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Carbon reduction scheme

19 November 2009

On 1 April 2010 a mandatory emissions trading scheme known as Carbon Reduction Commitment comes into force. The CRC is designed to encourage businesses to reduce their carbon footprint.

It will apply to approximately 5,000 businesses and organisations in the public and private sector, primarily those with an annual electricity bill of more than £500,000. Around 15,000-20,000 more businesses will be required to disclose information, with civil or criminal penalties for those who fail to comply.

Each year, the government will auction allowances for businesses to trade with each other. Each business must buy sufficient allowances to cover the equivalent amount of carbon dioxide it produces. After three years, the government will limit the number of allowances, thereby encouraging energy efficiency. During the year from 1 April 2010, businesses will have to report their carbon dioxide emissions, thereafter allowances must be purchased.

The final CRC order will set out rules establishing who has to comply based on direct, indirect and self supply, but this may not be the business whose name is on the energy supply contract. The business that has to comply with the CRC is the one that receives the energy supply. So for example, if the landlord receives the energy supply but provides some of that to the tenant, the landlord will need to comply with the CRC.

Landlords and tenants may need to make provision in their leases for CRC allowances and credits. There is further guidance on the Environment Agency’s website.

If you need clear and pragmatic legal advice, we’re here to help so please get in touch.

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Nigel Whittaker BA (Hons)
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