CRC Energy Efficiency Scheme – The essential guide for the Board and their lawyersPublished: April 2010

In association with

Click on the topics to link to the relevant sections.

Contents 1. The purpose of this guide. 3

2. Key elements of the CRC. 4

3. What will I have to do if my organisation has to participate in the CRC? 10

4. Setting up your CRC team. 10

5. How your lawyer can help you. 11 5.1 Organisation structure and boundary. 5.2 Buying, selling and leasing properties and companies

after the CRC has started. 5.3 Issues for lenders.

6. Key dates and deadlines. 12

7. What happens if I fail to comply with the CRC? 15

8. Audits. 16

9. How much will the CRC cost? 17 9.1 The costs. 9.2 The value at stake.

10. Take early action – how to capitalise on the opportunities with the Carbon Trust Standard. 19

10.1 The Carbon Trust Standard. 10.2 Claiming the benefit.

11. What you need to do for the Introductory Phase (2010-2013). 21

12. Further information. 23

In association with

The UK has committed to reduce its greenhouse gas emissions by 80% by 2050 from a baseline of 1990.

CRC Energy Efficiency Scheme – The essential guide2 CRC Energy Efficiency Scheme – The essential guide2

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1. The purpose of this guide

The Carbon Trust Standard (CTS), an independent voluntary certification scheme chosen as an early action metric under the CRC, and Practical Law Company (PLC), the UK’s leading provider of legal know-how and transactional and market intelligence for business lawyers, have worked together to provide companies that may be affected by the CRC Energy Efficiency Scheme (CRC) and their lawyers with an essential guide to the scheme.

This guide is designed to bring you up to speed on how the CRC could affect your organisation.

It is intended for your information only and is not a comprehensive guide to the CRC, nor should it be used as a substitute for professional advice.

It covers:

1. How the CRC works.

2. How much will the CRC cost?

3. Taking early action – how to capitalise on the opportunities with the Carbon Trust Standard.

4. What you need to do for the Introductory Phase.

The Carbon Reduction Commitment offers a significant financial incentive to large organisations to reduce their carbon.

Lord Puttnam

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What is the CRC?

• TheCRCEnergyEfficiencyScheme(CRC)isanewUK-widemandatoryemissionstrading scheme, which applies to large businesses and public sector organisations.

• TheGovernmentestimatesthattheseorganisationsareresponsibleforaround10% of the UK’s overall greenhouse gas emissions.

• Ifpartsofanorganisationarealreadycoveredbyclimatechangeagreements(CCAs) or the EU Emissions Trading Scheme (EU ETS), it may still be required to participate in the CRC, although the emissions covered by these schemes will not be included in the CRC.

• TheCRCaimstohelptheUKtoreduceitsgreenhousegasemissionsby80%by2050(comparedto1990levels),asrequiredundertheClimateChangeAct2008.

What type of organisations does the CRC apply to?

• TheGovernmentestimatesthattheCRCwillapplytoaround5,000organisationswho were responsible for electricity supplies of 6,000 MWh during the qualification period. These organisations will be primarily those whose annual electricity bills are approximately £500,000 and over.

• Theschemeisalsolikelytoaffectanother20,000organisations,whichwillnothave to participate in the scheme but may still have to provide the Administrator with information about themselves and their energy use.

How the CRC works, including the steps involved in deciding whether your company is covered by the scheme.

Please click on a question for quick navigation or scroll through.

What is the CRC?

What type of organisations does the CRC apply to?

When will the CRC come into force?

How will the CRC work?

Main obligations of participants.

Who regulates the CRC?

How does the CRC apply to different types of organisational structures?

What is the qualification period?

What are the qualification criteria?

What energy supplies is your organisation responsible for?

Assessing which emissions are covered by the CRC.

Penalties.

2. Key Elements of the CRC

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See page 13 for a PLC diagram showing how the phases overlap. This can also be downloaded and printed in A3 format from www.practicallaw.com/5-500-7843

When will the CRC come into force?

• TheCRCwillcomeintoforceon1April2010.

• Theschemeisdividedintosevenphases:

- Phase 1 (the Introductory Phase): 1 April 2010 to 31 March 2013.

- Phase2:1April2011to31March2018.

- Phase 3: 1 April 2016 to 31 March 2023, etc.

• Eachphaseisdividedintocomplianceyears,whichrunfrom1Aprilto31March.There will be some overlap between the end of one phase and the start of the next one.

• TheIntroductoryPhaseconsistsofjustthreecomplianceyears.Subsequentphases will consist of seven compliance years.

How will the CRC work?

A cap and trade scheme, with a twist.

• DuringtheIntroductoryPhase,theGovernmentwillsellanunlimitednumber of allowances at a fixed price of £12 per tonne of CO2.

• Insubsequentphases,theGovernmentwillauctionalimitednumberofallowances annually, to encourage participants to reduce their CO2 emissions.

• ThetypeofcompaniesandotherorganisationsthatarelikelytobecoveredbytheCRC include:

- large retailers, including shopping centres and supermarkets;

- hotel chains;

- large offices, including data centres, banks and law firms;

- jointventures(JVs),privatefinanceinitiatives(PFIs),publicprivatepartnerships(PPPs), franchises and private equity funds;

- utility companies (such as water companies);

- NHS Trusts and hospitals;

- schools and universities;

- Central government departments and local authorities.

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How will the CRC work? (continued)

• Participantswillbuyallowancesbasedonhowmuchtheythinktheywill emit during the relevant compliance year.

• Participantscanalsobuyorsellallowancesfromeachotherinthe secondary market.

• Attheendofeachcomplianceyear,participantswillneedtosurrenderenoughallowances to the Administrator to cover the amount of CO2 they emitted during the relevant compliance year.

• TheGovernmentwillrecycletherevenueraisedfromthefixedpricesale and auction of allowances back to participants after a six-month period.

• Inordertoincentiviseparticipantstoimprovetheirenergyefficiencyyear-on-year, the recycling payments will have a bonus or penalty applied to them, so that those whose energy efficiency improves each year will receive a larger recycling payment and those whose energy efficiency does not improve (or worsens) will receive a smaller recycling payment.

• Thesizeofthebonusorpenaltywillbebasedontheparticipant’sposition in a League Table that the Administrator will publish each year.

• Thebonusorpenaltywillvaryovertime:inthefirstcomplianceyearthat the League Table is published (2011–2012), this will be ±10%, rising to ±50% in the fifth compliance year.

• Allparticipantswillberankedtogether(ratherthanbysector),using three metrics:

- The absolute metric: This measures how a participant’s emissions have changed over the last compliance year as compared to a rolling average of the previous five compliance years.

- The early action metric (the EAM): This measures whether participants have taken voluntary steps prior to the start of the CRC to reduce their CO2 emissions. This metric is determined by two equally-weighted factors: the percentage of a participant’s emissions covered by automatic metering (AMR) and the Carbon Trust Standard (CTS) or a recognised equivalent scheme.

- The growth metric: This measures a participant’s change in emissions relative to its turnover (or expenditure, in the case of public sector participants). This metric is the percentage change in emissions intensity for the current compliance year as compared to a rolling average of the previous five compliance years.

• Eachmetricwillhaveaweighting.Therelativeweightingofthemetricswillchange over the first four years of the scheme. The EAM will only apply during the Introductory Phase.

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Main obligations of participants.

• Submitafootprintreportatthebeginningofeachphase,showingwhich of the organisation’s overall emissions are covered by the CRC.

• SubmitanannualreportinJulyofeachcomplianceyear,showingwhat the organisation’s emissions were during that compliance year.

• Producean“evidencepack”providingsupportinginformationonthefootprintand annual reports.

• BuyandsurrenderenoughallowancestocovertheamountofCO2 emitted by the participant during each compliance year.

Who regulates the CRC?

• TheEnvironmentAgency(EA)hasoverallresponsibilityforadministering the CRC across the UK.

• TheCRCisthenenforcedbythefollowingAdministrators:

- The EA, in England and Wales.

- The Scottish Environment Protection Agency (SEPA), in Scotland.

- TheDepartmentoftheEnvironment(DoENI),inNorthernIreland.

Three key steps to deciding whether an organisation is covered by the CRC.

• Step1:Establishwhatyourorganisationstructureis.

• Step2:Decidewhatelectricitysuppliesyourorganisationisresponsiblefor.

• Step3:Decidewhetheryourorganisationmeetsthequalificationcriteria.

See the PLC flow chart on page 14.

How does the CRC apply to different types of organisational structures?

Where to draw a boundary around your organisation for the purposes of the CRC. In the private sector:

• TheCRCappliestogroupsofcompaniesandothertypesofundertakings,soyou need to establish who is the parent company and what are its subsidiaries. The group will participate together as a single participant, unless it is able to,anddoesdisaggregatelargesubsidiaries(knownas“SignificantGroupUndertakings”(SGUs)).DisaggregatedSGUswillparticipateintheCRCasseparate participants. Each group will have a Primary Member who will liaise with the Administrator on behalf of the group. This will be the Highest Parent Organisation by default.

• TheCRCalsoappliestoJVs,PFIs,PPPsandfranchises.

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• IftheparentcompanyofagroupisbasedoutsidetheUK,butthegroupisresponsible for energy supplies in the UK (for example, through a UK-based subsidiary or office), the group may be covered by the CRC and will have to nominate one of its UK members as a Primary Member.

• Landlordswillbeliablefortheirtenants’emissionsiftheyareresponsibleforsupplying energy to the tenants. The terms of a lease may, or may not, enable landlords to recoup these costs from their tenants.

In the public sector:

• SomepublicsectororganisationshavetoparticipateintheCRCregardlessof whether they meet the qualification criteria (such as central government departments).Thesearecalled“MandatedParticipants”.

• Otherpublicsectororganisations(suchaslocalauthorities)willhavetoparticipate in the CRC only if they meet the qualification criteria.

What is the qualification period?

• Beforethestartofeachphase,thereisaqualificationperiodwithdefined start and end dates. Organisations will need to decide whether they meet the qualification criteria within this period and thus need to participate or not in that phase of the CRC.

• ThequalificationperiodfortheIntroductoryPhaseisthe2008calendaryear.The qualification period for Phase 2 is 1 April 2010 to 31 March 2011.

What are the qualification criteria?

• AnorganisationmustparticipateintheCRCifit:

- has at least one half hourly meter (HHM) settled on the half hourly market; and

- had electricity supplies of 6,000 MWh or more through all of its HHMs during aqualificationperiod(sometimesreferredtoasthe“qualifyingamount”or“qualificationthreshold”).

• Dependingonthepriceyoupayforyourelectricity,thequalifyingamountequates roughly to an electricity bill of around £500,000 a year.

• Smallerorganisationswithlowerelectricityconsumption,whodonotmeet thesecondcriterion,maystillneedtomakean“informationdisclosure” to the Administrator.

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What energy supplies is your organisation responsible for?

• TheGovernmentoriginallysaidthatorganisationswouldonlybeliable for energy supplies if they were the party named on the energy bill (the“counterpartytothesupplycontract”rule).

• Thishassincechangedandorganisationsnowneedtodecidewhois“responsiblefortheenergysupply”,basedonwhetherthesupplyof energy is a direct supply or self-supply.

• However,landlordswillbeliablefortheirtenants’energyconsumptioniftheyare responsible for supplying the energy to the tenants. The terms of a lease may, or may not, enable landlords to recoup these costs from their tenants.

Assessing which emissions are covered by the CRC

• Youfirstneedtoassesstheoverallenergysuppliestoyourorganisationandthendecide which emissions from those supplies are covered by the CRC. This will all be set out in a footprint report, which needs to be submitted once per phase.

• TheCRCdoesnotcoveremissions:

- relating to transport , domestic accommodation or energy consumed outside the UK.

- already covered by CCAs or the EU ETS.

Penalties

• Certainbreachesamounttoacriminaloffence(forexample,makingfalse or misleading statements).

• However,themajorityofbreacheswillresultinacivilpenalty,suchasafine (for example, failing to register for the scheme, failing to submit a footprint report or annual report and failing to surrender enough allowances at the end of a compliance year).

The Standard will also make a positive contribution to our standing in the league table of the Government’s new carbon trading scheme, the Carbon Reduction Commitment (CRC).

Dr Steven Boorman, Director Corporate Responsibility,Royal Mail Group

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...having gained the Standard we will have a higher ranking in the CRC league table. This will definitely reduce costs to our business.

Adrian Swindells, General Manager (Ops), Abbey Corrugated

• Measurehowmuchenergy(electricity,gasandotherfuels)yourorganisationconsumes and translate this into carbon dioxide (CO2) emissions. If you form part of a group, this will mean collating data from across the various parts of your organisation.

• Youmustthensubmitafootprintreportthatwilldeterminewhichofyouremissions are covered by the CRC.

• Reportonyouremissionsinanannualreport.

• Developastrategytoreduceyouremissions.

• FromApril2011,buyenoughallowancestocoveryourorganisation’sannualemissions – which could cost tens or hundreds of thousands of pounds (or more) depending on your emissions.

3. What will I have to do if my organisation has to participate in the CRC?

If your organisation is covered by the CRC, it will need to designate a person – or a team – with responsibility for ensuring compliance with the CRC.

Forexample,thiscouldbeyourfinancedirector,orenergy/environmentmanager,who will need to work with their in-house lawyers and possibly also external counsel and consultants.

Yourfinancedirectorwillalsoneedtoworkwithotherteamsinyourorganisation(for example, your estates and facilities department) to get a more accurate fix on the organisation’s financial exposure to the CRC and to develop appropriate reporting and auditing procedures. Marketing representation can also help establish the impact of participation on an organisation’s reputation

4. Setting up your CRC team

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Broadly,therearethreeareaswhereyoumayneedyourlawyers’input(or,ifyouare a lawyer, where you may be involved in the CRC).

5.1 Organisation structure and boundary

Asmentionedin“Key elements of the CRC”,oneofthekeystepstodecidingwhether your organisation is covered by the CRC is to analyse your organisation structure and decide where to draw the boundary around it for the purposes of the scheme.

The CRC has different implications depending on how your organisation is structured and what its business activities are.

In working out your organisation’s boundary you will need to answer a number of questions, including the following:

• Ifyouarealargegroup,doyouknowhowtoapplytheCompaniesAct2006teststoidentifyyoursubsidiariesincludinganythatarejointventures?

• IfyouhaveSGUsinyourgroup,doyouknowhowtoapplytherulesondisaggregation and do you know what other issues to consider regarding disaggregation?

• Doyouknowwhatcountsforthepurposesofqualificationintermsofthestructureofyourorganisationandwhatdatetoapply?Forexample,intheIntroductory Phase, what counts is how your organisation was structured on31December2008.Ifyouhavegonethroughre-structuringsincethequalificationyear(2008fortheIntroductoryPhase)thenyoumayneed to refer back to what your structure was then.

5. How your lawyer can help you

• DoyouknowhowanychangestoyourorganisationwillimpactonyourregistrationorparticipationintheCRConceaphasehasstarted?YoumayalsobesubjecttotherulesintheCRCorderregardingchangestoorganisations,depending on the exact nature of the changes to the organisation.

Unless you draw the right boundary around your organisation, you are at risk of non-compliance with the scheme and the various offences and civil penalties thisentails.See“What happens if I fail to comply with the CRC?”onpage15.

5.2 Buying, selling and leasing properties and companies after the CRC has started

Youwillalsoneedtoliaisewithyourlawyers(eitheryourin-houseteam or external advisors) regarding the impact of the CRC if you decide to buy or sell a company or buy, sell or lease a property once the CRC has started. They will need to be involved in the due diligence phase and in drafting the relevant corporate and lease documentation.

5.3 Issues for lenders

If you are a lender then you will need to talk to your lawyer about any potential liabilities your organisation might incur if the borrower becomes insolvent.

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1 April 2010 •ThefirstcomplianceyearoftheIntroductory Phase begins. •Organisationsthatmeetthequalificationcriteria

need to register for the scheme between April and September 2010.

1 April 2011 •Thesecondcomplianceyearbegins. •Participantswillneedtopurchaseallowances

to cover their forecast carbon dioxide emissions for the period April 2011 to March 2012.

July 2011 •Eachparticipantmustsubmitafootprintreportfor the Introductory Phase (2010-11) by the last workingdayofJuly.

October 2011 •Thefirst“recyclingpayment”willbemade,returning all the revenue raised from the sale of allowances in April 2011 to the participants.

Keydatesinthefirst18monthsoftheCRCinclude:

6. Key dates and deadlines

Organisations need to act now to ensure they meet their obligations under the CRC. To help simplify their preparations for the CRC, PLC has developed a CRC Survival Kit, which will walk those affected through the compliance process.

Sara Feijao,Head of Environment at legal publisher,Practical Law Company

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Timeline

To download the pdf visit http://www.practicallaw.com/5-500-7843

This timeline explains how the first four Phases overlap.

Forfurtherexplanationof the terms used in this timeline please see the key below, and CRC Energy Efficiency Scheme PLC glossary and abbreviations at http://environment.practicallaw.com/1-501-2573

©CopyrightPracticalLawCompany.Formoreinformationvisit http://environment.practicallaw.com/about/crc-survival-kit

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©PracticalLawPublishingLimited2010.Formoreinformationsee http://environment.practicallaw.com/about/crc-survival-kit

How to work out whether your organisation is covered by the CRC

You will have tocomply with CRC

in some wayYes

Yes

No

No

No

3

Was the electricitysupplied to yourorganisation viaHHM during the

QualificationPeriod between3,000 MWh and

6,000 MWh?

6

Your organisationin not coveredby this Phase of

CRC

You must registeras a Participant

during the firstyear of the

relevant Phase

You must make anInformationDisclosure

during the first year ofthe relevant Phase andyou must report yourconsumption data

You must make anInformationDisclosure

during the first year ofthe relevant Phase butdo not need to report

consumption data

Identify all the HHMthat supplied your

organisation duringthe Qualification

Period. Are any of theHHM settled on the

half hourly market?

2

Yes

2a

Yes

NoIs your organisation

a MandatedParticipant?

(relevant only topublic sector

organisations)

Work out yourelectricity supplies

via HHMduring the

Qualification Period

1Work out the

“boundaries” of yourorganisation

on theQualification Day

for therelevant Phase

4A. Identify suppliesyou are “responsible”for: and

B. Excludeelectricity used fordomesticaccommodation ,transport andconsumedoutside the UK

5Was the electricitysupplied to yourorganisation viaHHM during the

Qualification Period6,000 MWhor greater?

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The CRC includes criminal and civil penalties for non-compliance.

• Youcouldbeprosecutedinthecriminalcourtsifyou:

- FailtocomplywithanenforcementnoticeservedbytheAdministrator.

- Knowingly or recklessly make false or misleading statements on material matters.

- Falsifyyourrecords.

- Obstruct the Administrator.

The key criminal offences are punishable by:

- If convicted in a magistrates’ court: up to three months’ imprisonment and/or a fine not exceeding £50,000).

- If convicted in the Crown Court: up to two years’ imprisonment and/or an unlimited fine.

• Youcouldalsoincurcivilfinancialpenalties.Listedoppositearesome of the main civil penalties:

Failure to register A fine of £5,000, plus an additional fine of £500 per working day of delay, uptoamaximumof80workingdays.(Themaximumfineis£45,000.)

Failure to make an information disclosure A fine of £500 per HHM settled on the half hourly market for which that organisation is responsible.

Failure to provide a footprint report A fine of £5,000, plus an additional fine of £500 per working day, up to a maximum of 40 days. After 40 working days, the total accumulated daily rate fine is doubled. (The maximum fine is £45,000.)

Failure to provide an annual report A fine of £5,000, plus an additional fine of £500 per working day, up to a maximum of 40 days. After 40 working days, the total accumulated daily rate fine is doubled (the maximum fine is £45,000). The CRC emissions for the relevant year will be double those reported in the previous year and the participant will have to acquire and surrender these allowances immediately and their Compliance Account will be blocked until they do so and the participant will be ranked bottom in the League Table.

Failure to surrender sufficient allowances A fine of £40/tCO2 for each tonne of CRC emissions that should have had an allowance surrendered, and the recycling payment will be withheld until the necessary allowances have been surrendered.

In relation to all these breaches, the Administrator will publish information about the non-compliance on the CRC Registry.

7. What happens if I fail to comply with the CRC?

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A director (or a senior manager of equivalent status for organisations that are not companies) will be responsible for signing off on the evidence pack that supports the submissions made in the footprint and annual reports.

As is the case with other environmental legislation, where an offence is committed by a company, the Administrator will also be able to prosecute directors and senior managers, where the offence has been committed with their consent or connivance, or as a result of their neglect.

The Environment Agency anticipates auditing 20% of participants each compliance year.

Organisations will be selected for audits based on a series of risk criteria. The audits will be desk-based initially, although site visits will also take place where necessary.

8. Audits

If you’re a large business or a public sector organisation, the CRC is something you’re going to have to deal with. Fortunately, the Carbon Trust Standard can help as it’s recognised under the CRC. That means that organisations who’ve been awarded the Standard will be better placed on the CRC league table and reduce the cost of compliance.

Tom Delay, CEO, The Carbon Trust

What happens if I fail to comply with the CRC? (continued)

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Organisations that are ranked highly will receive a bonus payment; organisations that are ranked lower will receive a penalty.

9.1 The costs

The main costs involved in participating in the CRC are:

• Theregistrationfee:£950.

• Theannualsubsistencefee:£1,290.

• Thecostofallowances.

• ThecompliancecostofsettingupanaccountintheCRCRegistry(suchastheaccount opening and subsistence fees).

• Internalmanagementandexternalconsultancycostsassociatedwithdatacollection, preparing footprint and annual reports, training, preparing a trading strategy and so on.

The cost of allowances:

• Theactualamountaparticipantwillneedtospendonallowanceswilldepend on how much energy they consume. An allowance represents the right to emit the equivalent of one tonne of CO2 (tCO2).

• Attheendofacomplianceyear,participantswillhavetosurrenderallowancesequivalent to their CRC emissions.

9. How much will the CRC cost?

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Notes:

1. CRC Footprint is the total CRC emissions that the organisation is responsible for.

2. Approximate energy bill shows the approximate energy costs associated with the CRC footprint for each column.

3. Annual allowance cost: This is calculated based on allowances priced at £12/tCO2 in Phase 1 of the CRC.

4. Estimated value at stake: Based on a bonus or penalty rate of +/- 10% in the first year of the CRC (2010-2011), the value at stake between the best and worse recycling payments can be estimated at around 20% of the cost of the allowances purchased. Greater variances can apply where there is a difference between the organisation’s purchased allowance and their reported footprint.

CRC Footprint (tCO2): 5,000 50,000 100,000 (see note 1)

Approximate energy bill: ~ £750k ~ £7.5m ~ £15m (see note 2)

Annual allowance cost: £60k £600k £1.2m (see note 3)

Estimated value at stake 2011: £12k £120k £240k (see note 4)

Gaining the Carbon Trust Standard is also an early action metric for the CRC scheme and will improve the company’s position on the league table.

Mark Oliver, Managing Director, H+H UK Limited

• IntheIntroductoryPhase(April2010-March2103),thecostofallowanceswill be capped at £12/tCO2. However, from Phase 2 onwards, there will be no maximum price for allowances and so the price will fluctuate depending on a rangeoffactors,includingthetotalnumberofallowancestheGovernmentsoldin that compliance year.

TheGovernmentestimatesthattheCRCwillreduceparticipants’energybillscollectively by around £1 billion each year by 2020.

9.2 The value at stake

Theestimatedcostofallowancesfororganisationsofdifferentsizesand the potential value at stake from the bonus/penalty payments in 2011 is illustrated right:

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The Carbon Trust Standard will help ensure the firm is well placed on the CRC league table, which will also illustrate our commitment to reducing carbon emissions.

John Flowers,Property and Facilities Director,Eversheds LLP

10. Take early action – how to capitalise on the opportunities with the Carbon Trust Standard

The CRC aims to reward organisations that reduce their carbon emissions. They can profit from lower energy bills and will receive larger recycling payments based on their position in the League Table.

The first year of the League Table (2010–2011) will be based exclusively on the EAM, which will determine the full bonus/penalty amount that will be paid to participants – rewarding those organisations that have taken early action to reduce their CO2 emissions on a voluntary basis before 2010.

There are two types of early action that are recognised under the CRC:

1. Installation of voluntary AMR.

2. Achieving certification against the Carbon Trust Standard or equivalent.

10.1 The Carbon Trust Standard

The Carbon Trust Standard is an independent voluntary certification scheme that qualifies as an EAM under the CRC.

It is a mark of excellence that publicly recognises organisations that have genuinely reduced their carbon footprint and committed to reducing it year-on-year.

Over 250 organisations have achieved the Carbon Trust Standard – from public sector organisations,suchastheLondonFireBrigade,FifeCouncilandTheUniversityofManchester–tohouseholdnames,suchasB&Q,O2,firstdirectandTesco.

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10.2 Claiming the benefit

To claim the early action benefit, organisations must have a valid Carbon Trust Standard Certificate at the end of the first compliance year of the CRC (31 March 2011) and the other two compliance years in the Introductory Phase (2011–2012 and 2012–2013).

Organisations should contact the Carbon Trust Standard now to ensure there is sufficient time to meet the Carbon Trust Standard criteria should shortfalls in their data be identified.

The Carbon Trust Standard will have the following weightings in the League Table for the Introductory Phase:

•Complianceyear1:50%.

•Complianceyear2:20%.

•Complianceyear3:10%.

To achieve the Carbon Trust Standard, organisations will need to demonstrate that they have:

•Measuredtheircarbonfootprint.

•Achievedareductionintheircarbonemissions.

•Evidenceofgoodcarbonmanagement.

To take action now:

Apply for the Carbon Trust Standard now to help ensure you have a valid certificate in the first year of the CRC.

For more information or to apply for the Carbon Trust Standard, visit

www.carbontruststandard.com or call 0800 019 1443.

Achieving the Carbon Trust Standard demonstrates to our clients, prospective clients, our staff and in general, our market, that we are genuinely committed to reducing our greenhouse gas emissions resulting from our operations.

Mr Alastair Mitchell,Chief Operating Officer UK,Linklaters LLP

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11. What you need to do for the Introductory Phase (2010-2013)

Set up a CRC team comprising representatives from the following internal departments:

• Energy/environment.

• Estates/facilities.

• Finance.

• Legal.

• Procurement.

• Marketing.

Getagoodunderstandingofthestructure of your organisation and its operations, and set up a system to collect and report information on energy supplies and emissions that is accurate and consistent.

Work out if your organisation meets the qualification criteria, and therefore needs to participate in Phase 1 of the CRC.

That is, does your organisation have at least one HHM settled on the half hourly market and did it have electricity supplies of 6,000 MWh or moreviaHHMsin2008?

If you meet the qualification criteria, you will need to register online with the CRC Registry.

As soon as possible. As soon as possible but no later than 1 April 2010 (when the CRC comes into force).

BetweenAprilandSeptember2010.

ACTION By WHENACTION By WHEN

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If your organisation has at least one settled HHM but did not have electricity supplies of 6,000 MWh ormoreviaHHMsin2008,thenitwill not have to participate in the CRC but it will still have to make an information disclosure to the Administrator about its energy use.

Once you have registered, you will need to work out which of your organisation’s overall CO2 emissions will be covered by the CRC and prepare a footprint report.

ForthefirstcomplianceyearoftheIntroductory Phase (2010/11), you will need to submit your annual report at the same time as your footprint report for that phase.

Profit from taking early action:

• ApplyfortheCarbonTrustStandard while you can.

• InstallvoluntaryAMR.

Consider how you will finance the purchase of allowances.

Buyenoughallowancestocoveryour organisation’s forecast CRC emissions for the 2011–2012 compliance year.

BetweenAprilandSeptember2010.

During2010to2011,andinanyevent in time for submitting your organisation’s footprint report and annualreportinJuly2011.

As soon as possible but install AMRs by not later than 31 March 2011.

Within your normal budgeting process for 2011 but before April 2011 when the first sale of allowances takes place.

April 2011.

ACTION By WHEN ACTION By WHEN

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12. Further information

© The Carbon Trust and Practical Law Company Ltd, 2010. All rights reserved.

TheCarbonTrustisfundedbytheUKGovernment.ItisanindependentcompanysetupbytheGovernmenttoacceleratethemovetoalowcarboneconomy.ThisdocumenthasbeenpreparedbytheCarbonTrustStandardinassociationwithPracticalLawCompany.Itisintendedforyour information only and is not a comprehensive guide to the CRC Energy Efficiency Scheme, nor should it be used as a substitute for professional advice. The Carbon Trust Standard has no control over the content in any websites or documentation provided through any links in this document. If you need advice on how to obtain the Carbon Trust Standard, general advice on how to reduce your carbon emissions, or any other information connected with this document, please refer to the relevant contact details provided above.

Practical Law Company – for more information on the CRC or to subscribe to the CRC Survival Kit:Visit: www.practicallaw.com/about/crc-survival-kit

Contact Will Long • william.long@practicallaw.com • 020 7202 9059

The Carbon Trust Standard – for more information or to apply: www.carbontruststandard.com • cts@carbontrust.co.uk • 0800 019 1443

The Carbon Trust – for carbon reduction advice and support:www.carbontrust.co.uk • 0800 085 2005

Finance Directors may also wish to refer to the guide “Profit from early action with the Carbon Trust Standard” and contact the Institute of Chartered Accountants in England and Wales (ICAEW) for more information on CRC accounting.www.icaew.com/corporateresponsibility • sustainability@icaew.com

Department of Energy and Climate Change:www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx

The Environment Agency:Lead UK CRC Administrator, and CRC regulator for England and Waleswww.environment-agency.gov.uk/crc • crchelp@environment-agency.gov.uk

The Scottish Environment Protection Agency (SEPA):CRC regulator for Scotlandwww.sepa.org.uk/climate_change/solutions/carbon_reduction_commitment.aspx

The Department of the Environment in Northern Ireland:CRC regulator for Northern Irelandhttp://www.doeni.gov.uk/index/protect_the_environment/climate_change/crc.htm

CTS

C02

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