(with thanks to EAUC for providing this news item)

The Department of Energy & Climate Change (DECC) have recently published their proposals for the simplification of the Climate Reduction Commitment (CRC) Energy Efficiency scheme.

The scheme has been criticised by many for its complexity, and as a result, the Government committed itself to simplifying the CRC and published a number of discussion papers earlier this year. DECC has now summarised the proposals for a simplified scheme, intended to be applied from Phase 2 (2013) onwards.

The most significant proposals include:

• Making the qualification process easier: Under the original scheme, qualification of organisations was based on two criteria: (i) the presence of one or more settled half hourly meters; and (ii) a total electricity of at least 6,000MWh measured to such meters. Under the simplified scheme, participants will just have to prove they use a certain amount of electricity from the qualifying meter. Whether this will differ, in practice, from the original rule is currently unknown.
• Reduce the number of fuels covered by the scheme: Currently participants are required to report on their energy supplies from a list of 29 fuels. DECC now proposes to reduce this number to four: electricity, gas, kerosene, and diesel (and the latter two, where used for heating purposes).
• Move to fix price allowance sale: The initial scheme provided for an allowance auction from Phase 2 onward. The number of allowances would have been capped following the auction, with an option to purchase additional allowances on the secondary market. Current proposals, however, would establish two sales per year, with a fix price for allowances. This removes the need for businesses to come up with auctioning strategies, although it is unsure whether there will still be room for a secondary market and how this market evolve.
• Simplifying organisational rules: Previously, participation was based on highest parent company. This caused problems to many business structures, particularly private equity and other investment funds, as it did not reflect their natural structure or processes of these organisations. Under the simplified scheme, although qualification would be maintained at highest parent company, organisations will be permitted to participate as “natural business units”. What will be considered as a natural business unit is not defined in the proposals.
• Removing overlaps between the CRC scheme and other schemes: Any organisations or sites covered by a Climate Change Agreement or the EU Emissions Trading Scheme will be automatically exempt of the CRC.

Despite numerous calls from stakeholders, DECC has decided against changes made to rules dictating the landlord and tenant relationship under the scheme.

Following this review, the Government now intends to publish draft legislative proposals in early 2012 for formal public consultation.

To view the full proposals, click here.