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Companies should view the government Carbon Reduction Commitment (CRC) as an opportunity to sharpen competitive edge in the recession, instead of as another overhead.

This is according to consultants at sustainable-power company Ener-G, who believe the CRC can boost bottom-line performance by reducing energy costs, while enhancing corporate social-responsibility programmes.

This view is underscored by government figures suggesting the CRC could help businesses save a total of GBP1bn by 2020.

About 20,000 organisations must register for the CRC programme.

Of these, an estimated 5,000 will become full participants and will have to pay for their carbon emissions when the CRC gets under way with its first trading year from April 2010 to March 2011.

Although the CRC is still in its draft format, acting now can quickly save money and prevent the reputational damage of being named and shamed in a league table of energy performance.

The business and public sectors generate more than one-third of UK CO2 emissions.

The CRC scheme aims to cut emissions among those consuming more than 6,000,000kWh of half-hourly metered electricity (an approximate annual energy spend of GBP500,000).

The most energy-intensive organisations are already subject to the EU Emissions Trading Scheme or Climate Change Agreements.

Performance will be measured and published in a league table, with positions determining how much of the carbon tax is ‘recycled’ back to each organisation.

Liam McDonagh, head of consultancy services at Ener-G, said: ‘Many organisations affected by the scheme have not yet started to plan for the various phases, because they have gone into survival mode and are battening down the hatches against the recession.

‘But the CRC is an important catalyst for cost reduction and must rise up the boardroom agenda.

‘It also takes time to prepare and businesses mustn’t get caught short.’ The CRC rules underpin the Climate Change Act 2008, which sets legally binding targets to reduce greenhouse-gas emissions by 80 per cent by 2050, based on 1990 levels, with at least 26 per cent CO2 emission reductions by 2020 measured against the same baseline.

Under the CRC, organisations will have to report on core emissions (derived from gas and electricity consumption) but some may also have to report on residual emissions, including diesel, coal and LPG.

Performance in the first year of the scheme (April 2010 – March 2011) will be evaluated by two early-action measurements.

McDonagh added: ‘The first metric evaluates the extent of voluntary automatic metering in place, which means organisations should be reviewing how energy use in their properties is measured; deciding if this is suitable for achieving a high rating and obtaining costs for upgrade as appropriate.

‘The second early-action metric is involvement in an energy-efficiency accreditation scheme, such as the Carbon Trust Standard, and organisations should obtain details of schemes, along with costs and timescales for accreditation.

‘The two early-action metrics will provide a foundation for energy management, but to convert this into carbon reduction requires focused reviews of policies, procedures and behaviour, as well as detailed technical surveys of property.’ The findings of reviews and surveys will constitute recommendations for improvement, which can be prioritised and implemented to complement CRC strategic requirements and develop capital and revenue cost-schedules for annual business planning.

McDonagh said: ‘Reviews and surveys will also produce many no cost or low-cost quick wins, in particular behavioural changes such as switching off equipment and lighting when not required and introducing temperature policies to prevent over heating or cooling.

‘In our experience, no-cost or low-cost measures can typically achieve energy savings of five to ten per cent.

‘Older buildings are generally less efficient, but lighting, plant, equipment and controls upgrades and improvements to building fabric can still have attractive returns on investment with typical payback periods of less than five years.

‘In addition, these types of initiatives usually improve the internal environment.’ The CRC means organisations must buy allowances to cover CO2 emissions in April each year for the following 12-month period.

In the first three years of the scheme (April 2010 – March 2013), allowances will be traded at GBP12 per tonne of CO2.

The first sale will take place in April 2011, covering actual emissions for 2010/11 and projected emissions for 2011/12 – a double accounting year.

Subsequent sales will be just for the projected following year.

So for an organisation using 6,000,000kWh of electricity a year, the first sale will cost GBP77,328.

With this example, the at-risk penalty or bonus amount in October 2011 will be 10 per cent of traded value of the 2010/11 allowances, or GBP3,866 (at best the recycling payment will be GBP42,530, at worst GBP34,798).

Allowances for 2011/12 will be recycled in October 2012.

In the third year of the scheme, the penalty or bonus will rise to 30 per cent, but because the calculation includes baseline emissions of the footprint year (energy consumption in 2010/11), organisations at the top and bottom of the table could stand to gain or lose far more than 30 per cent of that year’s allocation value.

From April 2013, the cost of carbon allowances will be determined by sealed-bid auction and the total number of allowances will be capped.

It is expected that by the fifth year of the scheme, the recycling penalty/bonus will increase to +/- 50 per cent.

Ener-G is holding a series of path-finder seminars across the UK to assist businesses in understanding their CRC obligations and support available from the Ener-G group.

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