Carbon Reduction Commitment

The Carbon Reduction Commitment (CRC) is a proposed mandatory cap and trade scheme in the United Kingdom that will apply to large non energy-intensive organisations in the public and private sectors. It is anticipated that the scheme will have cut carbon emissions by 1.2 million tonnes of carbon per year by 2020. The British Government first committed to cutting UK carbon emissions by 60% by 2050, compared to 1990 levels, then in October 2008 changed the commitment to 80% by 2050.

The Carbon Reduction Commitment was announced in the 2007 Energy White Paper, published on May 23, 2007. A consultation in 2006 showed strong support for it to be mandatory, rather than voluntary. The Commitment is to be introduced under enabling powers planned for inclusion in the Climate Change Bill. A consultation into the scheme's implementation was launched in June 2007.

Coverage

The CRC scheme will apply to organisations that have a half-hourly metered electricity consumption greater than 6,000 MWh per year. Organisations qualifying for CRC would have all their energy use covered by the scheme, this includes emissions from direct energy use as well as electricity purchased. Such organisations - including hotel chains, supermarkets, banks, central government and large Local Authorities - mostly fall below the threshold for the European Union Emissions Trading Scheme, but account for around 10% of the UK carbon emissions. Emissions covered by the EU Energy Trading Scheme and by a Climate Change Agreement would be exempt from the CRC, as would organisations with more than 25% of their emissions covered by Climate Change Agreements.

Operating mechanisms

Although mandatory, the Carbon Reduction Commitment will involve self-certification of emissions, backed up by auditing, rather than third-party verification. Emission allowances are to be auctioned, with all the income from the auctions recycled back to participants by the means of an annual payment based on participants' average annual emissions since the start of the scheme, with a bonus or penalty according to the organisation's position in a CRC league table. In March 2008 the Government responded to a consultation into the implementation of the CRC. The Government is minded to proceed with an allowance price of £12/tCO2 for the introductory three year phase, although this will be confirmed in the response to the Summer 2008 consultation on the CRC regulations. It is suggested there should be two fixed price sales in the first year of the scheme.

Participants in the Carbon Reduction Commitment will also be able to purchase (but not sell) emission allowances from the EU Emissions Trading Scheme at a price that is the higher of the EU ETS price or the minimum CRC floor price.

From http://en.wikipedia.org/