There are a variety of schemes that UK organisations – particularly large or energy-intensive businesses – are subject to; I’ve summarised the more prominent of these below.
Energy Savings Opportunity Scheme (ESOS)
• A mandatory scheme that requires participants to assess their energy use every 4 years and identify cost-effective efficiency measures…however, there’s no obligation to implement the measures.
• An organisation qualifies if they have more than 250 employees, or an annual turnover greater than 50 million euros, and an annual balance sheet total greater than 43 million euros.
• Organisations must notify the Environment Agency (via a qualified ESOS assessor) by a set deadline that they have complied with their ESOS obligations. The next deadline for compliance 5 December 2019.
Carbon Reduction Commitment (CRC)
• A mandatory scheme requiring organisations to buy and surrender allowances equal to their CO2 emissions each year.
• Organisations with an annual consumption of over 6000 MWh (roughly £750k p/annum) are obliged to participate.
• Designed to encourage efficiency measures and reduce CO2 emissions for energy not already covered by Climate Change Agreements and the EU Emissions Trading System.
• In March 2016, the government announced they would close the CRC after 2018-19 compliance. Revenue is to be replaced by an increase in the Climate Change Levy ie the cost, previously paid by larger businesses, will now be spread between all those that pay CCL.
Streamlined Energy and Carbon Reporting (SECR)
• Same, mandatory, qualification as ESOS, but exempts organisations with consumption below 40,000 kWh p/annum.
• Legislation not yet published so no action yet needed. SECR is expected to start April 2019, when the current phase of the CRC ends.
• Requires companies to include a summary of energy use & carbon emissions in their annual accounts, along with an overview of any energy efficiency programmes they’ve implemented.
Climate Change Agreement (CCA)
• A voluntary agreement made by an organisation to improve their energy efficiency. In return, they receive a discount on the Climate Change Levy (CCL), a tax added to electricity and fuel bills.
• To qualify, an organisation must be engaged in a qualifying process. These are wide ranging; from industrial, such as chemicals, paper, and plastic to agricultural, such as pig and poultry farming.
• Sector associations manage the underlying agreements for businesses in their sector. An operator that wants to enter into a CCA must apply first to its sector association.
EU Emissions Trading System (EU ETS)
• Works on the ‘cap and trade’ principle. A cap is set on greenhouse gas emissions and reduced over time so that total emissions fall. Companies receive or buy emission allowances which they can trade with one another. They can also buy international credits from emission-saving projects around the world.
• A company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces emissions, it can keep the spare allowances to cover future needs or sell them to another company.
• Trading encourages emissions to be cut where most cost effective. A robust carbon price also promotes investment in clean, low-carbon technologies.
• Participation is mandatory for companies, above a certain (sector-dependent) size, who either use a qualifying gas and/or fall within a qualifying sector:
o Carbon dioxide (CO2) from power and heat generation.
o Nitrous oxide (N2O) from production of nitric, adipic and glyoxylic acids and glyoxal
perfluorocarbons (PFCs) from aluminium production.
o Energy-intensive industry sectors including oil refineries, steel works and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals. Also commercial aviation.
Article researched and written by Phil Bennett