What will replace the CRC Energy Efficiency Scheme, and when?

To download Carbon Credentials Response to the Streamlined Energy & Carbon Reporting (SECR) Consultation scroll to the bottom of the article.

CRC participants are well aware that the CRC Energy Efficiency Scheme is closing. Businesses will be required to submit their last CRC report by July 2019 and to surrender allowances for the final time in October 2019. Allowances will be replaced by an increase in CCL from April 2019.

These changes were announced in the 2016 spring budget. The government wants to end the complex, bureaucratic and costly scheme and streamline the business energy tax landscape, by moving to a system where businesses are only charged one energy tax administered by suppliers, the CCL.

However, the majority of respondents to the 2016 public consultation “Reforming the business energy efficiency tax landscape” supported replacing CRC reporting with another mandatory streamlined reporting framework in April 2019. Respondents agreed that mandatory reporting drives the uptake of low carbon and energy efficiency measures and that board or senior level sign-off delivered greater benefits than a voluntary approach. There was support for the principle that participation in any new reporting framework should be based on company size and that qualification should be compatible with the Energy Savings Opportunity Scheme (ESOS). Respondents also supported continuing the reporting of global greenhouse gas (GHG) emissions in company accounts by listed companies. Responses highlighted the benefit of a transparent and comparable approach, based on consistent metrics as well as reputational and competitive drivers.

Given the agreement that CRC reporting should be replaced, the government proposed to consult in 2016 on a simplified energy and carbon reporting framework (SECR). However, this consultation was delayed by the referendum and general election until the end of 2017, leaving little time for new legislation to be in place by 2019.

What are the proposals to replace CRC reporting and, given the delay in the consultation, when are the new requirements likely to come into force?

The government’s review of energy and carbon reporting policy

The SECR consultation is the second part of the government’s review of energy and carbon reporting policy, and deals with the details of the new reporting framework proposed in the energy efficiency taxation review in 2015.

The SECR consultation was far reaching, asking for views on the following matters:

  • Mandatory annual reporting and disclosure of energy and carbon information through Company Accounts
  • Who these requirements should apply to
  • Reporting of cost-effective energy efficiency opportunities, such as those identified through ESOS audits, and action on these
  • Complementary disclosures
  • Electronic reporting

The SECR consultation does not apply to higher education or the public sector. The government proposes voluntary carbon emissions reporting and reporting mechanism and energy efficiency measures are supported by the loans scheme administered by Salix Finance (see our blog of 4 December 2017 for details).

Carbon Credentials’ position

Carbon Credentials welcomes this comprehensive review of energy reporting policy. We firmly believe that the foundation of both mandatory reporting and energy performance is accurate and verified energy data, presented to provide meaningful business intelligence.

Our position on the SECR proposals is:

  • We agree that businesses need a simplified reporting framework.
  • Reporting by unquoted companies should align with the mandatory GHG reporting provisions by quoted companies.
  • Large unquoted companies should report energy and carbon through their annual reports.
  • From 2019 energy and carbon reporting to Companies House should be electronic and the government should collate and publish energy and carbon data.
  • The policy should apply to all ‘large’ companies based on employee numbers and financial tests.
  • Reporting requirements within the Companies Act regime also apply to Limited Liability Partnerships (LLPs).
  • UK quoted companies should continue, or start to report, on the following:

a)      global Scope 1 and 2 GHG emissions, b)  an intensity metric, c)  start to report on global total energy use.

  • UK unquoted companies in scope should report on the following:

a)      total UK energy use, b)  Scope 1 and 2 GHG emissions associated with UK use, c) intensity metric.

  • The government should not mandate specific intensity metrics by sector, but propose best practice and guidance.
  • It should be mandatory for quoted and unquoted companies to disclose their actions to improve energy savings.
  • In the long-term the TCFD (Task Force on Climate Related Financial Disclosures) recommendation that companies consider the potential financial impact of climate change should become a mandatory disclosure within companies’ annual reports.
  • Financial and risk managers need clear guidance from the government to help them understand climate risks and the implications to their business.
  • Complementary policies should include mandating target setting and reporting evidence of performance improvements, as these would add most value for businesses, the market, and other stakeholders.
  • A dedicated administrator would be beneficial to ensure that the new regulations are applied rigorously

Download our more detailed response below.

Next steps: will SECR come into force in April 2019?

BEIS is currently analysing the responses to the consultation to help develop and finalise the new reporting framework. At the time of writing, no date has been set to publish the responses.

It seems unlikely that there is sufficient time for a new regulation to go through all the necessary stages before becoming law in just 14 months when there is considerable pressure on ministers’ time. In addition, the government recognises that it needs to give as much advance notice as possible to stakeholders of the changes, including new qualification criteria. In our view, SECR reporting will come into force in 2020, at the earliest.

The final year of CRC coincides with the end of Phase 2 of the scheme, and the end date is unlikely to change. 2019 promises to be a busy reporting year for some organisations. Not only will they be submitting their last CRC reports, the deadline for ESOS Phase 2 compliance is 5 December 2019. Qualifying companies will have little time to prepare for SECR reporting, if the new scheme commences in April 2019.

Large unquoted companies and limited liability partnerships currently collecting and reporting their annual energy data for CRC are advised to continue doing so after March 2019, so that they already have processes up and running when SECR reporting starts, whenever that may be.

Carbon Credentials has supported participants in mandatory and voluntary energy and carbon reporting since 2010. We have engaged with government to publicise new energy regulation initiatives through our workshops and events, particularly the Energy Efficiency Tax Review consultation in 2015 and the SECR consultation in 2017.

Download Carbon Credentials Response to the Streamlined Energy & Carbon Reporting (SECR) Consultation

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