Energy managers have given a cautious welcome to government plans to simplify the Carbon Reduction Commitment (CRC) scheme – while calls for a “coherent” UK energy efficiency policy are getting louder… Energy Demand investigates.
Last month the government announced a package of measures aimed at streamlining the CRC and reducing some of the administrative burden on businesses. Amongst the proposals, which the Department of Energy and Climate Change (DECC) claims will cut the administrative burden by 55% and save £272 million, are plans to abolish the much-maligned Performance League Table, remove state schools from the scheme… and cut fuel reporting requirements to cover just gas and electricity.
The government also announced a review of the scheme in 2016 — with the tax element of the CRC given “strong priority” for removal.
Potentially, this could mean a return to the pre-2010 policy of recycling CRC revenues back to the participants, although a DECC spokeswoman was unwilling to confirm this. “We can’t pre-judge the review at this stage to speculate on what that will mean for revenue recycling,” she told Energy Demand.
The EMA remains broadly positive. “Whilst most energy managers will still be studying the detail of the government proposals on the CRC, its simplification is certainly to be welcomed as a step in the right direction,” says Steve Wright, chairman of the working group on mandatory carbon reporting at the Energy Managers’ Association (EMA).
But speaking to energy managers this week, Energy Demand has found that frustration at repeated changes to regulation and a lack of long-term policy are threatening to overshadow any benefits of a new, streamlined CRC.
“Any simplification has to be welcomed although of course it is yet another change which everyone needs to get to grips with,” Steven Fawkes, chairman of Day One Energy, says. “Reducing the number of fuels – which in the strange terminology of CRC includes electricity – is welcome but the reality now is that gas and electricity account for 93% of CRC emissions.”
One definite positive related to the fuel reporting cut, however is the removal of CHP from the mix. “This [inclusion of CHP as a reporting ‘fuel’] just added to the disincentives to use CHP, when we should be encouraging its wider use,” says Fawkes.
Performance League Table: good riddance
The measure which has received the most enthusiastic response by far is the abolition of the Performance League Table – the list which details the carbon performance of all CRC participants – which has attracted criticism for being too complex and difficult to interpret.
The table presents a number of issues for energy managers. Although it is supposed to show how each company is performing, the parameters used to score each company are not consistent across the board, making it difficult to make meaningful comparisons between each of the participants.
“The Performance League Table is meaningless,” says one source in the energy management community. “I couldn’t tell who my competitors were. It’s like comparing sugar and eggs.”
Because not all carbon emissions are reported under the CRC, it allows some businesses to tailor their carbon reporting to the CRC and boost their ranking, while others who are making carbon savings elsewhere outside the CRC have seen their ranking slip.
“What we need is real transparency, so that businesses have to report all their carbon emissions, not just the emissions that they want to,” says the source.
So, while the package of simplification measures is indeed welcome, it does not solve the fundamental problems energy managers have with the CRC – namely its complexity, and the amount of time needed to compile data for the reports.
“For larger and more complex organisations this will still be significant,” says Wright. “There is opportunity cost of human resources employed on ‘carbon accounting’ instead of ‘carbon saving’, which is counterproductive. It is the source of a great deal of frustration amongst energy managers.”
Many businesses also find themselves in other reporting schemes in addition to CRC, such as the Climate Change Agreements (CCAs), the EU’s Emissions Trading System, and the upcoming Greenhouse Gas Emissions for Quoted Companies. These systems often overlap, and use different emissions reporting conversion factors, all adding to the energy manager’s workload.
Policy vision lacking
But, according to Fawkes, the UK’s energy efficiency problem goes higher than the CRC and is actually symptomatic of poor policy-making on energy efficiency, and a lack of government vision.
“The real issues here are the frequent changes of policies and programmes, the piling up of policies without a coherent long-term plan and excessive reliance on sticks rather than carrots,” he says. “We are at a critical point in UK energy efficiency policy and to scale up efficiency we need to develop coherent policies for each sector of the economy, and even sub-sector, that put in place the specific enabling conditions that can drive up the demand for energy efficiency products and services, the supply of energy efficiency solutions and the flow of finance into energy efficiency.”
The government’s pledge to review the CRC in 2016 has further added to the uncertainty, although the removal of the tax element will be welcome for energy managers and policy-makers alike, adds Fawkes.
So what next?
The EMA is currently working on proposals that it believes would go some way to resolving the CRC’s problems. Chief amongst these is the reform of the CRC into a straight carbon tax, which many energy managers believe would significantly reduce the administrative burden on them.
“The CRC accounts for about 10% of energy cost and accounts for about 99% of the paperwork burden. For us it is a complete waste of resources and would be far better just as a straightforward tax,” says Paul Boreham, head of energy at LandSecurities, and chairman of the EMA.
The EMA believes that the government’s apparent wavering on CRC, alongside the introduction of mandatory carbon reporting for FTSE companies in 2013, represents a great opportunity to homogenise carbon reporting across the board, which it says would bring a number of benefits. A reduction in man-hours spent on carbon accounting would be a major plus, but perhaps most importantly it would bring the UK in line with international investment standards, and potentially give the UK commercial sector access to billions of pounds of finance.
“Looking forward to the future review of CRC in 2016, the view of the EMA is that the separation of carbon taxes’ from carbon reporting would simplify the landscape considerably and allow a common method and standard of reporting on GHG emissions to be extended to cover all organisations over the longer term,” says Wright. “This would provide consistency of reporting for valid cross sector comparisons, and bring the UK into line with international standards that are used by investors to assess the environmental credentials of organisations globally.”