Readers will be aware of the carbon reduction commitment scheme imposed by the EU and introduced by the government as a means of addressing levels of CO2 produced by commercial premises. But does it affect you? This article sets out main principles of the scheme.
If an organisation has any settled half hourly meters and was supplied with 6,000MWh or more of electricity through those meters during the year before each 'phase' (a period of four years for the introductory phase starting on 1 April 2010 and periods of six years thereafter), it will have to register as a participant in the CRC - primarily this covers those whose annual electricity bills are approximately £500,000 and over.
Participants need to buy allowances to cover their CO2 use; each allowance is worth one tonne of CO2. At the end of each year they have to surrender enough allowances to cover their emissions. If a participant has too many allowances, it can sell them to other participants.
During the introductory phase (1 April 2010 - 31 March 2014) an unlimited number of allowances will be sold by the government at a fixed price sale. This will last for a month and the price of allowances will be £12/tCO2. It appears that the fixed price sale of allowances will take place in April 2012 and April 2013 and it is assumed that in April 2012 participants will have to purchase allowances to cover CRC emissions for the preceding year commencing April 2011 and their forecast emissions for the forthcoming year commencing 1 April 2012.
The current intention is that from phase 2 (1 April 2013 - 31 March 2019) onwards, the number of allowances available for sale will be limited by the government and sold at auctions held at the start of each compliance year, with the first auction in phase 2 taking place in April 2014.
Once the government has held the fixed price sales or auction of allowances, if participants wish to buy more allowances, they can do so either through the secondary market (e.g. by buying allowances from other participants) or the safety valve mechanism which enables participants to buy additional allowances from the administrator at certain stages during a compliance year. The purpose of the safety valve is to protect against the price of allowances becoming too high as compared to those in the wider carbon market.
From October 2011 and in October every subsequent year, the administrator (being one of a number of regulators across the UK) will publish a league table or performance table ranking participants based on their respective performances.
Under the CRC, landlords are liable for their tenants` emissions if they supply energy to their tenants (as is often the case in multi-let office buildings and shopping centres). The terms of a lease may not always enable landlords to recover these costs from their tenants and in such circumstances landlords may be obliged to bear the cost of purchasing allowances.
3 May 2011
This article is general comment.
You must not act or decide not to act without receiving legal advice specific to your circumstances.
© Copyright 2011 Burt Brill and Cardens Solicitors