Carbon Reduction Commitment

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Carbon Reduction Commitment AEA is the Government
adviser contracted to develop the CRC scheme
A world leadingenergy and climatechange
consultancy
Stephen Boyle, Principal Consultant, Climate
Change and Policy 1st June 2009
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About AEA

• Global business supporting public and private
  sectors
• Energy and climate change
• Air and water quality
• Risk management and due diligence
• Resource efficiency
• Sustainable transport
• Innovation and knowledge transfer
• Sustainability
• Information technology and environmental
  management

AEA is supportingDECC as it developsthe
regulations for CRC
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What is the CRC?

• Mandatory auction-based emissions trading
• Enabling powers Climate Change Bill
• Public and private sector
• Covers all non-transport energy emissions
• Applies at highest UK parent organisation
• Requires participants to monitor energy use and
  trade emissions allowances
• Starts in April 2010 but preparation starts now

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Qualification Process
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Whats covered
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Annual reporting

• Financial year compliance cycle
• Purchase Allowances for the year
• Evidence pack and source list
• Report emissions by end July after the year end
  and surrender allowances
• Audit not verification
• Rules for renewable generation, export of power
  from own generation, heat from CHP

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Sales and recycling
April 2010 April 2011 April 2012
April 2013
Scheme starts
First sale (double)
Second sale (single)
First auction (single)
First recycle (double)
Second recycle (single)
Capped phase (auctions)
Introductory phase (12/t sales)
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Stirlings value at risk

• Stirlings 2007/08 Energy usage kWh kgCO2
• Electricity 19,142,427 10,279,484
  
• Gas 31,577,573 5,841,851
• Oil 1,616,065 430,070
• Renewable 0 0
• Others 0 0
• Total 52,336,065 16,551.405
• Stirlings CRC Auctioning Revenue for the fixed
  price phase
• 10/11 16,552 number of allowances at 12/CO2 -
  198,624 10 - VAR 39,725
• 11/12 16,552 number of allowances at 12/CO2 -
  198,624 10 - VAR 39,725
• 12/13 16,552 number of allowances at 12/CO2 -
  198,624 20 - VAR 79,450
• Stirlings CRC Auctioning Revenue for the
  following 3 years (at 2.6 GDP)
• 13/14 16,552 number of allowances at 12.30/CO2
  - 203,590 30 - VAR 121,154
• 14/15 16,552 number of allowances at 12.60/CO2
  - 208,555 40 - VAR 166,844
• 15/16 16,552 number of allowances at 13.00/CO2
  - 215,176 50 - VAR 215,176
• Total Value at Risk for Stirling over 3 year
  fixed price period 158,900

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The league table

• Early action, prior to April 2011
• Percentage emissions reduction - absolute
• Percentage reduction in emissions/turnover -
  growth
• Performance is assessed against a 5 year rolling
  average

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Recycle payments

• Each participants share of emissions in 2010/11
  multiplied by total recycle pot each year

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Base payment
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In summary - what to do and when
01/08
07/08
01/09
07/09
01/10
07/10
01/11
07/11
01/12
07/12
Registration
HH Electricity
Preliminary Report
All energy EUETS, CCA
Annual emissions, turnover, early action
Annual compliance
Annual emissions, turnover
Emission period Reporting period
Key
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Key features

• Compliance preparation
• Registration
• 2010/11 footprint data (2010/11 will be base
  element for recycle payments)
• Annual compliance
• League table
• Metrics and emissions performance
• Carbon Trust standard and automatic meter reading
• Recycle payments and reputational impacts
• Landlord / tenant responsibilities
• Trading strategy and cash flow implications

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Compliance preparation

• You should produce a detailed compliance action
  plan
• Milestones
• Data requirements
• Responsibilities
• Assess your readiness for scheme compliance
• Building on carbon targets
• Actions to overcome shortfalls
• Evidence pack requirements
• Confirm additional sources position
• AEA could support your formal submissions process

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Landlords and tenants

• Review significance
• Emissions within landlords responsibility
• Significance
• Risk of pass-through / lease strategy

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A successful trading strategy

• Understand your abatement options
• Forecast your business as usual emissions
• Understand how the sale/auction will work
• Recognise the risks
• Others will be bidding in the auction so you may
  not get what you want
• The alternative to the sale is the secondary
  market/safety valve

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Your approach to CRC

• The scheme has many opportunities to win or lose
• League table good emissions performance
• League table early action metrics
• Landlord and tenant arrangements
• Non-core sources
• Successful trading strategy

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Preparing for the CRC - Summary

• Work out your organisation structure
• Know your emissions exposure
• Understand your compliance obligations
• Make sure your systems are in place to gather and
  manage data and forecast emissions
• Understand your abatement opportunities
• Take a proactive approach to the opportunities
  the scheme presents

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Carbon Reduction Commitment
Stephen Boyle, Principal Consultant, Climate
Change and Policy 0870 190 6804,
Stephen.Boyle_at_aeat.co.uk 1st June 2009