Carbon Reduction CommitmentAEA is the Government adviser contracted to develop the CRC scheme

Daniel Waller, Knowledge Leader, Carbon Management0870 190 6297, daniel.waller@aeat.co.uk

A world leadingenergy and climatechange consultancy

• Global business supporting public and private sectors

- Energy and climate change

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- Innovation and knowledge transfer

- Sustainability

- Information technology and

environmental management

About AEA

AEA is supporting

DECC as it develops

the regulations

for CRC

• Mandatory auction-based emissions trading

• Climate Change Bill commitment

• Public and private sector

• Applies at highest UK parent organisation level

• Purchase allowances to match emissions from Government at 12/tCO2

• Receive money back +/- bonus/penalty dependent on relative performance

What is the CRC?

No

Yes

You are covered

You are not covered

No

Total HHM electricity use > 6000MWh/year?

You are not covered

Yes

Qualification Process

-

Mandatory half hourly metered (HHM) electricity?

Declare qualification statusApril – Sept 2010

• Landlords may be responsible for tenant emissions

• Energy Service Companies may be responsible for customer emissions

• Key issues for landlords:

• Uncontrolled CRC exposure and possible net costs

• Incentives for emissions savings

• Cost recovery or measures to reduce exposure

Person that is the customer of a supply contract and receives the supply from the energy provider under that contract

Emissions responsibility

• Franchisor takes on CRC liability (Responsible Person)

• Franchisee has “reasonable assistance duty” (Associated Person)

• Particularly relevant for:

• Fast food, retail, telecoms, petrol stations, car dealerships, trade associations, some Universities

• Challenges:

• Data management

• Scheme economics – pass through of costs / benefits

• Delivering energy management

Agreement between parties where franchisee sells or distributes goods, or provides services, and equips or presents its premises as

instructed by “the franchisor”

Franchises

Parent Organisation

-Subsidiary 2

-Subsidiary 3

-Subsidiary 4

Subsidiary 1

• Principal subsidiaries- Identified in reporting and annex to league table

- Eligible for baseline updates - “Designated Changes”

(>6,000 MWh in 2008)

Principal Subsidiaries

• Joint ventures/PFI- Where no majority shareholder Company participates in its own right – if it qualifies

- Otherwise grouped with majority owner

-Subsidiary 2

Parent Organisation

-JV 1: 50/50 Ownership

-JV 2: 70:30 Ownership

-

Subsidiary 1 (>6,000 MWh in 2008)

Joint Ventures / PFI

What’s covered - ‘Footprint’

Core sources

Non-core sourcesEUETS emissions

CCA emissions

Based on emissions in the period April 2010 to March 2011

Reporting will be by 31st July 2011

Based on emissions in the period April 2010 to March 2011

Reporting will be by 31st July 2011

All energy consumed for non-transport purposes

•Electricity•Gas•Oil, diesel etc

• Financial year compliance cycle

• Evidence pack and source list

• Apply rules for renewable generation, export of power from own generation, heat from CHP

• Report this by end July after the year end and surrender allowances

• Audit not verification

Annual reporting

Civil Penalties

• Failure to register (£5,000 + £500 per day)

• Failure to disclose information (£1,000)

• Failure to provide footprint report (£5,000 + £0.05/tCO2/day for 40 days)

• Failure to provide annual report (£5,000 + £0.05/tCO2/day for 40 days then doubled)

• Incorrect reporting (£40/tCO2 for emissions incorrectly reported)

• Failure to surrender sufficient allowances (£40/tCO2 for each tCO2 shortfall)

• Failure to keep adequate records (£5/tCO2)

In summary - what to do and when

Registration

Preliminary Report

Annual compliance

01/08 07/08 01/09 07/09 01/10 07/10 01/11 07/11 01/12 07/12

Emission period

Reporting period

Emission period

Reporting periodKey

HH Electricity

All energyEUETS,

CCA

Annual emissions, turnover, early action

Annual emissions, turnover

Capped phase (auctions)

Capped phase (auctions)

Sales and recycling

April 2010 April 2011 April 2012 April 2013

Scheme starts

First sale (double)

First recycle (double)

Second sale (single)

Second recycle (single)

First auction (single)

Introductory phase (£12/t sales)Introductory phase (£12/t sales)

Early action

Growth metric

Absolute emissions

Early action

Growth metric

Absolute emissions

0%

10%

20%

30%

40%

50%

60%

1 2 3 4 5

YearM

ax b

on

us/

pen

alty

• Percentage emissions reduction - absolute

• Percentage reduction in emissions/turnover - growth

• Early action, prior to April 2011

• Performance is assessed against a 5 year rolling average

The league table

Emissions metrics

Absolute metric• % change in emissions compared with

previous 5 year average

Growth metric• % change in emissions/turnover

compared with previous 5 year average

Early action metrics• % AMR coverage

• % CT Standard coverage

- Revenue applied for Local Authorities/Universities rather than turnover

- Based on available data until 5-year history established

• Early action – by March 2011

• The Carbon Trust Standard

- Measure your footprint (more than required by CRC)

- Demonstrate reduction (absolute or relative > 2.5% p.a.)

- Demonstrate good carbon management

• Is it worth it from a CRC perspective?

Early action – CT Standard

• Automatic Meter Reading (AMR)

• Electricity and gas

• There will be a minimum standard

- Capture storage and retrieval for data

- Half hour frequency

- Software for data manipulation

Early Action Metric - AMR

Participants should consider AMR as part of a metering,

monitoring and targeting strategy – not just for CRC in isolation

Participants should consider AMR as part of a metering,

monitoring and targeting strategy – not just for CRC in isolation

Your action plan - today

• Understand your liability

- Understand Organisational structure (CCA/EU ETS)

- Meter audit – H/H electricity will determine liability

- 2008 HH Electricity data

• Sources of emissions (core and non-core)

- At least 90% of total emissions to be included

- Costs/Benefits of including >90%?

Your action plan - today

• Understand your abatement options

- Prepare a MACC?

• What do you want out of the scheme?

- Compliance?- Financial rewards –

Energy vs. Carbon?- Brand rewards?

• Evaluate early action metrics

• Work out your organisation structure

• Know your emissions exposure

• Understand your compliance obligations

• Make sure your systems are in place to gather and manage data and forecast emissions

• Understand your abatement opportunities

• Take a proactive approach to the opportunities the scheme presents

Preparing for the CRC - Summary

Carbon Reduction Commitment

Daniel Waller, Knowledge Leader, Carbon Management0870 190 6297, daniel.waller@aeat.co.uk