Understanding the Carbon Reduction Commitment

Since 1st April 2010, all large employers in the public sector, including local councils, have had to comply with the new CRC Energy Efficiency scheme, formerly known as the Carbon Reduction Commitment, a key part of the UK’s response to the challenge of climate change.

The CRC covers all local councils using at least 6,000 Megawatt hours of electricity a year. Local councils will be required by law to report their energy use each year to the Environment Agency (the scheme administrator), buy enough allowances to cover their annual emissions, and take action to reduce their energy use this year and in years to come. The CRC scheme encompasses all of a local council’s buildings, offices, sites and depots and also includes schools.

The first phase of the scheme runs for three years. In the first year, local councils must get together information on all types of energy use, including electricity, gas and oil, and calculate their total energy use over the ‘first footprint year’ from April 2010-2011. A report identifying their total emissions must be submitted to the environment agency by the end of July 2011. In year two, local councils need to decide how many ‘emission allowances’ they’re allowed to buy. Under the terms of the scheme, organisations must buy one emission allowance for each one tonne of CO2 they expect to emit during the year, based on the report submitted in year one.

The cost of carbon

CRC will create a link between councils’ carbon and their finances by requiring them to buy allowances to cover their CO2 emissions, says Dave Lewis, head of business energy services at npower. “Another impact is one of resources. The CRC will call on participants to compile accurate records of their energy use and carbon emissions in order to submit annual reports on these. For many councils, typically operating diverse and varied estates, this could be challenging and they will need to make sure they have the technology available to do this and the resources to dedicate to data completion.”

Leeds City Council has worked hard to ensure that it’s energy efficient prior to the introduction of the new CRC scheme by installing automatically-read energy meters and aiming to achieve a Carbon Trust Standard, explains Peter Lynes, group manager of the council’s energy unit. “Our savings from last year to this year have amounted to approximately 4.6% of carbon emissions from buildings. For us to stay ahead of the game, we need to produce carbon savings of approximately that level each year for the foreseeable future.”

The council is installing new software so that it can track energy consumption and carbon emissions to a sufficient standard, says Lynes. “The old software was insufficient, so we’ve opted for new software to ensure compliance. This system change will involve 350 budget holders and other staff undergoing training to ensure sufficient skills with the new system.” There are also a number of initiatives involving staff from all levels, especially those with building management and IT management responsibilities, adds Lynes. “For instance, our volunteer ‘Energy Guardians’ from all levels across the council rely on the support of their line managers to ensure that some of the more behavioural and educational issues are addressed.”

Engaged in energy saving

Local government managers have a role to play in ensuring that councils are compliant with CRC, says Lewis. “For local councils to succeed within the CRC, saving energy needs to be at the heart of all operations, so local government managers will play a vital role in spreading the energy saving message and engaging all staff across all sites to encourage them to work towards reducing energy usage across their organisations.”

But many local authorities aren’t prepared for the CRC scheme, says Hugh Caswell, commercial director for CR Energy. “Many only have a small energy team, which is already under strain from an enormous workload. The first year of CRC compliance also means meeting certain milestones and deadlines, resulting in bursts of activity followed by a lull. Many local authorities also complain that the software the government has produced for reporting is far from user-friendly. All in all, local authorities will struggle to meet timescales.”

There are both financial and reputational consequences for councils that fail to comply with the new CRC scheme. If a local council over the 6GWh threshold fails to produce a footprint report by July 2011, it will be fined £5,000 plus £500 for each working day after that, up to a maximum of 80 days.

Another concern for local councils is the performance league table which will be published at the end of each year and used to compare how successful both public and private-sector organisations have been in reducing emissions. “This could have a big impact on a council’s reputation, particularly if they come near the top or bottom of the league table,” says Lewis.