CRC Reform – Energy usage to be reported in financial statements

News of what is to become of the CRC (formerly Carbon Reduction Commitment) Scheme post-2019 has finally arrived, in the form of a new Government consultation from the Department of Business, Energy and Industrial Strategy (BEIS) issued on 12th October 2017*:

  • the obligation to buy allowances to cover energy usage will cease and be replaced by an increase in the rate of the Climate Change Levy (CCL) – a longstanding tax on high energy usage;
  • instead of reporting to the Environment Agency, disclosure of energy usage is proposed to form part of a company’s financial statements.

Disclosure in the accounts is designed to bring to the attention of the Board (and other stakeholders such as potential investors) the potential for cost savings through implementation of energy efficiency measures and thereby to contribute to Government policy in the area of climate change and energy security.

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Environment Agency softens its approach to Energy Savings Opportunity Scheme (ESOS) compliance

The Environment Agency (EA) has published guidance on its approach to enforcement of ESOS (the Enforcement Guidance). ESOS currently requires organisations to undertake energy audits and confirm full compliance to the EA by 5 December 2015. The Enforcement Guidance now allows some flexibility in that the EA will "normally" not take enforcement action where organisations miss the December deadline, provided they are compliant by 29 January 2016. Requirements for organisations consuming less than 40,000kWh per year have also been scaled back. Organisations will still be expected to make genuine efforts to meet the ESOS requirements by 5 December 2015, and must inform the EA by that date if they are unable to do so.  This bulletin provides a summary and for more information, the Herbert Smith Freehills guide to ESOS is available here.

1. EA reacting to growing concerns about compliance with ESOS

2. Whilst the guidance clarifies the EA's likely approach it is not an extension of time

3. Guidance deals with more than just deadlines

4. Also of note

5. Further information

 

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Government consults on business energy efficiency measures, including possible abolition of the CRC

The Government has launched a major consultation on the energy reporting and taxation regime for UK businesses. The consultation recognises that at present there are a number of overlapping energy efficiency schemes in force. This has created a high degree of complexity and potentially does not incentivise behaviours as intended. The Government is therefore considering reform to simplify regulation and meet EU 2020 environmental targets through encouraging investment in energy efficiency and low-carbon alternatives. Notably the proposals include replacing the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) and Climate Change Levy (CCL) in favour of a single business energy consumption tax (based on the current CCL) and a single reporting framework. The consultation appears to set the tone for extensive future engagement in this area rather than setting out any definitive conclusions. This may present businesses with an opportunity to influence the future direction of policy.

 

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