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RIP CRC: What do I need to do when the CRC ends?

So the Carbon Reduction Commitment  Energy Efficiency Scheme (the “CRC”) is being scrapped.  Are there any practical steps I need to take now?

The Environment Agency has just published guidance to participants in the CRC on what to do now it is being closed.  As we blogged previously, the current compliance year (ending 31 March 2019) will be the last one for CRC.

The guidance describes the steps you need to take, which are:

  • collecting all relevant CRC data for this compliance year;
  • submitting an annual report for this compliance year (by no later than 31 July 2019);
  • ordering the allowances needed to cover your 2018/19 emissions (this needs to be done between 1 June 2019 and 31 July 2019);
  • paying for all allowances you’ve ordered (which needs to be done between 2 and 19 September 2019);
  • surrendering the correct number of allowances (by no later than 31 October 2019);
  • maintaining up-to-date contact details on the CRC registry (until 31 March 2022); and
  • maintaining a CRC evidence pack (until 31 March 2025).

The guidance also makes it clear that you do not need to:

  • collect any CRC data after 31 March 2019;
  • make any annual CRC reports for years beyond this compliance year;
  • register for any further phases of the CRC; or
  • pay any further subsistence fees, unless they are already due.

It goes on to say that you can correct any reports you’ve submitted for previous years or, if necessary after it is submitted, the report you submit for this final compliance year.  There is a process for buying additional allowances until the end of February 2022.  If after that date any participant is discovered to have surrendered too few allowances for any compliance year, the CRC administrator will be able to impose a penalty at least equal to the value of the allowances shortfall.  You are therefore strongly advised to check your reports and the allowances you have surrendered for previous years as soon as possible, so that if any corrections or additional allowances are needed, you can sort this out well before the end of February 2022.  The CRC regulators can continue to conduct compliance audits, and will take enforcement action against CRC participants who are found to have surrendered too few allowances, until 31 March 2025.

The guidance states that the Department for Business, Energy and Industrial Strategy has indicated that the current rules for allowances refunds will continue as they are until 31 March 2022.  After that date the Secretary of State may refund any unsurrendered allowances (which implicitly means that he may decide not to do so too).  Again, therefore, if you have bought more allowances than you needed for any compliance year (and you are confident that your returns are accurate and therefore you do not need to surrender them for any other compliance year) make sure you act quickly whilst there is still a clear framework for refunds.

The CRC is not being replaced directly, but the Climate Change Levy has been increased to ensure that the abolition of the CRC remains fiscally neutral to the Treasury.  A brand new regime known as Streamlined Energy and Carbon Reporting (“SECR”) is currently being proposed that will require certain businesses to report on their carbon dioxide emissions and energy use in annual reports.  The government consulted on SECR over the summer and published its response to the consultation in October, which confirmed that the government will be proceeding largely as suggested in the consultation.

We will provide further comments on SECR once legislation has been published that gives us more detail on how it will work.  It is going to be more limited in its scope than the CRC and, in particular, will not apply to any public sector bodies at all, or to any overseas companies or undertakings (although the UK subsidiaries of overseas companies could be included if they satisfy certain tests).  Watch this space – we’ll be blogging with more details as soon as they’re available.