UK Energy Compliance Changing Tack

Blog – Friday, March 18th, 2016
Electricity

Written by Chris Havers

This week saw the awaited Government response to the Energy Efficiency reporting consultation that was announced in the Chancellor’s 2016/17 budget. Here is a summary of the key environmental points for you as it affects large and small businesses in Camden in the coming years. The key message from us is; low cost preparation now saves you higher costs in the future.

Key Headline

The key headline is the dismantling of the Carbon Reduction Commitment (CRC). The CRC is the reporting scheme / tax for larger businesses with higher energy consumptions. They pay for allowances for the energy that they use. Unfortunately it gained a reputation from some as a reporting burden for businesses, for others it had positives such as raising the issue of carbon reductions to senior level. It has now been confirmed that the CRC will continue until the end of what they call phase 2 (2018 – 19), and will then cease to exist. This however brings a tax hole that the Treasury needs to plug. This revenue hole will therefore be filled by an increase in the Climate Change Levy (CCL) for all businesses that pay it. The CCL is the tax that you see on your monthly corporate energy bills and is based on every KWh of gas and electricity that you use. The interesting part about this is that only large companies/ charities/ public sector organisations take part in the CRC, so while they will not be required to report anymore from 2019, there will be an increase in tax for all businesses (large and small) who pay the CCL. This heightens the need for many Camden businesses to reduce their energy use sooner, rather than later to mitigate increases to their energy bills in the future.

Increase in Gas levy

Also worth noting, that due to the current low cost of gas, there will also be a change in the CCL rates in 2019. This change will increase the cost of gas. So worth preparing for a larger gas spend as well. This for some can be easily mitigated through low cost initiatives that reduce consumption for heating. It is therefore wise for Camden businesses to seek to measure and reduce now to avoid higher rates in the coming years.

New reporting framework on the horizon

So, back to the large organisations. As well as the removal of the CRC, there will also be a new consultation into how to streamline other energy reporting frameworks – notably ESOS, EU ETS, and the CCA. By this point some readers who are not part of these schemes are just seeing jumbled letters – bear with me though…These schemes are reserved for the larger emitters based on specific criteria on energy consumption and reporting boundaries, but those companies taking part will have a new framework to consider near the turn of the decade. Also, for those who participate in GHG Mandatory reporting (publically listed FTSE companies), this appears to be continuing as normal – Feedback stating that there is real value in raising environmental data to the Directors to be integrated into financial reporting for investors. A lesson that the smaller growing businesses can definitely take heed of.

For those companies too small to fall into the ESOS directive, there is the reasonable assumption that they also not fall into this potential new reporting framework. The use of the following term in the Government response stating:

The government will protect the smallest or lowest energy-consuming businesses by exploring de minimis arrangements for the new reporting framework “.

This whole framework will be explored in a consultation in the upcoming summer, so stay tuned for more details, plus we would recommend that you get involved in when prompted. The CCCA will ensure that we communicate the consultation when it arises.

These changes to the energy efficiency landscape continue to show the importance of using simple procedures to measure, manage and reduce your energy consumption. Doing so now will pay dividends in the immediate, medium and long term future. The way climate change is mitigated falls on everyone’s shoulders, and policy is rapidly evolving. The UK is is accountable for its emissions and we all have a part to play, so regulation will continue to push us in the direction of meeting the targets. We at the CCCA aim to keep you prepared for the swings and roundabouts when the they arrive.

Contact us here if you want to learn more

Blog written by Chris Havers, Principal Carbon Consultant of the CCCA.