Carbon Reduction Commitment – the challenges

The UK Government has made a significant commitment to reduce greenhouse gas emissions by 2020.

The targets that have been set for the reduction in carbon emissions, are tougher than most other European countries and increases the cost of doing business.  The rules for who pays what are relatively complex. However, the key programmes are:

electricity pylonsThe Carbon Reduction Commitment (CRC) had a false start with disappointing numbers of participants.

The Government has relaunched the scheme with 2010/11 being the “footprint” year. Any organisation that consumes more 6,000 MWh of energy per annum (around £500,000 spend) will be charged £12 per tonne of CO2 produced.

In electricity terms, this adds 0.652p to a business’s KWh cost, regardless of when it was used i.e. day or night.

Climate Change Levy (CCL) is added to all business electricity use and is currently at 0.48p per KWh and committed to rise by RPI every April.

Carbon Price Floor (CPF) is aimed at the generators and has just finished consultation.  The starting price from 2013 for each tonne of CO2 is expected to be around £16, rising over the next 7 years to £30.

Based on these numbers, CPF will potentially add around 1p per KWh rising to 2p per KWh in 2020.