The Carbon Reduction Commitment (CRC) is a new legally binding climate change and energy saving scheme in the United Kingdom, applicable to large non energy-intensive organisations in the public and private sectors. It is the UK’s first mandatory carbon trading scheme and will have a significant impact on carbon emission reductions for participating organisations.
The commitment to implement CRC was announced in the 2007 Energy White Paper, following consultation on measures to best secure cost-effective carbon savings from large non-energy intensive business and public sector organisations. You can view the letter sent by the UK Government to Chief Executives and equivalents of various companies here.
The scheme is scheduled to start in April 2010 with a three year introductory phase.
 
CRC Coverage:
 The scheme is applicable to large organisations using more than 6,000 MWh/year of half hourly metered electricity. This translates to an electricity bill of approximately £500,000 and above and is aimed at encouraging large organisations to reduce their fixed source energy consumption.
This scheme will cover approximately 5,000 organisations ranging from retailers, banks to universities and local authorities. Please refer to this link for further details on the organisational structure of CRC and emission responsibility as published by DEFRA.
 
Implementation:
Organisations falling within the scope of this new legislation will have to firstly measure and record energy use and calculate their carbon emissions accordingly. They then have to start buying carbon allowances at the start of each compliance year via auctions or through fixed price sale during the introductory phase to cover their emissions; the resulting revenue generated will be redistributed amongst the participating organisations depending on their position within the CRC league table.
The league table will be the main driver to simulate energy efficiency amongst the scheme’s participants since this brings brand reputation and management’s attention into focus. It will be published every year and will be based on an absolute metric, a growth metric and an early action metric to gauge energy savings achievements. Further details on the league table metrics can be found here. CO2Benchmark.com enables companies today to get a head start when it comes to assessing their relative position in their sector. Benchmarking emissions will now have financial implications.
 
Resources for Participants:
Participating organisations can benefit from the scheme by reducing their carbon emissions, thus earning profit by finishing in the upper part of the CRC table and acquire prestige and positive media attention in the process. This will also be applicable to companies already investing in renewable resources since green electricity does not count as zero carbon in the CRC scheme. Indeed electricity suppliers have already been incentivised to pursue renewable energy sources.
A detailed timeline on the execution and implementation of the CRC scheme can be found here as published by DEFRA.
Further details on the CRC, ideal strategies and other benefits can be viewed here.
Given the cash flow implications of the scheme, it is essential for those organisations coming within scope to prepare and budget for CRC compliance. CRC carries not only an energy price tag but also a reputational price.