Carbon Trust Salix Finance
• Regulatory requirements Building regulations and
  EPBD
• Polluter pays Energy bill incorporates cost of
  CCL and EU ETS

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CRC consultation responses
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From Consultation to Policy
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From Consultation to Policy
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Participant Actions

• Calculate organisations CRC emissions
• All fixed point energy sources (electricity, gas,
  other), excluding de-minimis and all emissions
  outside CCAs and EU ETS
• Emissions assigned to counterparty to supply
  contract
• Not transport emissions
• Actions to take throughout the scheme year
• Forecast emissions in line with abatement
  strategy
• Purchase allowances from Government
• Monitor and manage emissions throughout the year
• If required purchase additional allowances or
  sell excess
• Report emissions and surrender allowances
• Receive a recycling payment

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The Qualification Process
Calendar year 2008 Suppliers record
electricity use for all organisations with
half-hourly (100kW/70kW) metering systems
1 Apr 2010 Scheme Starts
Oct 2009 to Mar 2010 Registration All
organisations buying electricity settled on the
half hourly market disclose total half hourly
electricity consumption
2008
2009
2010
April 2009 Qualification packs Full year data
sent to all customers with 100kW/70kW metering
systems.
Note all dates related to legislation are
subject to parliamentary timetabling