Proposed changes to CRC

Monday 24th October 2016

In the 2016 budget, George Osborne announced that rather than continue trying to reform the CRC energy efficiency scheme, it will simply be abolished from 2019.  This means that the last CRC year will be from April 2018 – March 2019, with reporting completed in July 2019, and the final carbon allowance payments to be made in September 2019.

However, the Government are not planning to give up the funds, and there will be an increase in the main rates of CCL from April 2019 to “cover the cost of CRC abolition in a fiscally neutral form”.  This will spread the cost across a different range of organisations to those that will benefit from the cessation of CRC.  So whilst those that are currently in CRC will see a reduction in costs of around 0.817p/kWh on the electric and 0.336p/kWh on the gas, the equivalent increase on the CCL will be just 0.264p/kWh on the electric and 0.136p/kWh on the gas.  The measure will be cost neutral from the Government perspective because the increased CCL charge will apply to all commercial supplies above the ‘low usage’ level, regardless of organisation size.

So the users set to lose out the most from the changes will be small and medium commercial energy users, who are not big enough to need to participate in CRC.  These companies will see a significant increase in CCL rates between the 2018 and 2019 year.  Companies for whom the damage will be minimised are:

  • Those currently in the CRC scheme – although after 9 years of payments, reporting and changing parameters, it is well deserved!
  • Those with Climate Change Agreements – there will be an increase in the available CCL discount to balance out the rise in the CCL rates.

Although the financial apects of the CRC scheme have tended to get a lot of the attention, there was also reference made to a new scheme that would take over the energy reporting aspects of the CRC.  This will be detailed more within the postponed consultation on a simplified energy and carbon reporting framework.  Originally due to be published in Autumn 2016, this is now most likely to be out in the new year.

The framework will hopefully retain the aspects of energy reporting that provide benefit to organisations – such as recognition of improvement and achievement in energy management, senior level interest in energy management performance and accurate measurement of energy use across organisations – whilst losing the aspects that caused the most problems and cost without any real benefit – such as complex qualification criteria, large numbers of deadlines over the year and registry account maintenance.

Suggestions for the new framework range from application of an energy management system such as ISO50001 (which although potentially resource heavy, is at least proven to result in energy reductions) to expansion of the ESOS scheme to include an annual reporting aspect.  Once more information is available, we will advise our customers on how the framework will affect them, and the measures that they can begin to take to get the best value out of any changes that they will be required to make.