Warning on UK Carbon Reduction Laws
From 1 April, organisations with annual electricity bills of approximately £1 million or more must start measuring and accurately reporting their energy usage to Government auditors, in compliance with the Carbon Reduction Commitment legislation. Those that submit late or inaccurate data could be penalised and publicly chastised for those failures.
Vincent Neate, KPMG's UK Head of Sustainability comments further:
KPMG's work with organisations preparing for the Carbon Reduction Commitment (CRC) has found that compliance failures, such as incorrect reporting, pose the greatest immediate risk to both reputation and the bottom line. Our experience is that two thirds of businesses are misstating their carbon numbers by a margin that will incur financial penalties.
The data provided this year will be used to produce the first league tables ranking participants on their success at managing and reducing their carbon emissions. Their publication, in April 2011, will inform a bonus and penalty system which effectively sees money from the worst performers given to those nearer the top, to reward their performance.
The Government's hope is that the scheme will incentivise large, non-energy intensive organisations to reduce their carbon emissions; indeed it expects to achieve an annual saving of 4.4 million tonnes of CO2 by 2020. We estimate the CRC will affect up to 5,000 full participants while a further 10,000 or more will have compliance obligations, although will not have to trade carbon - for now.
There are still signs, even at this late stage, that many of the scheme's participants are not yet fully prepared for the CRC. Some are hopeful of a last minute postponement of the scheme, thinking this is signalled by the delays in clarifying some of the more complex areas of the scheme. However we believe the scheme is going to start in April and all organisations should be prepared.
The penalties for late or inaccurate data submission mean organisations could find themselves incurring unexpected costs and their efforts to establish green credentials may be severely set back. Furthermore, many organisations don't fully understand the implications of the CRC league table's early action bonuses so may miss out on this form of potential return on investment.
A checklist of key actions for those affected by the scheme includes:
- Determine if you have any mandatory half hourly meters - If you do, you are caught by the scheme
- Determine the level of 2008 electricity use through any half hourly meter. If this is less than 6000, you still have to report but won't have to pay for carbon. If it is more than 6000MWh (approx £1m spend) then you are likely to have to report and trade in full from 1 April
- Collate and retain copies of energy bills and statements from 2008
- Build a register of fixed source energy use and emissions
- Recognise any emissions where landlord/tenant confusion might arise
- Familiarise yourself with all the deadlines for registration and data submission
- Start measuring your full carbon footprint within the scheme from 1 April 2010
- Check and double check that data
Organisations that understand the scheme have an opportunity to be rewarded for improved energy efficiency while others will be penalised and face reputational damage. The scheme effectively creates a financial and reputational price for not being 'green'.
For more information about the Carbon Reduction Commitment Energy Efficiency Scheme, click here to download our latest publication.