1. THE CARBON REDUCTION COMMITMENT
ENERGY EFFICIENCY SCHEME REP
NOW ORT
SAL ON
E
How companies cut carbon, save
money and meet legal compliance
2nd edition, June 2010
Ethical Corporation
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www.ethicalcorp.com/crc

2. COMPLIMENTARY REPORT SUMMARY
What you are getting
Receive an independent analysis and critical look at the UK’s new regulation mandating companies
to measure and report their greenhouse gas emissions.
Hear the opinions and compliance strategies of professionals from over 20 companies interviewed for this
brand new, 2nd Edition report on how big companies in the UK reduce their emissions, and make it pay.
The report provides you with eight in-depth case studies on the challenges and solutions of big
companies in complying with the CRC.
Find out what will be the future of the CRC? Hear uncensored opinions from experienced sustain-
ability professionals.
The report answers your burning questions
1. Will my company be double reporting, if we’re already part of the European Union’s ETS or if we
generate energy through on-site renewable sources?
2. Is a sealed bid system the most effective way and fair way to sell carbon allowances?
3. Will the scheme deliver emissions reductions?
4. What are the regulatory loopholes?
5. Are there ways to guarantee my company is listed near the top of the annually published league table?
6. What does it cost to register, measure emissions, report emissions, purchase allowances and pay any
non-compliance fees?
7. What’s the average number of person days a company devotes to the key administrative activities
created by this new regulation?
8. I don’t know what portion of our utility bills we are responsible for, or how to influence purchasing
decisions. What should I do?
and more…
In-depth case studies cover the key challenges and exemptions in the scheme
Company Case study focus
McDonalds The franchiser perspective on the CRC
SAP Capitalising on a new opportunity: The CRC as a key to a competitive future
Land Securities Addressing a new challenge: Negotiating landlord-tenant agreements for CRC compliance
Asda Abatement strategy and CRC performance
Sainsbury’s Capitalising on a new opportunity: Proactive engagement with the CRC
Ecotricity Industry comment from a green energy supplier
Alliance Boots Strategy insight: Emissions quantification and data collection
Designing a strategy to address the challenge of a medium-sized firm spread over
ITV
multiple locations
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3. COMPLIMENTARY REPORT SUMMARY
Key benefits
This is a mandatory UK regulation in effect as of April 2010, with mandatory self-reporting for 5000
UK-based companies. Find out what you need to know and what to do now!
Get more information that you can't find on government websites.
The onus to comply is on you. Learn how new UK carbon policy affects you, and how to comply
and save money each step of the way.
Find out how leading companies are benefiting from the scheme.
Fully understand complexities and contradictions with the scheme, including what issues will
likely be adjusted in the near future.
Get the information needed to adapt your company's emissions reduction strategy accordingly,
be listed at the top of the annually-published league table, and save money through energy
efficiency.
McDonalds, SAP, Land
Gain access to emissions reduction and compliance strategies from
Securities, Alliance Boots, Asda, Sainsbury’s, Ecotricity, ITV and more.
From this report, you’ll receive:
Clear, precise guidance on complying with the scheme each step of the way.
Pointers and real insight from companies that have found ways to make the scheme benefit
their business.
Easy-to-use diary to remind you of your company’s obligations from 2010 through to 2013.
Detailed advice on how to ensure your company is measuring carbon emissions in a way that
the UK government requires.
A clear breakdown of which organisations falls under this regulation, when exemptions are
valid, and which organisations will need to comply during the next phase of the scheme.
The reasoning behind a market-based approach, how it works, and why it is the best approach.
In-depth debates on the most contested aspects of the scheme.
This updated 2010 report finds that the changes made to the scheme have been welcomed but that
there are aspects of the CRC Energy Efficiency Scheme that remain contested.
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4. COMPLIMENTARY REPORT SUMMARY
A sample of Ethical Corporation findings
The report provides you with:
1 Insight into how the CRC was designed, such as…
The scheme has been designed so that, over the long term, the relatively high price of allowances will
make it more cost-effective for all firms to invest in cleaner technologies, improved production
processes and energy-efficiency strategies. In this respect, the cap-and-trade market structure provides
an incentive for organisations to reduce their emissions.
2 Strategic approaches to trading, such as…
By identifying and separating out its emissions sources, a firm can plot a marginal abatement curve
that enables the firm to develop the most cost-effective and efficient abatement strategy based on its
existing emissions. Firms should only purchase CRC allowances if all the abatement opportunities have
been exhausted. The market price of carbon would need to be lower than the cost of abatement or
there would be mo point in purchasing allowances.
3 Exemptions from the scheme, such as…
Subsidiaries of CRC organisations (or whole CRC organisations if no subsidiaries exist) are exempt if
they can demonstrate that they have more than 25% of their relevant emissions covered by CCAs.
4 Last-minute changes to the scheme, such as…
Principal subsidiaries have now been renamed to ‘Significant Group Undertakings’, and regulations have
been made more flexible for this group. Subsidiaries that are large enough to qualify in their own right
(over 6000MWh) may now opt to participate in the scheme separately from their organisation group.
The caveat here is that organisations cannot opt to disaggregate a nominated SGU if this will bring
their own energy consumption below the 6000MWh threshold.
5 Critiques of the scheme, such as…
The British Retail Consortium believes that the UK Government has failed to understand the business
realities of franchising operations, arguing that franchisers have very little control over their franchisees’
energy management.
BT contests DECC’s decision to exclude renewable energy, requiring companies to report renewables at
the average grid factor. Several other interviewees echoed BT’s concerns, yet most agreed why DECC
seeks to avoid double counting of fuel credits.
6
A simple presentation of what is required by your company, and associated fines such as…
If your organisation is eligible for CRC, but has failed to register by the end of the registration period,
you will have to pay a fixed fine of £5,000. Then, for each subsequent working day you fail to register,
you will be fined an additional £500 per working day to a maximum of 80 working days, together with
publication of non-compliance.
7 Expert opinions on the specifics of the scheme, such as…
The following quote by an Asda representative: “The problem with a league table is that it is open to
abuse, in that companies that have taken no action to reduce their carbon outputs could take rapid
action and be seen as progressive whereas those companies, such as Asda, that have a sensible plan
to reduce carbon outputs could join the scheme and have an impossible challenge of further reducing
carbon against those companies who have taken little action to date. For the measure to work effec-
tively, credit must be given to work undertaken before CRCs came into effect.”
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5. COMPLIMENTARY REPORT SUMMARY
Contents
Overview ...................................................................................................................................................................... 5
Section 1: The Carbon Reduction Commitment Energy Efficiency Scheme (CRC)
1.1 Quick facts .............................................................................................................................................................. 6
1.2 How does the CRC work? ........................................................................................................................................ 6
1.3 Who benefits?.......................................................................................................................................................... 6
1.4 Who is targeted? .................................................................................................................................................... 7
1.5 What am I reporting on? ........................................................................................................................................ 7
1.6 My company is already involved in other schemes ................................................................................................ 7
1.7 Which part of my organisation is responsible for CRC participation? .................................................................... 8
1.8 How is the scheme being regulated? ...................................................................................................................... 9
1.9 What stage are we at? ............................................................................................................................................ 9
Debate: Treatment of onsite renewables and Renewable Obligation Certificates (ROCs)
and the “double numbers” risk .................................................................................................................................. 11
Key dates for your diary .............................................................................................................................................. 14
Section 2: The marketplace structure
2.1 How the market works .......................................................................................................................................... 18
2.2 The introductory phase (2010) .............................................................................................................................. 18
2.3 The capped phase (2013)...................................................................................................................................... 18
2.4 The safety valve .................................................................................................................................................... 18
2.5 Revenue recycling and the league table .............................................................................................................. 19
Section 3: The registration process
3.1 Linking qualification and registration ....................................................................................................................21
3.2 Information for registration ....................................................................................................................................21
3.3 The SGU registration window and the registration fee ..........................................................................................21
3.4 Exemptions to the CRC ..........................................................................................................................................21
3.5 What happens if your company fails to register? ..................................................................................................22
Section 4: Monitoring, reporting and audit of emissions (MRA)
4.1 Monitoring ............................................................................................................................................................ 23
4.2 Reporting .............................................................................................................................................................. 23
4.3 Risk-based audit .................................................................................................................................................. 23
Section 5: Compliance costs
5.1 Costs of scheme coordination .............................................................................................................................. 25
5.2 Benefits: Energy saving ........................................................................................................................................ 25
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6. COMPLIMENTARY REPORT SUMMARY
Section 6: Case studies
ITV – Challenge: Medium-sized firm spread over multiple locations ........................................................................ 26
Land Securities – Challenge: Negotiating landlord-tenant agreements for CRC compliance...................................... 26
McDonalds – The franchiser perspective on the CRC ..................................................................................................28
Alliance Boots – Strategy: Emissions quantification and data collection .................................................................. 28
SAP – Opportunity: The CRC as key to a competitive future ......................................................................................29
Asda – Abatement strategy and CRC performance .................................................................................................... 30
Sainsbury’s Supermarkets – Opportunity: Proactive engagement with the CRC ..........................................................31
Ecotricity: Industry comment from a green energy supplier ...................................................................................... 32
Section 7: Looking forwards ...................................................................................................................................... 34
References .................................................................................................................................................................. 36
Tables and boxes
Box 1: CRC objectives ....................................................................................................................................................5
Box 2: List of acronyms ................................................................................................................................................5
Box 3: The “top-down” approach ..................................................................................................................................6
Box 4: Trading strategy ..................................................................................................................................................6
Box 5: Target sectors......................................................................................................................................................7
Box 6: British Retail Consortium (BRC) on the franchisor responsibility ......................................................................8
Box 7: An expert view on the changes and the current downsides of the CRC at this stage
of its development ........................................................................................................................................................9
Box 8: Why not include credits for on-site renewables? ..............................................................................................12
Box 9: A cautious view on the league table ................................................................................................................13
Box 10: Insider advice: Constructing a marginal abatement curve ..............................................................................18
Box 11: Will the scheme deliver emissions reductions?................................................................................................19
Box 12: Trading strategy – the “prisoner’s dilemma” ..................................................................................................19
Box 13: League table loopholes ..................................................................................................................................20
Box 14: Does your organisation qualify? ......................................................................................................................21
Box 15: Sage advice for companies considering CRC loopholes and their degree of compliance..............................22
Box 16: What will reporting under the CRC really require from companies? ..............................................................23
Box 17: An investment expert on company consideration of compliance costs ........................................................24
Box 18: Landlord tenant scenario ................................................................................................................................26
Box 19: The polluter pays principle (PPP) ..................................................................................................................27
Box 20: Alliance Boots preparedness for the CRC ......................................................................................................28
Box 21: Company expansion challenges due to the CRC growth metric ....................................................................29
Box 22: Implications of a change in the UK Government following the 2010 general election ..................................34
Table 1: Calendar of CRC integration ............................................................................................................................14
Table 2: Key administrative activities ..........................................................................................................................24
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7. Ethical Corporation report centre
Recent publications cover topics such as anti-corruption, voluntary initiatives in CSR, emerging
market issues, and managing carbon emissions. You can also visit Ethical Corporation’s website
and download some free research papers: www.ethicalcorp.com/reports
Anti-corruption, ethics and compliance in Russia
Practical information to develop local compliance strategies and overcome corruption challenges. For more infor-
mation, current prices or online ordering, visit: www.ethicalcorp.com/russia
Anti-corruption, ethics and compliance in China and Counter corruption in your supply chain in China
Learn more about the issues critical to your operational security, ethical management and success in China. For more
information, current prices or online ordering, visit: www.ethicalcorp.com/china
Best practices for designing effective ethics programmes
Find out which ethics and compliance training is most effective and productive. For more information, current prices or
online ordering, visit: www.ethicalcorp.com/ectraining
The Carbon Reduction Commitment Energy Efficiency Scheme: How companies cut carbon, save money, and meet
legal compliance
A hands-on management briefing on real-life ways big UK companies cut carbon, and their costs. Order online or
obtain more information at: www.ethicalcorp.com/crc
Corporate greenhouse gas emissions reporting
Learn how your competitors are calculating and verifying their GHG emissions – and discover which metrics and verifi-
cation standards will work for you. For more information, current prices or online ordering, visit:
www.ethicalcorp.com/greenhousegas
Guide to industry initiatives in CSR
Get the inside track from some of the world’s key industry-based initiatives. For more information, current prices or
online ordering, visit: www.ethicalcorp.com/initiatives
Job-specific guides for embedding CSR throughout your company
Winning methods for integrating sustainability into operational departments including communications, finance and
facilities.For more information, current prices or online ordering, visit: www.ethicalcorp.com/csr
Essential strategies for effective emissions trading and offsetting
With practical information from the leading companies, this report is everything you need to develop your company’s
emissions trading and offsetting strategy. Including case studies from 15 companies across industry. For more infor-
mation, current prices or online ordering, visit: www.ethicalcorp.com/emissionstrading
Unlocking the profit in water savings: How big companies manage water risk – and the business opportunities in doing so
Learn how water risks factor into your operations, and what you should do to ethically manage water use.
For more information, current prices or online ordering, visit: www.ethicalcorp.com/water
THE CARBON REDUCTION COMMITMENT
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ENERGY EFFICIENCY SCHEME REP
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How companies cut carbon, save
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2nd edition, June 2010
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Publishing date: June 2010
Secure PDF: 38 pages