Countdown to carbon reduction

Clay Technology magazine
18 Dec 2009

The UK Carbon Reduction Commitment kicks in from April 2010 and
could affect firms in the heavy clay industry. Alessandra McConville,
Environmental Programmes Leader at EEF, the manufacturer’s
organisation, guides us on the process of compliance.

Climate change is rapidly moving up the political agenda. This has led
to a number of regulatory instruments being put in place, at UK and EU
level, such as the Climate Change Agreements (CCAs) and EU Emissions
Trading Scheme (EU-ETS). However, neither the CCAs nor EU-ETS cover all
industrial and commercial emissions, particularly in less energy
intensive sectors, and, as a result, the UK Carbon Reduction Commitment
(CRC) Energy Efficiency Scheme has been introduced.

The EU-ETS mandatory emissions trading scheme covers the biggest carbon
emitters in the EU, such as power stations, iron and steel producers,
cement and lime, glass and ceramics. Climate Change Agreements,
meanwhile, allow companies in energy intensive sectors to receive an
80% discount from the Climate Change Levy charged on all non-domestic
energy. The discount is available in return for meeting energy
efficiency or carbon saving targets.

The CRC is a legally binding carbon trading scheme that will
start in April 2010 and require qualifying organisations to report on
carbon emissions, purchase allowances sufficient to cover them and
maintain adequate records of compliance. Companies could face fines or
prosecutions if they fail to meet their obligations.

The scheme will affect all those with half-hourly settled electricity
meters anywhere in their organisation. Firms will not be full
participants unless their total half-hourly electricity use across the
organisation in the ‘qualification year’ (2008) was greater than
6,000MWh. The CRC will cover energy-related CO2 emissions, mainly from
stationary sources. If a manufacturer’s main emissions sources are
electricity and gas, it is likely that it can exclude small uses of
fuel oil, solid fuels, etc. However, companies will need to undertake
an inventory of their emissions to understand this.

Transport emissions from road-going vehicles are excluded (although
on-site transport such as forklift trucks are likely to be included),
as are emissions from processes or sites covered by a CCA or EU ETS.
Some companies or their subsidiaries may be exempt from the CRC if over
25% of their emissions are covered by a CCA or by the EU ETS, however,
these firms will still need to register with the scheme and prove their
The ‘highest UK parent’ is responsible for emissions from all its
subsidiaries. If the highest parent company is based outside the UK, a
UK agent will need to be appointed.

Buying and selling

Organisations with half-hourly meters should have received
qualification information and will need to register online between
April and September 2010. Companies must identify who will be
responsible for the CRC in the highest UK parent and estimate how much
half-hourly metered electricity they used in the qualification year
(2008) in order to register.

They then must produce a ‘footprint report’ by July 2011 – essentially
a baseline report which records all the relevant emissions and
determines which are covered by the CRC. The first allowance sale will
take place in April 2011 for the financial year 2011/12.

Until March 2013, there is no limit on how many emissions allowances can be sold at a fixed price of £12/t by the Government.

In subsequent phases, there will be a cap on the number sold, and they
must be purchased at auction. Emission allowances will also be
available in the secondary market – for example, from companies that
have managed to reduce emissions and therefore have a surplus.

To minimise the impact on companies, all revenue raised by the
Government in selling allowances will be fed back to participants.
Companies will receive a bonus or penalty depending on their position
in a performance league table, which will be based on their performance
in reducing energy-related carbon emissions.

Guidance from EEF, the manufacturer’s organisation, recommends
developing a carbon footprint for 2008/9 to give practice in collecting
the data and help understand where the uncertainties are. The key
challenges are collecting all the relevant data, especially from
smaller sites that might not manage energy well and for fuels other
than electricity or natural gas; getting all parts of the organisation
to report in the same way and to the same level of accuracy; as well as
understanding the overall footprint sufficiently to exclude some
residual sources of emissions.

Finally, they need to quantify the impact and use their 2008/9
footprint to understand the likely allowance purchase requirement in
April 2011.

Winners and losers

The scheme has the potential to create significant winners and losers.
Companies that reduce energy use will see bills fall and reduce their
need for allowances, improving their league table position and getting
a better bonus from the scheme. Conversely, those who do not improve
their energy efficiency will be paying for allowances, be penalised for
a poor league table position, and spending more on energy.

The EEF is also running interactive qualification workshops from January 2010 around the country.

Further information:
Alessandra McConville.