EMEA Upstream Sustainability Services
The first of April 2011 marks the second year in operation of the UK’s energy efficiency scheme – the CRC, and the first year for which carbon allowances need to be bought (although not until the end of fiscal year 2011/12). This year will also bring the 6th public consultation in 5 years – like the last two consultations in December 2010 and February 2011, this will be aimed at simplifying a scheme that was originally intended to be “light touch” and yet has generated 600 plus pages of guidance to date.
Although the principle of simplification is welcomed, it is adding to the uncertainty for participants in this mandatory scheme, who still have to comply with the requirements of the CRC whilst being unclear of what the future holds. It is, for example, still unclear if and when the timing of allowance purchase will move from purchase in arrears to purchase in advance.
There have been calls, from both trade bodies and participants, to scrap the scheme entirely and/or merge it with existing carbon tax mechanisms, but it seems that the sponsoring department DECC (Department of Energy and Climate Change) still believes that energy taxes do not provide sufficient incentive to reduce emissions and prefers the mix of carbon trading and reputational incentives (or “naming and shaming”) which the CRC provides.
The informal consultation in February 2011 was intended to garner opinions on ideas for simplification already provided by stakeholders rather than set out policy direction. However it was still possible to infer, from the way that some options were drafted, that they were not favoured by DECC. This included an option of great relevance to the real estate industry – the possibility of transferring responsibility for CRC to tenants rather than landlords.
So it’s too early to say what the future of the CRC is, but we predict fairly incremental changes rather a revolution.