Carbon Reduction Commitment

Carbon Reduction Commitment – reduce your energy usage and the cost of CO2

The CRC scheme is designed to reduce CO2 emissions not covered by Climate Change Agreements or the EU Emissions Trading Scheme. It is aimed at large public and private sector organisations that are collectively responsible for around 10 percent of all the UK’s CO2 emissions. Around 20,000 organisations will be affected by the scheme.

Organisations are eligible for CRC if they (and their subsidiaries) have at least one half-hourly electricity meter (HHM) settled on the half-hourly market. They also qualify if their total metered half-hourly electricity consumption exceeded 6,000 megawatt-hours (MWh) during 2008.

Initially, it is estimated that around 5,000 organisations will qualify, including supermarkets, water companies, banks, local authorities and all central Government Departments. Qualifying organisations will have to comply legally with the scheme or face financial and other penalties. More of which later.

In a tenanted estate, if the landlord pays the electricity bills, he is deemed the responsible party for CRC. Electricity users cannot circumvent responsibility for CRC by splitting up a group of companies. The only exemptions are where an organization is already covered by a Climate Change Agreement or the EU Emissions Trading Scheme.

CRC will operate as a ‘cap and trade’ mechanism, providing a financial incentive to reduce energy use by putting a price on carbon emissions. In CRC, organisations buy allowances equal to their annual emissions. The overall emissions reduction target is achieved by placing a ‘cap’ on the total allowances available to each group of CRC participants. Within that overall limit, individual organisations can determine the most cost-effective way to reduce their emissions. This could be through buying extra allowances or investing in ways to decrease the number of allowances they need to buy.

All the money raised through the allowances will be recycled back to participants, according to how well they perform. The scheme features an annual performance league table that ranks participants on energy efficiency performance. Together with the financial and reputational considerations, the scheme encourages organisations to develop energy management strategies that promote a better understanding of energy consumption.

Organisations which qualify for CRC must calculate annual carbon dioxide emissions from all energy sources. As a minimum, organizations need to identify where at least 90 percent of CO2 emissions come from and submit a Footprint Report by July 2011 for the year April 2010 to April 2011. Reporting systems must be in place by April 2010.

In April 2011 qualifying organizations will purchase CO2 allowances at £12 per tonne from the government for each tonne of CO2 that they emitted in 2010 and which they anticipate emitting in 2011-12. From 2012 onwards, the price of CO2 allowances will be set by a closed auction where organizations that purchased too many CO2 credits are able to sell them back to those which purchased too few.

Carrot and stick

The government will publish annual league tables, with the best performers each year earning bonuses, and the worst performers being penalized. The rate of bonuses and penalties will increase from 10 percent in year one to 50 percent in year five. The bonus and penalty system will enable the best performers not only to recover the cost of CO2 purchases, but to make an equivalent profit, while the worst performers will end up paying in effect twice as much for their CO2 credits.

  • Punitive fines will be levied on organizations for non-compliance:
  • Failure to register – £5000 fine plus £500 per working day, publication of non-compliance
  • Failure to disclose information – where an organization with a Half Hourly Meter (HHM) that does not meet the qualifying threshold for CRC fails to make an information disclosure, a one-off fine of £1000
  • Failure to deliver Footprint Report – £5000 fine plus 5p fine per tonne of CO2 per day for the first 40 working days delay (increasing thereafter to 10p per tonne of CO2 per day)
  • Failure to deliver Annual Report – as per Footprint Report, plus a doubling of emissions for league table purposes (effectively guaranteeing a penalty payment)
  • Incorrect reporting – £40 per tonne of CO2 emissions incorrectly reported (but with a margin for error of 5 percent)
  • Failure to comply with Performance Commitment – £40 per tonne of CO2 in respect of all allowances that should have been obtained or cancelled


In April 2011, an organization with a total energy bill of around £900,000 per annum will need to purchase CO2 credits of around £60,000 for the year 2010-2011 and for the year 2011-12. Failure to comply would result in a one-off fine of £130,000. Failure to install a monitoring solution and produce a Footprint Report or Annual Report would result in a fine of over £240,000 (£120,000 for each missed report). While the penalties for non-compliance are high, it should be clear that investing in energy management technology can provide an attractive offset against the cost of compliance by producing on-going reductions in energy usage and costs.

Securing your CRC objectives with Allen Martin

Allen Martin Energy Management Systems simplify the administrative requirements of CRC compliance and provide vital information to help you plan and manage your carbon reduction programme. For each site, Allen Martin systems are able to collect and collate kilowatt hour and other metered utility data. Date and time-stamped meter readings can be collected from any utility meter with a pulsed output and are stored securely within the Allen Martin system. Consumption reports can be generated automatically for any required period – daily, weekly, monthly or annually. Metered data can be password-protected and is viewed in a standard web browser. It can also be exported to an external data management package for further analysis or archiving.

One of the keys to CRC success is to enlist the commitment of members of staff. If people can see how well the organization is doing, they are much more likely to ‘buy in’ to the idea of saving energy. Allen Martin Green Displays placed in receptions or other public areas make building users aware of corporate carbon commitment targets as well as achievements. Live, minute-by-minute information can be displayed on energy and utility usage, waste recovery systems, chp plant, and on-site solar or wind power generation.

Allen Martin systems incorporate a host of energy management functions that minimize energy consumption by running services in the most energy-efficient way. Self-adaptive optimum start-stop, three-term control and load shedding and flexible time programming are just a few examples. Diagnostic tools and data logging routines allow the identification of potential energy savings through fine-tuning the operation of building services plant and highlighting when maintenance is needed. Automatic reporting of fault conditions and out of limit alarms enables problem areas and breakdowns to be spotted, eliminating unnecessary waste.