Last edited 21 Apr 2021

CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme was introduced in 2008 as the 'Carbon Reduction Commitment' (CRC). The Scheme itself began in April 2010 with the introduction of the CRC Energy Efficiency Scheme Order 2010. It forms part of the UK's commitment to reduce greenhouse gas emissions by at least 80% from 1990 levels by 2050.

The Scheme is slowly being phased in throughout the UK, and in England and Wales is being administered by the Environment Agency.

The Scheme aims to encourage energy efficiency and a reduction in carbon dioxide emissions in large public and private sector organisations. It does this by introducing financial and reputational incentives.

The Scheme covers large non-energy-intensive organisations within the UK's public and private sector such as:

These large non-energy-intensive organisations account for about 10 per cent of the UK’s carbon dioxide emissions.

The Scheme does not cover energy-intensive businesses such as power generation, cement, glass, pulp and paper industries which are already covered by other forms of emissions trading and climate change levy schemes.

Qualification for the scheme is based on the amount of electricity consumed by an organisation. Organisations that had at least one half hour meter in 2008 were required to make an information disclosure in 2010. Organisations with at least one half hour meter and whose electricity consumption was at least 6,000 MWh in 2008 are required to participate fully in the scheme.

Where businesses are part of a larger organisation, they must take part in the scheme together under their highest parent organisation.

Participating organisations are required to monitor and report their energy use each year and to purchase allowances equal to their annual emissions in tonnes of CO2 during each compliance year from 2011/12 onwards.

The total allowances cost for each year is calculated by multiplying by the quantity of CO2 emissions in tonnes, as submitted in the organisations annual report, by the cost per allowance set by HM Treasury. For 2011/12 and 2012/13, this will be £12 per tonne.

From 2013/14 it is intended that the total number of allowances will be capped, and that rather than being sold at a fixed price, allowances will be auctioned.

The scheme was originally intended to be revenue-neutral, meaning that all the money raised from selling allowances would be distributed back to participants, with the highest-ranking organisations in the league table receiving larger distributions. However in 2010, the government decided instead to retain the revenues generated. This resulted in considerable lobbying against the scheme, and a result, a consultation process is now underway to try to consider how the scheme might be simplified.

In the 2016 budget, it was announced the Carbon Reduction Commitment energy efficiency

scheme would be abolished and replaced, in a revenue neutral way, with an increase in the Climate Change Levy from 2019. This it was said was because the scheme had been 'bureaucratic and burdensome'.