Government lays groundwork for CRC expansion

It might not even come into full effect until next year, but the government is already laying the groundwork for the extension of its Carbon Reduction Commitment (CRC) legislation to include far more organisations than the 5,000 companies and public sector bodies currently expecting to join the cap-and-trade scheme.

In a move that suggests the government is keen to extend the reach of the scheme, new draft regulations released last week confirm that even businesses who are not large enough to be eligible to buy and trade emission allowances in the scheme will have to provide the Environment Agency with information on their electricity consumption.

The CRC is a domestic emissions cap-and-trade scheme designed to include firms and organisations that are not heavy enough emitters to qualify for inclusion in the EU's Emissions Trading Scheme.

It is primarily intended to target large non industrial consumers of energy, such as supermarkets, hotels and hosptials, and will therefore require any organisation that uses more than 6,000 MWh of electricity a year to comply with emission caps or buy in extra carbon allowances to cover excess emissions.

But new draft rules confirm that any organisation which uses half hourly electricity meters will have to calculate its electricity consumption and produce an annual report to the Environment Agency to prove they should be exempt from the cap-and-trade element of the scheme.

"Organisations which consume settled half hourly electricity supplies, but which do not meet the qualification criteria, are required to provide the administrator with information as to their electricity consumption," says the draft order on the CRC.

A spokesman for the department of energy and climate change (DECC) said that an estimated 20,000 firms use half hourly meters, but those who use under 3,000 MWh of electricity a year will only be required to tick a box on a form to comply with the regulation.

However, under the draft proposals those who consume between 3,000 MWh and 6,000 MWh of electricity a year will be required to report their energy use to the Environment Agency every three years.

Directors will be required to sign off on these energy use reports and could face fines of £50,000 or up to three years imprisonment if they knowingly falsify the information.

The DECC spokesman said this reporting requirement would allow the government to "to keep an eye on" firms in case they pass the energy use threshold that means they should face emission caps.

However, the move also means that the government would be able to expand the scheme to include smaller firms using between 3,000 and 6,000MWh a year relatively easily.

DECC estimates that in its current guise the CRC will cover about 10 per cent of UK emissions with seven per cent forced to comply with emission caps and engage in the carbon trading component of the scheme.

Businesses now have until June 4 to respond to the consultation on the draft legislation.