The deadline for reporting required under the U.K.’s Carbon Reduction Commitment (CRC) is fast approaching. End of July, to be exact.
But while organizations are in a rush to meet their obligations, it’s important to look over the horizon and understand major changes that are afoot.
HM Treasury launched a consultation late last year, seeking to reform the energy-efficiency tax landscape and associated regulations. This included the country’s CRC and Climate Change Agreements (CCA), but also energy and carbon reporting, including links to the Energy Savings Opportunity Scheme (ESOS).
The main purpose for this consultation was to simplify and rationalize the landscape of business energy-efficiency and carbon-reduction policies.
Main topics of the consultation:
- Develop a single reporting framework, which incorporates the most effective elements from the range of reporting schemes and delivers a significant net reduction in compliance costs associated with reporting through the prism of the ESOS.
- Implement tax and price signals to replace CRC and the Climate Change Levy (CCL), creating a new structure based on the CCL model.
It is not surprising that the main emphasis was placed on supplanting CRC, but little attention has been paid to the fact that the proposed overhaul is much broader, as in the whole of ESOS.
Although the schemes are complementary, there are significant differences: CRC is an annual scheme with obligations to report on all owned electricity and natural gas sources, whereas ESOS requires reporting on all owned and leased energy, including that used for transportation, every four years.
Looking back, however, the first phase of the CRC scheme required companies to report on electricity and gas, along with 27 other fuels. After lengthy and excessive negotiation, it was agreed that the focus of CRC would be narrowed to the two main energy sources. So the treasury’s recommendations might be aimed at getting closer to the original design — having one, more frequent report with additional streams included.
With CRC money effectively being channeled via CCL, moving from a CRC to ESOS-like pattern looks like a game changer. The often used phrase is, “You can’t manage what you don’t measure.” And whereas it’s not 100 percent true for managing qualitative change, it is absolutely the case with energy efficiency and emissions strategies.
The CRC is still in effective until March 2019 with final compliance obligations spanning to October 2019. Meanwhile, the ESOS reporting regime is subject to a new consultation this year. Plus, the process for transposition of the Non-Financial Reporting Directive (NFR) has already begun with a due date of Dec. 6, 2016.
That means it looks like energy and other non-financial reporting are here to stay for the immediate future, with expanding scope and coverage at all levels — from national to international, from compliance to reputational.
Preparing annual CRC returns is the priority, but getting ready for new and revised requirements, starting with NFR in 2017, is essential. Learn from CRC, learn from ESOS. Ask questions early, revisit those energy audits, implement the no- and low-cost recommendations, and build reporting strategies for long-term success.
Contributed by Ekaterina Tsvetkova, Head of Sustainability Consultancy, Energy & Sustainability Services, Schneider Electric