The rules will instead be simplified, the Government's Next Steps paper has confirmed. Administrative burdens and overlaps with other schemes will be reduced and greater certainty for business introduced.
The proposals will provide business with "greater flexibility" while "reducing the administrative burden", said Greg Barker, Minister for Energy and Climate Change, in a written statement.
"I believe the principle of the scheme is right, which is why I am proposing to make the CRC simpler while still protecting its strong environmental integrity to cut emissions in large organisations and business," he said.
The proposed changes mean that participants will only need to report on their use of electricity and gas, as well as kerosene and diesel where these are used for heating, rather than the 29 fuels covered by the CRC at present.
The new rules will aim to make it easier for corporate groups to participate in the CRC, without forcing them into structures that do not reflect the way their natural business structure. The current rules for qualification will be retained and participants will have to notify the Environment Agency of their overall structure at the beginning of each phase of the CRC.
After this, however, participants but will now be able to 'disaggregate', or split, the group into separate CRC participants in a way that better reflects the group's "natural business units". Presently, disaggregation is only possible if each unit would still qualify as a CRC participant in its own right as a Significant Group Undertaking.
Reputational incentives are to be retained under the new plans and the first Performance League Table will be published in October 2011 as originally planned. However, reputational elements of the league table may be revised in light of evidence gathered from the early operation of the CRC.
Once again, however, the Government has confirmed that the revenue from the sale of carbon allowances will not be recycled back to participants – echoing the decision made in last year's Budget. Despite the recycling payment having been abandoned, companies that meet their emissions targets will still be able to sell off surplus allowances on the secondary market.
The rules for trusts will be revised so that only the entity that has a genuine commercial interest in the property and with access to the resources necessary to reduce emissions will be responsible for compliance with the CRC.
The Government intends to abandon auctioning of carbon allowances in Phase 2 of the CRC, and will instead introduce two fixed-price sales. Retrospective sales of allowances will continue throughout the remainder of the introductory phase of the CRC with the first sale taking place in 2012, as previously announced. From the start of Phase 2, two fixed price sales per year will remove the need to develop auction strategies with the added benefit of price certainty. The first sale will be a cheaper forecast or 'forward' sale at the beginning of the year and the second a retrospective sale of more expensive allowances at the end of each year.
The Government believes this will grant greater flexibility to participating companies, whether by forecasting energy use at the start of each compliance year to take advantage of cheaper allowances or, if preferred, opting to buy what they need to comply in the retrospective sale.
No changes will be made to the current landlord and tenant rules. Landlords will remain responsible for supplies of energy to their tenants. Tenants are responsible if they arrange and receive the supplies themselves.
The rules will be changed in relation to the EU Emissions Trading Scheme (EU ETS) and Climate Change Agreements (CCAs). There will be no need to participate in the CRC id a site is covered by either the EU ETS or a CCA.
Interested parties have until 2 September 2011 to comment on the proposals. The DECC will then formally draft legislation to amend the CRC, anticipated to come into force in April 2013.
The CRC is a mandatory scheme aimed at improving energy efficiency and cutting CO2 emissions in large public and private sector organisations not currently covered by the EU ETS. Organisations caught by the CRC have to measure and report their emissions, which are mostly the result of gas and electricity use, and then pay £12 per tonne of CO2 they produce.
