90 million tonnes of current scheme’s reductions might be ‘wasted’
The UK Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a Government policy which requires non energy-intensive businesses using more than 6,000MWh per year of electricityto increase their energy efficiency.
It has been a hot topic over the past six months. First it was announced that the revenue generated will not be recycled to participants, generating over £1bn for the Treasury a year. Then there was speculation as to whether the scheme might be scrapped altogether.
The Government is in consultation with stakeholders over simplifications of the scheme until 11th March, and held a day-long event on Thursday 3rd March to discuss potential improvements with participants.
The overlap between the CRC and the EU Emission Trading Scheme (EU ETS) is highlighted as a key area for consultation. A report by Carbon Retirement released on Friday 4th March shows that the overlap in emissions covered by the two schemes with mean the CRC is largely environmentally ineffective.
Decrease in power use will not lead to decrease in emissions
The report states that if the CRC is successful in encouraging investment in energy efficiency, energy production in the UK will go down, but net global emissions will not decrease as a result. This is because energy production is covered by the EU ETS. The volume of allowances in the EU ETS is already set, so the allowances that energy companies no longer have to buy will instead be purchased by other sectors.
The Committee on Climate Change forecasts that 87% of CO2 savings within the CRC will be made by reductions in electricity demand. In achieving this, Carbon Retirement estimates that CRC participants will save an estimated 90 million tonnes of greenhouse gases between now and 2020.
The report states that these reductions will be “wasted”, as other sectors covered by the EU ETS use the allowances left unused by energy companies. Ironically, the more successful the CRC is in driving energy efficiency in the UK, the more allowances will be available to heavy industry in Europe.
Business pay cost of carbon three times
Ben Wielgus, of KPMG’s Climate Change & Sustainability practice, said, “One of the real challenges of the [CRC] is that it overlaps with a number of existing schemes including the EU ETS and the climate change levy. With the shift in the CRC to an effective levy on carbon emissions, we find CRC participants in the difficult situation of paying for carbon emissions three times – once through the CRC, once through the climate change levy (CCL) and once through cost of carbon charged by their electricity companies through energy bills.”
The Department for Energy and Climate Change acknowledges this overlap in consultation documents, which ask for policy suggestions to overcome such issues. Carbon Retirement has issued a call for organisations covered by the CRC to include the need for an adequate resolution to this issue in their response to the open consultation.
Jane Burston, Founder of Carbon Retirement, said, “Encouraging businesses to be responsible with their carbon footprint by paying for their emissions is a positive thing, but the credibility of the CRC hinges on whether it is actually doing anything to reduce emissions.
“The overlap between the two schemes undermines both the businesses that are compliant under the CRC and European climate policy.”
Carbon Retirement’s report makes two practical and comprehensive policy suggestions to overcome the overlap and ensure CRC participants’ hard work translates into genuine emissions reductions. Both involve the closer linking of the CRC and EU ETS in order to avoid any overlap.
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