The end of CRC reporting. What will it mean to the current CRC participants?

July 2019 will be the final reporting deadline for CRC Phase 2 and we already know that the fiscal element of this scheme is due to be replaced by an increased Climate Change Levy (CCL) rate. But what does this mean for those who have been participating in CRC since it started in 2010, both financially and in terms of how the incentive for energy and carbon saving projects is affected?

Firstly, the financial impact.

Let’s consider a couple of example buildings for a fictional organisation that has participated in CRC.

Table 1: Example annual consumption and charges under CRC and CCL 2018 and 2019 rates

kWhTonnes CO2CRC Cost*CCL cost
(from 1 April 2018)
New CCL cost
(from 1 April 2018)
Difference in CCL
Building AElec
1,000,000
381
£6,972.30
£5,830
£8,470
£2,640
Gas
250,000
45
£823.50
£507.50
£847.50
£340
Building BElec
300,000
114
£2,086.20
£1,749
£2,541
£792
Gas
425,000
78
£1,427.40
£862.75
£1,440.75
£578
Total
1,975,000
618
£11,309.40
£8,949.25
£13,299.25
£4,350

The compliance cost for the final year of CRC (2018-19) has been used for these calculations – £18.30 per tonne.

The table above shows that for just two buildings a saving of around £11,300 will be made in terms of CRC compliance costs after 2019, with a relative increase of £4,350 in Climate Change Levy. Therefore, overall the organisation is £6,950 better off. This demonstrates that current participants in CRC are likely to see a significant saving in the ‘carbon tax’ being applied to their operations, especially as CRC participants have many more buildings than just the two examples shown here.

In addition, an administrative burden is also being relieved by no longer having to compile and audit the data ready for reporting and submission.

So, what about the impact on incentive for energy saving projects?

The potential benefit of a CRC type obligation is to raise the profile of carbon emissions on the agenda of an organisation and give it a financial value that can assist in the business case for implementing carbon reduction and energy saving plans.

An organisation may well see the lapse of CRC positively given the cost and time taken to participate is no longer in place. But, as an energy management professional, we can also see that this shift creates an ideal opportunity to push forward the pursuit of energy management projects. The budgeting for CRC costs has been in place for eight years and organisations are used to this extra cost. Therefore, why not make a case for this money to be redirected towards energy saving projects once the CRC burden is no longer in effect?

My advice would be if you use this newly available time and money effectively and it may be possible to negate the effect of the CCL increase and leave your organisation in an even better position, both financially and in terms of its carbon footprint.

For guidance about the transition from CRC reporting to CCL and how to invest in energy savings projects, contact us.

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Posted by TEAM on 24 October 2018
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