Budget briefcase

Budget 2016 – A missed opportunity?

We heard from the Chancellor George Osborne yesterday as he set out government spending plans and it certainly offered a mixed bag for the energy and environment sector. It was framed as a budget of long-term solutions, “putting the next generation first”, which was promising following the recent Paris Agreement, however this claim has since received some criticism from representatives of the ‘green economy’.

There were undoubtedly some positive announcements and there was an obvious effort to streamline energy efficiency requirements for businesses. Following a consultation on the future of the energy efficiency tax landscape it was finally revealed that the CRC scheme is to be abolished. In the form it has adopted, the CRC is a tax rather than a ‘commitment’ and, recognising this, the levy will be collected through an increase in the Climate Change Levy (CCL) after the 2018-19 reporting year.

The obligation for large companies to report on their greenhouse gas (GHG) emissions will remain. In the consultation, GHG reporting through the ESOS regulations was highlighted as a successful driver for energy efficiency investments. CO2balance are conducting a review of our ESOS experience and will publish the results in the coming weeks.

A single energy and carbon reporting scheme is to be introduced from April 2019 that integrates the requirements from climate change agreements (CCA), the ESOS regulations and the EU emissions trading scheme (EU ETS). In the short-term, not much will change but a single reporting system and tax will be seen as an improvement for any company negotiating the current overlapping policies and schemes.

Those looking for a drive towards a low-carbon, energy efficient future however have found few positives. After the last Budget the CCL also applies to electricity generated from renewable sources who will be impacted by the increase and policies to support and encourage the renewables sector were again, scarce. This dearth is one reason the UK has slipped in the ‘Renewable Energy Country Attractiveness’ table and with the announced tax cuts for oil and gas it does not seem as if the Government has much ambition to climb it again.

In the first Budget since the Paris Agreement and in the face of record-breaking global temperatures over the first two months of the year, many felt there was an opportunity to send a strong signal to bolster the ‘green economy’ in the UK. This ‘budget for the next generation’ however, was particularly notable for its failure to mention climate change at all and has left many feeling that, perhaps, this was an opportunity wasted.

CO2b_ESOS

ESOS: Driving forward..

As we reach the extended deadline for large companies within the UK to comply to the Government’s Energy Saving Opportunity Scheme (ESOS), it is a good time to reflect on the main outcomes that were common across many of the reviews we conducted.

Depending on the level of detail, audits can identify savings of between 10-40% and this is certainly the case with the organisations that we have worked with. Running through the audits there were a few themes where the vast majority of organisations could reduce energy consumption, save money and thereby improve the bottom line.

Low-hanging fruit

When visiting any organisation with a large number of employees it is clear that small actions by many will result in a large cumulative energy reduction. An effective employee engagement campaign, tailored to an organisation, is one example of the relatively simple opportunities to drive down energy expenditures. Just by adjusting the heating timer or the layout of an office, coupled benefits of energy saving and employee comfort can be achieved. Typically, zero or low investment opportunities alone could achieve 10% reductions in energy bills.

Transport

Though not the case with all organisations, where the company owns or leases vehicles, transport makes up a significant proportion of their total energy consumption. This presents attractive energy and cost saving opportunities, for example vehicle procurement policies, driver efficiency training and more effective route planning, all achieving dramatic fuel reductions. This came as a surprise, particularly to organisations with an established energy and sustainability management policy, highlighting that across sectors, not enough attention has been paid to decarbonisation of the transport sector.

Management

With this being the first ESOS reference period there was a sense of ‘getting your house in order’ to get an idea of the energy baseline before considering more significant investments. In many cases, responsibility for energy management was limited to supplier account management without considering the organisations’ energy expenditure. The attitude of ‘the cost is the cost’ is almost unique to energy bills and wouldn’t be accepted in any other area of business. Designating one or a few individuals as responsible for understanding, monitoring and managing energy consumption will inevitably lead to achievements in reducing energy demand.

Looking to the future, it is likely that the multiple policies and regulations relating to energy and carbon reduction will be amalgamated in to one energy tax similar to the Climate Change Levy (CCL) and one reporting system that is based on ESOS; many of these policy decisions are expected to be announced in the Spring budget in March. To date, ESOS has highlighted the wealth of energy-saving opportunities but hopefully also raised energy management up the agenda, bringing it to the attention of company boards and directors. With current low prices, now would be an attractive time to act on opportunities to future proof organisations against rising energy costs and more stringent energy policies. Time will tell how the policy landscape might change but CO2balance will continue to work with all of our clients to help manage their energy and make significant cost savings in the process.

DECC launches another consultation on the CRC Scheme. What does this mean for your business?

med-res transparent

The Department of Energy and Climate Change has launched another consultation on the CRC Energy Efficiency Scheme to encourage the uptake of on-site renewable energy. The consultation also hopes to exclude metallurgical and mineralogical processes from the scheme.

DECC will also be amending the CRC Order 2013 to simplify the wording to avoid double counting of energy supplies under the CRC, CCAs and the EU ETS when there is a landlord and tenant relationship.

Important dates for Phase 1 of the Scheme

  • The compliance payment period is from 1st September to 20th September 2014.
  • The rate is £12 per tCO2 on actual emissions reported in the 2013/14 Annual Report.
  • Annual reporting period: 3 June 2014 to 31 July 2014
  • Allowance ordering period: 3 June 2014 to 31 July 2014
  • Payment period: 2 September 2014 to 20 September 2014
  • Allocation period: 2 September 2014 to 15 October 2014
  • Surrender deadline: 31 October 2014

Phase 2 of the scheme runs from the 1 April 2014 to 31 March 2019. The forecast payment period is from 1st June to 20th June 2014. The forecast rate is£15.60 per tCO2 and payment is based on a forecast of annual emissions. If a company opts out of purchasing forecasted credits, the compliance payment period is from 1st September to 19th September 2015 and payment will be £16.40 per tCO2, based on actual emissions

To find out more on how co2balance could help your organisation comply with the CRC Scheme please contact us here