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Carbon Reduction Commitment AEA is the Government adviser contracted to develop the CRC scheme

Carbon Reduction Commitment AEA is the Government adviser contracted to develop the CRC scheme. A world leading energy and climate change consultancy. Stephen Boyle , Principal Consultant, Climate Change and Policy 1 st June 2009. About AEA.

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Carbon Reduction Commitment AEA is the Government adviser contracted to develop the CRC scheme

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  1. Carbon Reduction Commitment AEA is the Government adviser contracted to develop the CRC scheme A world leadingenergy and climatechange consultancy Stephen Boyle, Principal Consultant, Climate Change and Policy 1st June 2009

  2. About AEA • Global business supporting public and private sectors • Energy and climate change • Air and water quality • Risk management and due diligence • Resource efficiency • Sustainable transport • Innovation and knowledge transfer • Sustainability • Information technology and environmental management AEA is supportingDECC as it developsthe regulations for CRC

  3. What is the CRC? • Mandatory auction-based emissions trading • Enabling powers Climate Change Bill • Public and private sector • Covers all non-transport energy emissions • Applies at highest UK parent organisation • Requires participants to monitor energy use and trade emissions allowances • Starts in April 2010 but preparation starts now

  4. No You are not covered Yes Declare qualification status April – Sept 2010 Declare exemption By 31st July 2011 Qualification Process No Mandatory half hourly metered (HHM) electricity? You are not covered - Yes Total HHM electricity use > 6000MWh/year? You are covered But do you qualify for CCA exemption?

  5. What’s covered • All energy consumed for non-transport purposes • Electricity • Gas • Oil, diesel etc Core sources CCA emissions Based on emissions in the period April 2010 to March 2011 Reported by 31st July 2011 Non-core sources EUETS emissions

  6. Annual reporting • Financial year compliance cycle • Purchase Allowances for the year • Evidence pack and source list • Report emissions by end July after the year end and surrender allowances • Audit not verification • Rules for renewable generation, export of power from own generation, heat from CHP

  7. Sales and recycling April 2010 April 2011 April 2012 April 2013 Scheme starts First sale (double) Second sale (single) First auction (single) First recycle (double) Second recycle (single) Capped phase (auctions) Introductory phase (£12/t sales)

  8. Stirling’s value at risk • Stirling’s 2007/08 Energy usage kWh kgCO2 • Electricity 19,142,427 10,279,484 • Gas 31,577,573 5,841,851 • Oil 1,616,065 430,070 • Renewable 0 0 • Others 0 0 • Total 52,336,065 16,551.405 • Stirling’s CRC Auctioning Revenue for the fixed price phase • 10/11 – 16,552 number of allowances at £12/CO2 - £198,624 – ±10% - VAR £39,725 • 11/12 – 16,552 number of allowances at £12/CO2 - £198,624 – ±10% - VAR £39,725 • 12/13 – 16,552 number of allowances at £12/CO2 - £198,624 – ±20% - VAR £79,450 • Stirling’s CRC Auctioning Revenue for the following 3 years (at 2.6% GDP*) • 13/14 – 16,552 number of allowances at £12.30/CO2 - £203,590 – ±30% - VAR £121,154 • 14/15 – 16,552 number of allowances at £12.60/CO2 - £208,555 – ±40% - VAR £166,844 • 15/16 – 16,552 number of allowances at £13.00/CO2 - £215,176 – ±50% - VAR £215,176 • Total Value at Risk for Stirling over 3 year fixed price period £158,900 *HM Treasury Mid-Term Forecast Report Feb 2009

  9. Early action, prior to April 2011 Percentage emissions reduction - absolute Percentage reduction in emissions/turnover - growth Performance is assessed against a 5 year rolling average The league table 60% 50% 40% Max bonus/penalty 30% 20% 10% 0% 2010 2011 2012 2013 2014 Year (starting April) (Double recycle) Early action Growth metric Absolute emissions

  10. Recycle payments • Each participant’s share of emissions in 2010/11 multiplied by total recycle pot each year 1 Base payment • Annual assessment against metrics – your score • Ranking of all participants – the league table • Bonus/penalty 2 League table bonus/penalty 3 Adjustment factor • Ensure sum of recycles equals total pot

  11. In summary - what to do and when 01/08 07/08 01/09 07/09 01/10 07/10 01/11 07/11 01/12 07/12 Registration HH Electricity Preliminary Report All energy EUETS, CCA Annual emissions, turnover, early action Annual compliance Annual emissions, turnover Emission period Reporting period Key

  12. Key features • Compliance preparation • Registration • 2010/11 footprint data (2010/11 will be base element for recycle payments) • Annual compliance • League table • Metrics and emissions performance • Carbon Trust standard and automatic meter reading • Recycle payments and reputational impacts • Landlord / tenant responsibilities • Trading strategy and cash flow implications

  13. You should produce a detailed compliance action plan Milestones Data requirements Responsibilities Assess your readiness for scheme compliance Building on carbon targets Actions to overcome shortfalls Evidence pack requirements Confirm additional sources position AEA could support your formal submissions process Compliance preparation

  14. Review significance Emissions within landlord’s responsibility Significance Risk of pass-through / lease strategy Landlords and tenants Responsibility for emissions will lie with the counter party to the energy supply contract

  15. A successful trading strategy Understand your abatement options Forecast your business as usual emissions Understand how the sale/auction will work Recognise the risks Others will be bidding in the auction so you may not get what you want The alternative to the sale is the secondary market/safety valve

  16. A proactive approach to the CRC will reap greater rewards than a simple compliance outlook Your approach to CRC • The scheme has many opportunities to win or lose: • League table – good emissions performance • League table – early action metrics • Landlord and tenant arrangements • Non-core sources • Successful trading strategy

  17. Work out your organisation structure Know your emissions exposure Understand your compliance obligations Make sure your systems are in place to gather and manage data and forecast emissions Understand your abatement opportunities Take a proactive approach to the opportunities the scheme presents Preparing for the CRC - Summary

  18. Carbon Reduction Commitment Stephen Boyle, Principal Consultant, Climate Change and Policy 0870 190 6804, Stephen.Boyle@aeat.co.uk 1st June 2009

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