For a public sector body that gets its act together there are quick and relatively easy financial gains to be made in the early stages of the government's carbon reduction commitment initiative. But once the "low-hanging fruit" has been picked and scoffed, gains on the same scale could be a little harder to harvest.
The carbon reduction commitment (CRC) is the UK's first mandatory carbon trading scheme. Starting in April 2010, it affects all large organisations in the private and public sectors that used 6,000 megawatt hours of electricity in 2008 – the equivalent of an annual bill of about £500,000.
Between 5,000 and 20,000 organisations – depending upon whom you talk to - are expected to be affected by the scheme, including most local authorities and all government departments.
Financial incentive to reduce emissions
CRC is designed to provide a financial incentive to reduce energy use by placing a price on carbon emissions. Each year, organisations affected will have to purchase allowances equivalent to their expected carbon emissions - initially they will pay £12 per tonne.
A cap will be placed on the total number of allowances collectively available to participants and the level at which that cap is set will determine the extent to which organisations are compelled to reduce their energy consumption.
The government expects the scheme to reduce emissions by at least four megatonnes of carbon dioxide per year by 2020, which should collectively save participants around £1bn. The proceeds of the sale of allowances will be repaid to participants later, along with a bonus for the best performers but minus a penalty for those who have performed the worst.
The government is also banking on what it refers to as the "reputational incentive". It plans to publish a league table of participants who will reap the public relations benefit or otherwise dependent on which end of the performance scale they fall.
Financially though, the government's aim is that the money saved from reducing energy consumption will exceed the cost of participating in the CRC scheme. "CRC should not be viewed as 'just another tax'," according to Harry Morrison, of the Carbon Trust, an independent company set up in 2001 by the government to accelerate the move to a low carbon economy.
He says that although it is an additional cost the majority of the money comes back after six months so the actual cost is much lower than the up-front payment. Also, the cost of the carbon under the CRC, at £12 per tonne in the first year, is much lower that the cost of the energy bill to which it relates.
"So the fundamental case remains that you can save far more money by good practice now, through behavioural change and through energy efficient technology, than you are going to have at risk under the CRC."
"I think that organisations need to go into it with a positive frame of mind and see it as an additional stimulus to help them realise those savings and not as an additional burden," Morrison added.
Following the initial sale, participant organisations will be able to trade carbon allowances on a secondary market. Those who reduce their energy consumption to a greater extent than anticipated can sell surplus allowances, while those that don't meet their targets can purchase the extra allowances that they need.
Organisations that start to manage their emissions before April 2010 will be rewarded for that too. First they must install a system for remote meter reading called automatic monitoring reading.
Then they must achieve the Carbon Trust Standard. This is an award made by Carbon Trust registered assessors and can take several months for a complex organisation to achieve.
From Bubb's Blog
From Whitehall Watch
