Hospitals are being warned they face paying higher fees and bigger fines following changes to the controversial CRC Energy Efficiency Scheme (CRC).
The initiative was introduced in 2010 and had a range of reputational, behavioural and financial drivers to encourage large public and private sector organisations to cut their energy use.
For starters, they had to report on carbon emissions annually, and they had to buy carbon allowances from the Government based on this energy use. The aim was to keep increasing the price of these allowances to encourage organisations to continue reducing their level of use.
Initially the price paid for allowances was £12 per tonne of CO2. But this only covered Phase 1 of the programme, with Phase 2 due to be introduced in April 2014. It will run until March 2019.
And it is expected the update will bring fresh challenges for hospitals across the country.
Firstly, the price of allowances is likely to increase as new legislation suggests that in the future they may be auctioned or sold on the open market, placing an extra burden on organisations to comply with the scheme.
Secondly, fines for failing to report on annual emissions could increase. Currently organisations are fined a one-off payment of £5,000; paying a further £500 for each subsequent day reports are delayed, up to a maximum of 40 working days - or £20,000.
To help hospitals and others understand the changes to the rules, CMR Consultants has published A Quick Guide To The Updated CRC Energy Efficiency Scheme.
Despite its simplification, the CRC can impose a significant cost and resource burden on an organisation. In addition, the scheme is being amended on a regular basis by the Government and there appears to be no sign of this changing
It provides an overview of the scheme and sets out the likely changes that will soon come into force.
And it charts the changes that have already been made following heavy criticism of the first phase. These include the abolishment, in late 2012, of the CRC Performance League Table, which was said to place an unnecessary burden on organisations. At the same time the Government revealed that a full review of the CRC would take place in 2016 and provided more detail on its ‘simplification package’, setting out 46 changes that aim to create a ‘new, leaner, simplified and refocused CRC’. Among the changes, the number of fuels that participants have to report on will be reduced from 29 to just two – electricity and gas for heating. An organisation-wide 2% de-minimis threshold for gas for heating will also be introduced to protect organisations that use very little. This change means that, from 2012-13, a participant will not have to report on gas for the last two years of the first phase of the scheme, or purchase allowances to cover these emissions if their gas consumption is below 2% of its electricity consumption.
Other simplifications will see the removal of the ‘90% rule’, which requires all participants to account for at least 90% of their carbon footprint emissions. The Government also said it will consider how the CRC can be used to encourage onsite renewables generation. State-funded schools in England will also be completely withdrawn from the scheme.
In the second phase it is likely the qualification criteria will change. Currently, organisations are mandatory participants in the CRC if during 2008, the year of qualification, they consumed more than 6,000MWh through their half-hourly electricity meters.
The CMR report states: “Despite its simplification, the CRC can impose a significant cost and resource burden on an organisation. In addition, the scheme is being amended on a regular basis by the Government and there appears to be no sign of this changing.”
The report advises hospitals to consider two key areas: Qualifying and registering for Phase 2 this autumn, and developing a strategy to sustainably reduce carbon emissions against the potential for the price of carbon allowances to increase over the coming years. This means ensuring they understand the qualification criteria, properly measure carbon use, develop a carbon management strategy, budget for the energy consumption allowances fees, and investigate the most effective ways of introducing energy-saving measures.
Click here for the full report.
