Terms that appear in capital letters in this update are defined in Practice note, CRC Energy Efficiency Scheme: PLC glossary and abbreviations.

In March 2012, the Department of Energy and Climate Change (DECC), together with the devolved administrations, published:

The consultation closes on 18 June 2012.

(See Legal update, CRC: detailed analysis of DECC consultation on proposals to simplify the scheme.)

The government said in the March 2012 Budget that:

(See Legal update, 2012 Budget: environmental announcements: CRC Energy Efficiency Scheme.)

For more information on the CRC in general, see:

PLC Environment attended an event held by DECC in London on 23 May 2012 to discuss the proposals in the consultation that was published on 27 March 2012. See below for a summary of some of the key issues discussed at this event.

DECC said that the key question the consultation sought to answer was whether the scale of the administrative burden imposed by the CRC will be reduced by the proposals so that the administrative burden of the CRC will be more proportionate to the carbon savings that it would achieve.

At the end of the event, Niall Mackenzie (Head of Industrial Energy Efficiency at DECC) said that he had heard and understood that the additional flexibility proposed by various changes in the consultation could increase the administrative burden of the CRC.

In response to PLC's question about whether the consultation was a real one or if a decision had already been taken by the Treasury to scrap the CRC as most people in the market were saying, Niall Mackenzie said that the consultation was real and that he was "pretty confident that the scheme will stay". However, he also said that over the summer the Treasury will be conducting an exercise to consider what the CRC could be replaced with.

A Treasury official indicated that they had already given some consideration to the idea of increasing the Climate Change Levy (CCL), broadening Climate Change Agreements (CCAs) and introducing greenhouse gas (GHG) reporting as a package to replace the CRC. He said that, for the CCL to produce the equivalent revenue to the CRC, its scope would have to increase greatly and it would be made more complicated. It would then cover more than just large non-energy intensive organisations (a figure of 1 million organisations as opposed to the 2,000 organisations covered by CRC was mentioned by DECC). The Treasury official said that it was hard to justify this idea from a policy perspective. He also said that he did not think that a carbon tax would deal with all the barriers to energy efficiency that the CRC does.

Niall Mackenzie said that DECC knew people preferred a carbon tax alternative to the CRC as it spreads the regulatory burden more widely but indicated that DECC is unlikely to go down that route. Niall Mackenzie described the CRC as "plan A" and an alternative carbon tax as "plan B".

In response to a number of comments that the double sale of Allowances (which is proposed in the consultation as a means of preserving the trading element of CRC) was overly complicated and that many participants would choose not to use this. DECC said that trading helped to get energy efficiency on companies' board agendas in a way that a tax would not.

Delegates also suggested that, if the trading element of the CRC had to be retained, then the price of Allowances should be set to incentivise participation in the earlier forecast sale of Allowances rather than penalise those participating the retrospective sale of Allowances. Delegates suggested that this could be achieved by linking the price of Allowances in the retrospective sale to the Carbon Price Floor (see Practice note, Climate change levy and climate change agreements: Proposals for CCL reform and carbon price support for an explanation of the Carbon Price Floor). The earlier forecast sale could then be discounted from this price. This would mean that retrospective purchases of Allowances would probably become the norm. Attendees also suggested that the Allowance price should be set independently and not by the Treasury.

Most delegates indicated that they were unlikely to take advantage of the extra flexibility around the disaggregation rules that is proposed in the consultation. Delegates said that to disaggregate smaller units within their organisations would increase the reporting burden on these units, which are not resourced to deal with it.

DECC mentioned that it had considered rolling back the start of Phase 2 to April 2013 again. The start of Phase 2 was delayed to 2014 to allow DECC more time to consult on changes (see Legal update, CRC: DECC consults on amendments to the CRC Order 2010: Changes to the timing of the CRC). Delegates said that they needed a certain date to work towards and that they would prefer this to be sooner, to deal with competition issues. Currently, some Participants are not able to take advantage of the CCA exemptions because their organisation structure does not meet the requirement for a Group CCA Exemption under the CRC(see Practice note, CRC Energy Efficiency Scheme: overview: Emissions covered by a Climate Change Agreement). Some competitors that are structured differently currently fall outside the CRC. If the CCA exemption is abolished those competitors may fall within the CRC. Those delegates considered that the sooner that change happens to level the playing field, the better.

More generally, delegates were concerned that the proposals in the consultation will not reduce the overlap between CCAs, the Emissions Trading Scheme (EU ETS) and the CRC will not reduce the overlap between these schemes, but will instead leave many organisations subject to many different schemes.

Delegates complained about the quality of energy suppliers' annual statements of Participant's energy use. Apparently suppliers are either not providing annual statements or the quality of the data provided is very poor. Delegates asked DECC to make the provision of annual statements mandatory and to specify the data quality that energy suppliers should provide. DECC said that it was aware of the problem and is speaking to Ofgem about how this problem could be addressed.

The consultation included a proposal to take the rules on the Performance League Table (PLT) out of legislation and put them into guidance (see Legal update, CRC: detailed analysis of DECC consultation on proposals to simplify the scheme: No decision on Performance League Tables). DECC said that this did not mean that changes would be made without consultation.

DECC asked delegates how the PLT could be constructed going forward as the current metrics used to rank Participants had been designed originally with Revenue Recycling in mind. Now that the PLT is no longer being used to determine Revenue Recycling Payments it would be possible to use different metrics to construct the PLT.

A number of delegates suggested making the PLT sector specific or allowing qualitative information to qualify the results. Other delegates said that this would increase the complexity of the PLT and would be best left to corporate and other analysts who look at corporate and public sector performance.

Niall Mackenzie said that he thought the PLT was about transparency and holding organisations that made green claims to account.