With the Carbon Reduction Commitment (CRC) drawing to a close after the current reporting year this month (October), many large businesses will find themselves with cash freed up that was previously earmarked to purchase carbon allowances. With the compliance price for CRC peaking at £18.30 per tonne of carbon emissions for the 2018/19 year of the scheme, the reduction in carbon taxation is likely to be significant.
However, the continuing increase in non-commodity costs, particularly for electricity, means that these savings will soon be swallowed up, so this is a golden opportunity to re-invest into measures that will strengthen environmental performance going forwards.
The CRC officially ended on March 31st 2019, requiring companies that qualify to collect relevant CRC energy data for the year prior to that, submit their annual report and complete the purchase and surrender of the correct number of carbon allowances by October.
Compliance audits will continue after that date, meaning that those organisations which took part in Phase 2 of the scheme are required to retain this data until March 2025. For those that qualified only for Phase 1, data must be kept until April 2020. Enforcement action by CRC regulators is possible up until these dates.
With the last required CRC payments likely having been completed, most CRC participants will see a net reduction in total energy taxes and levies for 2019/20. While Streamlined Energy and Carbon Reporting (SECR) requirements are being introduced, this is a reporting process only and does not involve any taxation.
It is important to note that to make up some of the shortfall in funding for existing renewable energy projects following the end of the CRC, Climate Change Levy (CCL) requirements increased significantly during the 2019/20 reporting period. Electricity saw a 45% increase, while gas CCL requirements jumped 67%. Over the following 5 years, CCL on electricity will fall slightly whilst CCL on gas will continue to rise quickly with CCL on gas and electricity reaching the same cost (p/kWh) by 2024. This will make gas increasingly expensive for many businesses, which will provide increasing incentives for energy efficiency measures that target gas consumption.
While your organisation may see the lower costs, at least initially, and reduced administration that comes with the end of the CRC as a positive, it is important to invest this freed up budget effectively. With the cost of CRC budgeted for over the past eight years, this presents a perfect opportunity to invest in measures that will reduce energy consumption and carbon emissions.
A key part of any strategy to reduce energy costs is to use less. If you are about to receive an ESOS report (as most ex-CRC participants will) then you should read it! – You may be surprised at how short the paybacks are for some energy efficiency measures. If your business can commit to re-investing the sum of money previously spent on CRC then this should deliver year-on-year savings, many of which will probably produce simple paybacks of under two years. Hopefully some of these savings can be re-invested in future years as part of a strategic plan to manage energy costs and increasingly to deliver on sustainability targets.
To find out how Inenco can help you to maximise the opportunities presented by these changes, contact us on 08451 46 36 26 or email firstname.lastname@example.org