The CRC - What you need to know
- the CRC is a mandatory scheme for large non-energy intensive UK commercial and public sector organisations
- the aim of the scheme is to reduce energy use
- over 2,700 organisations are participating in the CRC
- affected organisations must purchase allowances to cover their energy use
- revenues raised by the CRC will no longer be recycled back to participants.
Our “at a glance” CRC action points
Managing compliance
- develop a clear CRC compliance strategy - your strategy will need to be flexible and able to respond as developments unfold
- maintain adequate CRC records including evidence packs
- prepare to file footprint and annual reports by 29 July 2011
- put in place intra-group agreements to manage compliance if you are participating in the CRC as a group. Consider how to allocate costs across your CRC group. An on-going strategy is essential for groups given the joint and several liability of CRC group members
- be prepared for an Environment Agency audit
- keep on top of CRC developments - subscribe for our updates.
Mitigating the financial impact of the CRC
- assess the likely cost of participating in the CRC including the cost of purchasing allowances and any other associated administrative costs
- identify energy reduction measures and plan to reduce CO2 emissions: this is even more critical following the changes to the CRC dropping the revenue recycling payment
- explore whether it is possible to pass on CRC costs to others but beware of others trying to pass costs on to you!
- prepare to buy allowances from 2012.
CRC should be on your M&A agenda
- prepare a CRC transaction checklist for changes to group structures, acquisitions and disposals
- post-completion notifications may need to be made to the Environment Agency or baseline data updated
- specific CRC due diligence and warranties may be necessary.
Real estate issues
- landlords should consider whether they wish to pass CRC costs onto tenants as a tax or outgoing
- tenants may wish to challenge the principle of recoverability
- document how CRC will be treated in new leases
- carry out CRC due diligence on investment sales and purchases.
How our CRC Team can help
- determine whether your organisation qualifies for each Phase of the CRC
- on-going compliance obligations including record keeping requirements, reporting obligations and the purchase and surrender of allowances
- definitions of group used in the CRC Order and how these definitions apply to your organisation
- advise CRC groups on disaggregation
- assist CRC groups on intra-group arrangements (including setting out monitoring and reporting obligations for electricity and energy data, agreeing how the purchase of allowances will be managed and funded and addressing liability)
funding arrangements for the purchase of allowances
- changes to CRC group structures including whether any post-completion notifications need to be made to the Environment Agency
- CRC due diligence and warranties on acquisitions, disposals and joint ventures
transaction checklists
- advising property owners and occupiers on the operation of the CRC in light of the Spending Review and further consultations
- advising both landlords and tenants on how to deal with CRC costs in new leases and whether recovery of CRC costs is possible under current lease drafting
- due diligence on investment sales and purchases - review lease terms and consider position on lease renewals
- issues arising from the implementation of energy reduction measures including planning, real estate and contractual
- impact of the CRC on commercial arrangements such as outsourcing and franchises.
CRC Breaking News
28 March 2012: Consultation on simplified CRC Energy Efficiency Scheme
In this year's Budget on 21 March 2012, the Government claimed it was listening to criticism from business and promised to release another CRC simplification, aimed at delivering significant savings in the administrative burdens imposed on business by CRC.
The further consultation on CRC simplifications was released by the Government on 27 March 2012 and will run until 18 June 2012 in parallel with the Treasury taking soundings from business on alternatives to CRC. Given this twin track process, if you have comments on the structure of CRC or the principle of using CRC instead of alternative measures, as well as answering this consultation, your organisations also need to provide comments to Treasury as soon as possible.
View the consultation here.
12 January 2012: the Government lays draft regulations on the sale of allowances before Parliament.
There will be three sales of allowances in Phase 1. The First sale will take place between 1 June 2012 and 31 July 2012; the Second sale will take place between 3 June 2013 and the last working day of July 2013 and the Third sale will take place between 2 June 2014 and the last working day of July 2014. The sales in Phase 1 will be retrospective. As previously announced, the cost of allowances in the first sale will be £12/tCO2.
8 November 2011: The first Performance League Table is published today. Click here to access
30 June 2011: DECC announces the main changes it proposes to make to the CRC in order to simplify the scheme. The proposals include changes to the rules on organisational structures, the sale of allowances, the overlap with climate change agreements and the EU Emissions Trading Scheme and the number of fuels covered by the CRC. DECC is inviting comments on the proposals by 2 September 2011 and will then consult on draft legislation in February 2012. It is intended that the changes will come into force in April 2013. Please click here to view the DECC press release on proposed simplification measures.
June 2011: the Environment Agency publishes a revised guidance for private finance initiatives (PFI). Two new scenarios have been added to the section on "supply rules" including (1) when a PFI provider (who is in sole occupancy of the premises) receives and pays for energy supplies and (2) PFI arrangements that do not involve occupation of premises (for example, street lighting and road/bridge toll projects).
June 2011: the Environment Agency publishes a note to clarify the rules on how participants can benefit from the installation of automatic metering in the early action metric (EAM) in Phase One. The EAM is one of the criteria that will determine a participant's ranking on the Performance League Table. The first Performance League Table will be published in October 2011.
2 June 2011: the Environment Agency publishes guidance on the penalties that could be imposed for a failure to submit an annual report by 29 July 2011. The level of penalties imposed could be substantial. Please see our comment for more information.
1 April 2011: first trading year of the CRC commences. The first actual sale of allowances will take place in April 2012. It is still unclear how exactly the mechanics of this first sale will operate but the Government has confirmed that allowances for the first year 2011/2012 will be purchased retrospectively. Participants will therefore need to purchase allowances used from 1 April 2011 and should address the accounting treatment of this cost now. 1 April 2011 also marks the end of the initial CRC reporting year (April 2010 to March 2011). Participants should ensure that evidence packs detailing energy usage are prepared.
1 April 2011: CRC Energy Efficiency Scheme (Amendment) Order 2011 comes into force. The Order postpones the start of Phase 2 back to 2013 (from 1 April 2011).
29 March 2011: CBI calls for revenue recycling payment to be restored to the CRC. See the CBI press release.
16 February 2011: the final version of the CRC Energy Efficiency Scheme (Amendment) Order 2011 (2011/234) (Order) is published.
As proposed, the changes include extending the Introductory Phase to March 2014 and postponing the start of each of the second and subsequent phases by two years. The Order also removes the requirement for organisations which are not required to register as full participants to make information disclosures.
25 January 2011: DECC launches an informal simplification review of the CRC and presents a number of options for reforming the CRC. Responses are requested by 11 March 2011.