Carbon Counsel

Author:Ms Anita Lloyd
Profession:Eversheds
 
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The Clean Energy and Sustainability Group at Eversheds suggest some practical tips for preparing for a new carbon trading scheme that the government assesses will affect between 4,000 and 5,000 businesses and organisations in the UK and will be introduced from January 2010.

Introduction

Following two rounds of consultation in 2006 to 2007, the government is set to introduce a new carbon trading scheme - the Carbon Reduction Commitment ("CRC") - under the powers to be granted when the Climate Change Bill is enacted later this year.

The scheme is a result of the government looking for ways to achieve its self-imposed target to reduce the UK's carbon emissions by 20 per cent by 2010 and the new UK targets of 26 per cent to 32 per cent by 2020 and 60 per cent by 2050 which will be mandated in the Climate Change Bill when enacted. Analysis has highlighted that a number of organisations are not caught by existing Climate Change Policy measures, such as the EU Emissions Trading Scheme (EU ETS) and the Climate Change Levy Agreements (CCAs). The analysis has found that large commercial and public sector organisations account for about 14 million tonnes of carbon (MtC) emissions (approximately 10 per cent of the UK's emissions) and could cost-effectively save 1.1 MtC per year by 2020. In addition, the government's Updated Energy Projections indicate that without measures to target this group of organisations, emissions will increase by around 11 per cent by 2030.

The government's response to the consultation that took place last summer, information on the coverage and policy design of the scheme including the allocation of allowances, monitoring and reporting requirements and the design of the performance league tables, is anticipated in late February 2008 and a further consultation on the details of the CRC Regulations is expected in summer 2008.

Key Features of the New Scheme

Exactly what is it?

The CRC will operate as a 'cap and trade' scheme with the government setting an overall scheme cap within which organisations must purchase and surrender allowances to cover their annual CO2 emissions. An introductory phase of the CRC, which will have a fixed price sale of allowances rather than an auction, is proposed to take effect from January 2010 with the first capped and auctioned phase starting in 2013. The cap will be decreased steadily over subsequent phases.

The scheme proposes both a carrot and stick approach to incentivise participants to...

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