FOCUS CARBON COMMITMENT
Issue 13, Dec 10/Jan 11
THE GREAT CARBON COMMITMENT
From growing energy demands to legal implications, two of our London speakers present their views on the CRC ‘tax’, and what it means for the data center industry
Scheme has been a hot topic. (If you are a regular reader of FOCUS, you will already know this).
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The rest of the world is also keeping a close eye on what happens with the new ‘carbon tax’, as it has been called, seeing as the UK Government is one of the first to introduce set guidelines on how carbon emissions will be managed. And more governments, in future, are sure to follow.
The business sector in the UK is still somewhat in the dark about how far reaching the CRC will be, especially when it comes to the complexities of the data center industry. And it could be said government is no clearer.
t was no surprise to see the halls filled when speakers presented talks on the Carbon Reduction Commitment (CRC) at DatacenterDynamic’s London conference in November. The UK Government’s Carbon Reduction Commitment Energy Efficiency
Late November, UK Energy Secretary Chris Huhne said he is trying to delay the second phase of the CRC to iron out concerns the wider business sector might have. The CRC, when it was launched in April this 2010, stated that businesses which come under the scheme – which include data center operators – must register and start monitoring and recording carbon emissions. (If you want to know more about the CRC itself, read our research on page 54). The second phase will be the capping of participant’s emissions and the trading of carbon permits.
In this edition we asked two of our London speakers to write about their view on the CRC, how it will affect the data center industry and why the government needs it in the first place. Mark Bailey explains what is known from a legal viewpoint and Andrew Jones looks at it from the side of energy provision, with a warning that even without the CRC, the industry could still have challenging times ahead provisioning power.
What will become of the CRC? Mark Bailey, Intellect development forum member and Partner at Speechley Bircham
The UK Government has significantly altered the CRC Energy Efficiency Scheme by announcing in the UK Spending Review 2010 that revenue from the scheme will not be recycled to participants. Instead, payments from the sale of allowances under the scheme will be collected by the Treasury.
The scheme was initially designed to be a ‘cap and trade’ scheme, where payments from the sale of allowances would be recycled to energy efficient (relatively speaking) participants of the scheme. This performance would be measured in a league table.
The Government’s statement was simple. “The CRC Energy
Efficiency Scheme will be simplified to reduce the burden on business, with the first allowance sales for 2001-12 emissions now taking place in 2012 rather than 2011. Revenues from allowance sales totalling £1bn a year by 2014-15 will be used to support the public finances, including spending on the environment, rather than recycled to participants. Further decisions on allowance sales are a matter for the Budget process.”
WHAT DOES THE SPENDING REVIEW CHANGE? Under the original scheme, the sale of allowances for each scheme year was to take place in April each year. In later stages of the scheme, a secondary energy market was envisaged which would allow participants to purchase allowances on secondary markets.
The precise effect of the changes is not clear, although the Exchequer will raise £715m in 2011-12 anticipated to rise to £1020m in 2014.
The first allowance sales for the year 2011-12 will be in 2012 and therefore retrospective.
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The Government has indicated in a consultation paper issued on 17 November that the first sale of allowances will be delayed to April 2012 for 2011/12.
It is still not clear if further allowance sales will
be retrospective. The introductory phase of the scheme is likely to be extended by one year to March 2014.
THE CONSEQUENCES FOR DATA CENTRE INDUSTRY Every legislation has unintended consequences. These are particularly pronounced for the data centre industry. Data centers are a complex environment where often the ownership of the IT equipment in the data center is separate from the ownership of the infrastructure. This limits the ability for one or other party to fully control energy efficiency.
It is possible that non-latency-critical services could migrate offshore to more price competitive markets. This would depend on what capacity is available in the market – what is available where – and could also heighten focus on other factors such as the availability of secure power.
Moving offshore may initially seem attractive, but all participating countries in the Kyoto Protocol are required to make significant savings by 2020 so measures will have to be taken worldwide. Legal issues such as information security, data protection and the need for companies to keep their IT infrastructure under control will increase.
EFFECT ON LEAGUE TABLE
The league table (introduced to highlight participants that show reductions in carbon emissions, which originally placed financial rewards back in the hands of winners) now becomes a more simple indication of power consumption. While there may be some benefit in analyzing the relative position of data centre providers in the league continued . . .
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