Encouraging lower emissions

The government’s new Carbon Reduction Scheme risks penalising rather than incentivising energy efficient IT companies and could potentially stunt growth in the UK market, according to UK technology trade association Intellect.
    
The government’s Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is designed to improve energy efficiency in large public and private sector organisations. Targeted at organisations that spend over £0.5 million a year on electricity, business and public sector bodies will be required to purchase CO2 allowances, monitor their energy use and report their emissions. It is expected that by 2013 government will cap the number of allowances available each year and all allowances will be auctioned.

Discouraging growth
The CRC league table will rank companies according to changes in their absolute carbon outputs without taking account of changes in their operations or structure such as significant business growth. This effectively means that the CRC is discouraging growth. Data centre operators, for example, are likely to be penalised in this way due to the fact that while outsourcing of these functions may increase, the entire carbon liability falls to the utility bill payer, irrespective of whether the bill payer is in fact using the energy.
    
In order to achieve the desired outcome – a decrease in absolute emissions – an incentive should be created for an inefficient company to outsource to a more efficient one and also for an efficient company to accept business from an inefficient one (without the penalty of lower ranking). The current proposals for CRC do not achieve this.
    
Laurence Harrison, director of Energy and Environment at technology trade association Intellect, said: “Whilst we support the Carbon Reduction Commitment’s aim to improve energy efficiency, I would urge the government to look again at the structure of the scheme, and particularly the league table, to make sure it takes account of the wider benefits of IT deployment and pushes companies towards rational decisions about their CO2 emissions.”
    
He went on to say: “As it stands, this scheme will put the IT industry at the bottom of the CO2 emissions league table. This could damage the UK’s IT industry when in fact, as recognised by the WWF and the European Commission, our sector is playing a leading role in reducing carbon emissions across the rest of the economy.”

About the Scheme
The Carbon Reduction Commitment Energy Efficiency Scheme is the UK’s mandatory climate change and energy saving scheme, due to start in April 2010. It is designed to improve energy efficiency in large organisations.
    
The scheme will operate as a ‘cap and trade’ mechanism, providing a financial incentive to reduce energy use by putting a price on carbon emissions from energy use. In CRC, organisations buy allowances equal to their annual emissions. The overall emissions reduction target is achieved by placing a ‘cap’ on the total allowances available to each group of CRC participants. Within that overall limit, individual organisations can determine the most cost-effective way to reduce their emissions. This could be through buying extra allowances or investing in ways to decrease the number of allowances they need to buy.
    
All the money raised through the allowances will be recycled back to participants, according to how well they perform. The scheme features an annual performance league table that ranks participants on energy efficiency performance. Together with the financial and reputational considerations, the scheme encourages organisations to develop energy management strategies that promote a better understanding of energy consumptiton.

Eligible for CRC?
The scheme is designed to tackle CO2 emissions not already covered by Climate Change Agreements and the EU Emissions Trading Scheme. The scheme will cover large public and private sector organisations, who are responsible for about ten per cent of the UK’s emissions. This will affect around 20,000 organisations.
    
Organisations are eligible for CRC if they (and their subsidiaries) have at least one half-hourly electricity meter (HHM) settled on the half-hourly market. They also qualify if their total half-hourly electricity consumption exceeded 6,000 megawatt-hours (MWh) during 2008. Qualifying organisations will have to comply legally with the scheme or face financial and other penalties.

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