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The Carbon Reduction Commitment: what you need to know and its impact on your business
Alessandra McConville Environmental Programmes Leader, EEF
27 April 2009
INTRODUCTION
1.
CRC starts in 8 months time.
2.
Leaving things to the last minute is never the best plan.
3.
The key action is to get informed!
4.
There are 3 key practical steps you should be taking right now: •
Determine if you qualify.
•
Understand your footprint.
•
Quantify the impact of CRC.
Contents • What is the Carbon Reduction Commitment? • Do you qualify? • Understand your total footprint • Quantify the impact • Summary
1 What is the Carbon Reduction Commitment?
A short overview of the Scheme
What is the Carbon Reduction Commitment? • UK wide auction based emissions trading scheme for energy related carbon dioxide emissions • Mandatory for organisations using more than 6,000 MWh electricity through half hourly meters (based on 2008 data) • The highest UK parent organisation will participate on behalf of all the organisations in the group • Revenue neutral to the Exchequer – auction revenue recycled to participants
Why introduce the Carbon Reduction Commitment? • Financial Incentives • Social Responsibility / Reputation • Flexibility for participants • Certainty of environmental outcome
How will the Scheme work? • Participants need to surrender enough allowances to cover their CRC Emissions at the end of each Compliance Year (FY) • Allowances can be purchased from: • Government • Secondary market • Safety Valve • Revenue raised by Government will be recycled back to participants, in proportion to a Performance League Table • Phased: each phase will be three years.
The Introductory Phase will work differently from subsequent phases • Phase 1 is intended as a “Learning by doing” phase • Runs from April 2010 until March 2013 • Registration from April 2010 - Sept 2010 • 1st Compliance year April 2010 – Mar 2011 • Allowances: • No cap on emission allowances sold • Fixed price allowance sale - £12/t CO2 • Double allowance purchase in April 2011 • Performance League Table: • Early Action Metrics take into account actions already achieved.
Subsequent phases will be capped and based on auctions of allowances • Second phase begins in April 2013 • There will be a cap on the total number of allowances issued • Allowances will be sold through auction • Early Action Metrics will no longer count towards performance league table
All revenue raised through allowance purchase is recycled to participants • All revenue raised from Government’s sale/auction will be recycled back to participants • Set payment, based on your organisation's share of total CRC emission in first year of scheme (2010/11) • Adjusted by bonus/penalty, based on position in performance league table • Maximum bonus/penalty rates: • 2010/11 +/- 10% • 2011/12 +/- 20% • By year 5 +/- 50%!
The Performance League Table identifies organisations making carbon savings 3 metrics to determine position on league table: 1.
Compulsory absolute metric (60%) •
2.
Voluntary growth metric (20%) •
3.
% Change in annual emissions relative to preceding 5 years rolling average % Change in emissions per unit turnover relative to 5 year rolling average
Voluntary early action metric (20%) •
Extent of voluntary AMR at end of first year (Mar 2011)
•
Extent of Carbon Trust Standard
The first year’s league table will work differently • The league table for 2010/11 will be ENTIRELY based on Early Action Metrics • No credit will be given for Early Action Metrics after Phase 1 • In subsequent phases, the weighting will be: • 75% absolute metric • 25% growth metric
What kind of reporting and verification is required? •
Self Certification – no 3rd party verification
•
Audit of 20% every year
•
Emissions Reporting via an online Registry
•
Evidence Pack – record energy use and provide audit trail
•
Two types of report: • Once per phase – Footprint Report • Annually – Annual Report
Fees and Charges • Registration Charge • Participant (£950) • Non-participant (£285)
• Annual Subsistence Charge • Participant (£1,300) • Non-participant (£390)
• Safety Valve Purchase (£300/purchase) Additional ID check (£200/check)
Penalties • Failure to Register • Failure to disclose information • Failure to provide footprint report or annual report • Incorrect reporting • Failure to hold and cancel sufficient allowances - the ‘Performance Commitment’ • Failure to keep adequate records
CRC timeline
2. DO YOU QUALIFY?
QUALIFICATION CRITERIA
At least one half hourly meter (HHM) settled on the half hourly market and: • Annual electricity consumption through all HHMs was at least 6,000MWh in 2008 (1st January to 31st December). • For organisations using over 3,000MWh but less than 6,000WMh an information disclosure will be required.
SIMPLE ORGANISATIONS
• Typically will have had a letter advising of half hourly metering. • Straightforward process of calculating consumption from invoiced half hourly data. MPAN or Supply Number begins with 00
COMPLEX ORGANISATIONS
A Ltd
D
B
Plastics
Engineering Ltd
Ltd
Site 1 (2,000 MWh)
Site 2 Leased (200 MWh)
Site 3
Site 4
Site 5
(1,000 MWh)
(1,000 MWh)
(2,000 MWh)
UNDERSTAND YOUR SCOPE & BOUNDARIES
1.
Who is the highest parent in the group (financial control).
2.
Raise awareness of CRC implications for the group. A Director will need to be appointed responsible.
3.
Appoint & authorise someone to establish the group position: • Listing of all facilities owned or leased. • Identify the HH meters at each location and 2008 usage. • For leased facilities confirm who is the “counterparty to the supply contract. • Collate & retain this information as part of your “evidence pack”.
3. UNDERSTAND YOUR TOTAL FOOTPRINT
CALCULATE OVERALL FOOTPRINT
1.
Calculate for established overall organisational boundaries: •
Include all emissions sources e.g. Gas, electricity, gas oil etc.
•
Estimate tCO2 using DEFRA 2008 emissions factors.
EXCLUDE TRANSPORT & ONWARD SUPPLY
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply: •
Scheme only includes stationary combustion i.e. no vehicle related emissions.
•
Exclude electricity used for transportation.
•
If you purchase energy then supply on to a third party this is excluded.
3. Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
EXCLUDE CCA EMISSIONS > 1000MWh remains so A Ltd must purchase allowances to cover D Ltd >25% is under a CCA. Excluded from requirement to purchase allowances for CRC.
A Ltd
D
B
Plastics
Engineering Ltd
Ltd
Site 1 (2,000 MWh)
Site 2 Leased (200 MWh)
Site 3
Site 4
(1,000 MWh)
(1,000 MWh)
Site 5 (2,000 MWh) CCA agreement
Site 5 PP3 underlying agreement with B Engineering Ltd
EXCLUDE EU ETS EMISSIONS
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
DEFINE CORE & RESIDUAL SOURCES
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions
4.
Identify “core emissions sources”: (must report on) • Electricity consumed through HHMs (including pseudo HHM). • Electricity consumed through AMR meters. • Electricity consumed though profile class 5-8 meters. • Daily-read gas meters as consumed through AMR meters. • Non-daily metered gas consumption of more than 73,200 kWh per annum.
DEFINE CORE & RESIDUAL SOURCES
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
4.
Identify “core emissions sources”
5.
Identify if you have to include any “residual sources” to bring up to 90% coverage of total footprint (CRC + EU ETS + CCA = 90% total footprint)
6.
Now take out any remaining CCA or EU ETS emissions
This defines your total “CRC Emissions”.
4. QUANTIFY THE IMPACT
ESTABLISH A BALLPARK BUDGET FIGURE FOR ALLOWANCE PURCHASE 1.
Purchase in April 2011 for your “total CRC” footprint.
2.
Will need to budget for 2 years worth for the first sale of allowances only.
3.
Assume £12 tC02 for first phase.
4.
Simple organisations use EEF online calculator.
ESTABLISH A BALLPARK BUDGET FIGURE FOR ALLOWANCE PURCHASE
www.eef.org.uk/crcevents/calculate.aspx
QUANTIFY THE COST / BENEFITS OF REVENUE RECYCLING +/- 10% of your share of the emissions pot for year 1. Rising to +/- 50% in 2015.
QUANTIFY RESOURCE REQUIREMENTS 1. Responsible Director appointed overall. 2. Ensure data collation requirements are clearly defined e.g. • •
Ensure meters are read vs. 10% potential additional cost. Request annual summarised utility bills.
3. Evidence pack requirements defined and appropriate reporting responsibilities are clear: • • •
What data is required, where is it held. What happens if a meter fails. What happens if the organisation changes.
ESTIMATE POTENTIAL BENEFITS OF EARLY ACTION 1. Achieving the Carbon Trust Standard. 2. Installing additional automatic metering.
SUMMARY
SUMMARY – What to do next? If you think the Scheme covers you: 1. Get informed – EEF guide, DEFRA 2. Determine if you qualify for CRC. 3. Understand your overall carbon footprint, to determine your “CRC emissions.” 4. Quantify the impact of CRC. 5. Develop your strategy and approach to the CRC
SUMMARY EEF can help:
•
•
Raise awareness.
•
Establish readiness & help with strategy
•
Consultancy support to comply.
•
Longer term help with emissions reductions.
Qualification workshops: •
27th January 2010, Engineers House, Bristol
For further information email:
[email protected]
Alessandra McConville Environmental Programmes Leader, EEF
27 April 2009
INTRODUCTION
1.
CRC starts in 8 months time.
2.
Leaving things to the last minute is never the best plan.
3.
The key action is to get informed!
4.
There are 3 key practical steps you should be taking right now: •
Determine if you qualify.
•
Understand your footprint.
•
Quantify the impact of CRC.
Contents • What is the Carbon Reduction Commitment? • Do you qualify? • Understand your total footprint • Quantify the impact • Summary
1 What is the Carbon Reduction Commitment?
A short overview of the Scheme
What is the Carbon Reduction Commitment? • UK wide auction based emissions trading scheme for energy related carbon dioxide emissions • Mandatory for organisations using more than 6,000 MWh electricity through half hourly meters (based on 2008 data) • The highest UK parent organisation will participate on behalf of all the organisations in the group • Revenue neutral to the Exchequer – auction revenue recycled to participants
Why introduce the Carbon Reduction Commitment? • Financial Incentives • Social Responsibility / Reputation • Flexibility for participants • Certainty of environmental outcome
How will the Scheme work? • Participants need to surrender enough allowances to cover their CRC Emissions at the end of each Compliance Year (FY) • Allowances can be purchased from: • Government • Secondary market • Safety Valve • Revenue raised by Government will be recycled back to participants, in proportion to a Performance League Table • Phased: each phase will be three years.
The Introductory Phase will work differently from subsequent phases • Phase 1 is intended as a “Learning by doing” phase • Runs from April 2010 until March 2013 • Registration from April 2010 - Sept 2010 • 1st Compliance year April 2010 – Mar 2011 • Allowances: • No cap on emission allowances sold • Fixed price allowance sale - £12/t CO2 • Double allowance purchase in April 2011 • Performance League Table: • Early Action Metrics take into account actions already achieved.
Subsequent phases will be capped and based on auctions of allowances • Second phase begins in April 2013 • There will be a cap on the total number of allowances issued • Allowances will be sold through auction • Early Action Metrics will no longer count towards performance league table
All revenue raised through allowance purchase is recycled to participants • All revenue raised from Government’s sale/auction will be recycled back to participants • Set payment, based on your organisation's share of total CRC emission in first year of scheme (2010/11) • Adjusted by bonus/penalty, based on position in performance league table • Maximum bonus/penalty rates: • 2010/11 +/- 10% • 2011/12 +/- 20% • By year 5 +/- 50%!
The Performance League Table identifies organisations making carbon savings 3 metrics to determine position on league table: 1.
Compulsory absolute metric (60%) •
2.
Voluntary growth metric (20%) •
3.
% Change in annual emissions relative to preceding 5 years rolling average % Change in emissions per unit turnover relative to 5 year rolling average
Voluntary early action metric (20%) •
Extent of voluntary AMR at end of first year (Mar 2011)
•
Extent of Carbon Trust Standard
The first year’s league table will work differently • The league table for 2010/11 will be ENTIRELY based on Early Action Metrics • No credit will be given for Early Action Metrics after Phase 1 • In subsequent phases, the weighting will be: • 75% absolute metric • 25% growth metric
What kind of reporting and verification is required? •
Self Certification – no 3rd party verification
•
Audit of 20% every year
•
Emissions Reporting via an online Registry
•
Evidence Pack – record energy use and provide audit trail
•
Two types of report: • Once per phase – Footprint Report • Annually – Annual Report
Fees and Charges • Registration Charge • Participant (£950) • Non-participant (£285)
• Annual Subsistence Charge • Participant (£1,300) • Non-participant (£390)
• Safety Valve Purchase (£300/purchase) Additional ID check (£200/check)
Penalties • Failure to Register • Failure to disclose information • Failure to provide footprint report or annual report • Incorrect reporting • Failure to hold and cancel sufficient allowances - the ‘Performance Commitment’ • Failure to keep adequate records
CRC timeline
2. DO YOU QUALIFY?
QUALIFICATION CRITERIA
At least one half hourly meter (HHM) settled on the half hourly market and: • Annual electricity consumption through all HHMs was at least 6,000MWh in 2008 (1st January to 31st December). • For organisations using over 3,000MWh but less than 6,000WMh an information disclosure will be required.
SIMPLE ORGANISATIONS
• Typically will have had a letter advising of half hourly metering. • Straightforward process of calculating consumption from invoiced half hourly data. MPAN or Supply Number begins with 00
COMPLEX ORGANISATIONS
A Ltd
D
B
Plastics
Engineering Ltd
Ltd
Site 1 (2,000 MWh)
Site 2 Leased (200 MWh)
Site 3
Site 4
Site 5
(1,000 MWh)
(1,000 MWh)
(2,000 MWh)
UNDERSTAND YOUR SCOPE & BOUNDARIES
1.
Who is the highest parent in the group (financial control).
2.
Raise awareness of CRC implications for the group. A Director will need to be appointed responsible.
3.
Appoint & authorise someone to establish the group position: • Listing of all facilities owned or leased. • Identify the HH meters at each location and 2008 usage. • For leased facilities confirm who is the “counterparty to the supply contract. • Collate & retain this information as part of your “evidence pack”.
3. UNDERSTAND YOUR TOTAL FOOTPRINT
CALCULATE OVERALL FOOTPRINT
1.
Calculate for established overall organisational boundaries: •
Include all emissions sources e.g. Gas, electricity, gas oil etc.
•
Estimate tCO2 using DEFRA 2008 emissions factors.
EXCLUDE TRANSPORT & ONWARD SUPPLY
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply: •
Scheme only includes stationary combustion i.e. no vehicle related emissions.
•
Exclude electricity used for transportation.
•
If you purchase energy then supply on to a third party this is excluded.
3. Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
EXCLUDE CCA EMISSIONS > 1000MWh remains so A Ltd must purchase allowances to cover D Ltd >25% is under a CCA. Excluded from requirement to purchase allowances for CRC.
A Ltd
D
B
Plastics
Engineering Ltd
Ltd
Site 1 (2,000 MWh)
Site 2 Leased (200 MWh)
Site 3
Site 4
(1,000 MWh)
(1,000 MWh)
Site 5 (2,000 MWh) CCA agreement
Site 5 PP3 underlying agreement with B Engineering Ltd
EXCLUDE EU ETS EMISSIONS
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
DEFINE CORE & RESIDUAL SOURCES
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions
4.
Identify “core emissions sources”: (must report on) • Electricity consumed through HHMs (including pseudo HHM). • Electricity consumed through AMR meters. • Electricity consumed though profile class 5-8 meters. • Daily-read gas meters as consumed through AMR meters. • Non-daily metered gas consumption of more than 73,200 kWh per annum.
DEFINE CORE & RESIDUAL SOURCES
1.
Calculate for established overall boundaries.
2.
Exclude transport related & onward supply.
3.
Exclude subsidiaries with >25% CCA emission & EU ETS emissions.
4.
Identify “core emissions sources”
5.
Identify if you have to include any “residual sources” to bring up to 90% coverage of total footprint (CRC + EU ETS + CCA = 90% total footprint)
6.
Now take out any remaining CCA or EU ETS emissions
This defines your total “CRC Emissions”.
4. QUANTIFY THE IMPACT
ESTABLISH A BALLPARK BUDGET FIGURE FOR ALLOWANCE PURCHASE 1.
Purchase in April 2011 for your “total CRC” footprint.
2.
Will need to budget for 2 years worth for the first sale of allowances only.
3.
Assume £12 tC02 for first phase.
4.
Simple organisations use EEF online calculator.
ESTABLISH A BALLPARK BUDGET FIGURE FOR ALLOWANCE PURCHASE
www.eef.org.uk/crcevents/calculate.aspx
QUANTIFY THE COST / BENEFITS OF REVENUE RECYCLING +/- 10% of your share of the emissions pot for year 1. Rising to +/- 50% in 2015.
QUANTIFY RESOURCE REQUIREMENTS 1. Responsible Director appointed overall. 2. Ensure data collation requirements are clearly defined e.g. • •
Ensure meters are read vs. 10% potential additional cost. Request annual summarised utility bills.
3. Evidence pack requirements defined and appropriate reporting responsibilities are clear: • • •
What data is required, where is it held. What happens if a meter fails. What happens if the organisation changes.
ESTIMATE POTENTIAL BENEFITS OF EARLY ACTION 1. Achieving the Carbon Trust Standard. 2. Installing additional automatic metering.
SUMMARY
SUMMARY – What to do next? If you think the Scheme covers you: 1. Get informed – EEF guide, DEFRA 2. Determine if you qualify for CRC. 3. Understand your overall carbon footprint, to determine your “CRC emissions.” 4. Quantify the impact of CRC. 5. Develop your strategy and approach to the CRC
SUMMARY EEF can help:
•
•
Raise awareness.
•
Establish readiness & help with strategy
•
Consultancy support to comply.
•
Longer term help with emissions reductions.
Qualification workshops: •
27th January 2010, Engineers House, Bristol
For further information email:
[email protected]
