The CRC is one of a number of carbon reduction measures that the UK Government is introducing. It is committed to delivering carbon emissions reductions by 2010 of at least 20 per cent against 1990 levels. Longer term, its goal is to cut carbon emissions by at least 60 per cent by 2050.
It is expected that around 5,000 organisations will be subject to the CRC. It will cover large business and public sector organisations whose annual half-hourly metered electricity use is above 6,000MWh. Organisations spending more than £500,000 a year in the UK on electricity are therefore likely to be included in the scheme. The scheme targets the UK energy use emissions of the highest parent organisation, including any subsidiaries.
The CRC is being designed so that it does not overlap with other carbon reduction devices such as Climate Change Agreements and the EU Emissions Trading Scheme.
The Government consulted on the CRC in 2007 and is expected to do so again in 2008. The CRC is scheduled to begin in January 2010. Organisations within the CRC will be required to report all their UK-based CO2 emissions from all their fixed point energy sources. This includes electricity, gas and other fuel types such as LPG and diesel. However, organisations will not be required to report on their transport emissions. They will then be required to purchase allowances corresponding to their emissions from energy use, and to then surrender them at the end of the year.
During an initial three-year introductory phase, carbon allowances will be sold to organisations at a fixed price. In the second phase from 2013, the number of allowances will be capped and they will be auctioned off to the highest bidder.
In February/March 2008, Defra apparently sent out via the major energy suppliers a mailshot to all billing addresses for half-hourly meters in Great Britain to highlight that 2008 is the qualification year for CRC, to invite organisations to log their contact details, and to indicate whether they think they are likely to be covered by CRC.
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