ENERGY THE CRC - HOW MUCH ARE THE CO
SIMPLIFICATION PROPOSALS REDUCE T The Department of Energy and Climate Change (DECC) recently issued a consultation on
proposals to simplify the scheme without significant losses of CO2
emissions
covered. Proposals include reducing fuel type reporting requirements and reducing the need for trading allowances.
proposals to simplify the CRC Energy Efficiency Scheme (CRC). The idea is to reduce the cost of compliance and allow participants to focus better on energy saving. But will they achieve this? Jon Gorrie, Director Public Sector, KPMG ELLP and Ben Wielgus, Lead CRC Advisor, KPMG ELLP
he CRC has impacted on many public sector organisations including local councils, hospitals, universities, police forces and central government departments. It was introduced to drive emissions reductions through financial and reputational incentives. All participants had to submit their first footprint and annual reports by the end of July 2011. In November 2011 the first CRC league table was published. Whilst not picked up on by the mainstream media, the league table did feature across many articles in the trade and specialist press. In March this year DECC issued their consultation proposals.
T
All of this activity has been set against a background of increasing stakeholder interest in how business and the public sector are preparing for significant increases in the cost of energy and global discussions on the future of carbon reporting. DECC’s consultation is being undertaken as a result of stakeholder feedback and the Government’s stated intention to review the operation and design of the CRC with a view to simplifying it and substantially reducing the associated administration burden. The consultation document sets out specific
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To support DECC in developing its simplification proposals we conducted a survey for them on the administrative costs of the CRC. This involved an electronic survey of all 2,779 CRC participants followed up by a series of interviews to better understand the administrative costs incurred by CRC participants to date. The results of this survey replace the original cost estimates of the scheme which are now outdated. More granular data on the administrative burden of CRC compliance activities has helped DECC to estimate the cost impacts of the simplification proposals. We received more than 700 responses
to the survey, many of these from public sector organisations. Many respondents wanted to share with DECC their view that the CRC has proved to be more administratively complex than originally intended.
Our report to DECC on the
administrative costs is available alongside their proposals and impact assessment. Complying with the CRC undoubtedly comes at a cost. The survey we conducted on behalf of DECC suggested total administrative costs of £97 million across all 2,779 participants in year one and £172m for all of phase one (four years).
PUBLIC SECTOR SUSTAINABILITY • VOLUME 2 ISSUE 4 This means that on average
participants are paying £15,500 a year for administrative costs of the scheme over the whole four year phase (although this varies significantly between sectors, structures and sizes of participants) and it adds about 5 percent to the cost of carbon for an average participants. We expect, however, these costs will drop as participants become more efficient at complying with the scheme and responsibility for compliance becomes more automated, with better data quality from energy companies and more junior staff taking on responsibility for compliance. Adding the costs for allowances and administration of the scheme to the predicted energy savings made as a direct result of the CRC, the scheme will be a net cost to the participants.
But CRC or no CRC, the Chancellor has announced that the cost of carbon is here to stay, whether as part of the scheme or as a new environmental tax. Given that the administrative costs of the CRC are actually less than half of the energy savings DECC estimate will be encouraged as a result of the scheme creating, we believe that those organisations who really focus on driving energy efficiency as a result of
This means an estimated average administrative cost per participant of £35,000 for year one and £62,000 for phase one, broken down into their constituent parts in the chart below:
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