Clifford Chance

Brainstorming on Reform of the CRC Energy Efficiency Scheme

3 February 2011

The CRC Energy Efficiency Scheme, one of the UK's main initiatives to cut carbon dioxide emissions, is facing an uncertain future following the launch of an informal government consultation into potential areas of reform.

The Department of Environment and Climate Change (DECC), which has set a deadline of 11 March for the submission of responses, has identified several areas for discussion and possible reform.

Among the issues put forward by DECC are options for simplifying the administrative burden on private sector organisations in determining their group structures, and reducing the overlap between the CRC and other emissions-related mechanisms including the Climate Change Agreements (CCA) and the EU's  Emissions Trading Scheme (EU ETS).

Other areas highlighted in the consultation exercise include potential changes to the rules on responsibility for energy supplies, amending the current two-stage qualification test that determines which organisations meet the CRC qualification criteria, as well as options for changing the timing and frequency of allowance sales from 2012 onwards.

DECC does not rule out more fundamental changes and even scrapping the scheme and replacing it with other policy instruments.

Although DECC has emphasised that none of these areas and options are government policy, the outcome of this consultation exercise will help to develop DECC's proposals for more formal consultation into reform of the CRC Energy Efficiency Scheme.

Importantly, organisations involved in the scheme should continue to prepare for the first substantive CRC compliance year which starts on 1 April 2011.

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