Simulation shows companies unprepared for CRC |
A simulation of new carbon cutting legislation has highlighted that the majority of organisations affected will struggle to collect and verify their energy data risking unnecessary costs, penalties and in extreme cases facing criminal prosecution for non-compliance.
The Carbon Reduction Commitment (CRC) simulation has also revealed that when ‘trading’ carbon allowances in a virtual online auction, many organisations were exposed to unnecessary financial risk and potential cash flow problems as the ‘trading’ teams had no clear purchasing strategy and lacked the power to influence decisions that would be required under the real CRC.
In advance of the new legislation, regional development agency One North East commissioned energy consultancy TNEI Services to run a 12-month simulation of the CRC Scheme to give organisations in the region a head start and allow them to get CRC-ready. One of the key aims of the project, only the second of its kind in the UK, is to reduce the risk of North East businesses incurring unnecessary penalties.
The CRC comes into effect in April next year with qualifying organisations required to buy carbon allowances to cover the emissions they produce.
Around 30 organisations in both the public and private sector which will be affected by the CRC are involved in the year-long simulation.�The project is providing participants with a simulation of the CRC processes from energy and carbon data collection and reporting and the compilation of performance league tables to experiencing virtual carbon trading days. The aim is to demonstrate through tools and practical engagement what will be required under the new legislation and to help get organisations CRC-ready.
One North East Leadership Specialist, Kate Hatton said: “As part of our support for regional businesses we identified the opportunity to assist organisations to be better prepared for the new legislation that will come into force next year.
“The CRC presents major challenges for organisations with high-energy bills. By taking part in our simulation, organisations can gain practical experience of the legislation, get access to free expert advice and pro-actively cut their carbon dioxide emissions.”
The lessons learnt from the simulation are helping participating organisations prepare for the legislation and identify “quick wins” that will improve their position in the carbon performance league table when it goes live next year.�The simulation is also highlighting for the wider business community the major issues that need to be addressed, the likely pitfalls and how they can be avoided.
What is clear is that a significant number of organisations are still unprepared for the rigours of monitoring and reporting energy use and do not have the ‘CRC Team’ in place to both plan and deliver the energy savings required, or with the purchasing power to secure carbon allowances at a reasonable cost.
Feedback from the first ‘Trading Day’ focused on the need to appoint a CRC Team to take joint responsibility for their organisation’s compliance spanning senior management, finance, energy management and possibly the legal department because of the serious liabilities involved in the CRC.
One of the most serious issues was how to account for the money required to buy the carbon allowances, which in some cases would amount to nearly half a million pounds and recognising the impact this will have on an organisation’s cash flow and profitability.
Throughout the process participants are being encouraged to think about developing ‘Carbon Strategies’ to ensure that they benefit from ongoing measures to reduce their emissions and also that they appreciate the intricacies of carbon markets and the risk management requirements.
The simulation launched earlier this year with a number of training days for participating companies and their staff. Energy managers at TNEI provided companies with a mentoring system to offer advice on energy monitoring and reporting and early action to reduce unnecessary energy use.
Helen Nisbet, Project Manager for the CRC Simulation at TNEI explained:
‘The companies participating in this simulation have shown a foresight and understanding that this legislation needs to be considered seriously. Credit should be given to them for preparing for the full impact of the CRC and their early action will stand them in good stead for the real thing.
“We would urge all other companies and organisations that may be affected by the CRC not to underestimate the resourcing issues of measuring, managing and reporting carbon emissions. Ultimately there will be both financial and resourcing costs that need to be budgeted for.’
TNEI intends to maintain close contact with the participating companies following the CRC’s official launch next year to monitor how they cope when the legislation comes into effect.
There are still opportunities for organisations to identify “quick wins” that will deliver long term savings under the CRC legislation next year. For more information, contact TNEI Services on 0191 211 1400 or visit www.onenortheast.co.uk/carbonreduction
CRC SIMULATION CASE STUDIES
NORTHUMBRIA POLICE
CLARE SWIFT, Sustainable Development Advisor
Being involved in the CRC Simulation has been an eye opener for the Northumbria Police Force. The organisation knew it would be affected by the CRC legislation but without the simulation, they may have been unprepared and would have seriously underestimated how much it would cost the force.
The CRC Simulation has highlighted how much the legislation could potentially cost Northumbria Police, much of which will be repaid in the first round of rebates, but will pose cash flow problems in the interim. Like all public sector organisations, the police force is accountable to the public for its expenditure and its energy management efforts are hampered by the need to channel resource into front line activities – i.e. preventing and solving crime.
Keeping abreast of developments surrounding the CRC legislation was difficult prior to the team joining the CRC Simulation project. Sustainable Development Advisor at Northumbria Police, Clare Swift was aware of the legislation and tried to keep up to date with developments via the Environment Agency website and through information in IEMA publications – but it was a Catch 22 situation, finding the information was difficult unless you knew where to look for it.
With information feeds and briefings from the CRC Simulation team, Clare has been able to accelerate the force’s carbon cutting efforts and channelled resources into initiatives that will help reduce their CRC liabilities. One of the first initiatives has been to implement Automatic Monitoring and Reporting (AMR) of energy use and developing a Carbon Management Plan.
Clare Swift explained:
“We are in a better position now than we were 6 months ago thanks to the simulation. It has given us the impetus to implement the AMR – and this has been a lot speedier than it would have been without the simulation.”
“We are in a better position now than we were 6 months ago thanks to the simulation. It has given us the impetus to implement the AMR – and this has been a lot speedier than it would have been without the simulation.”
“It has also raised awareness about the need to manage energy use across the organisation and allowed the team to start compiling information at a relevant time and in an appropriate form.”
DARCHEM ENGINEERING, PART OF THE ESTERLINE GROUP
GARY JOBLING, Technical Services Manager
TNEI’s energy management team was already working with engineering company Darchem on energy management and staff training before the CRC simulation project. It was through this work that the senior management team became aware of the impact CRC legislation would have on Darchem and its American parent company, Esterline.
As a consequence of Darchem’s involvement in the North East CRC Simulation programme, the company was nominated as the UK representative for Esterline and instructed to coordinate the Group’s adherence to the new legislation.
Taking part in the CRC Simulation has provided the Darchem team with the tools that can assist them in the information and data collection from seven other Esterline sites in the UK. Documentation produced for the Simulation is being used as templates for Darchem’s own information gathering.
The Simulation has also highlighted the need to create a Darchem CRC Team – covering corporate affairs in the United States and senior managers within each of the business units in the UK. The team has kicked off communications with conference calls and web conferencing to share data and will follow this with site meetings in the future.
One of the major benefits of the simulation for Darchem has been to work with TNEI to develop energy management proposals for Esterline companies covering; Energy Auditing of each Business unit; specific monitoring and targeting for each site and identifying early actions to improve energy efficiencies.
Gary Jobling, Technical Services Manager explained;
“The CRC simulation has had many benefits not least the perspective it has given us on the information gathering required and where there are gaps in our current systems. The virtual Carbon Trading Day has also helped us understand the process of buying allowances, what it means for Darchem and the potential for how it will work in practice.”
“The CRC simulation has had many benefits not least the perspective it has given us on the information gathering required and where there are gaps in our current systems. The virtual Carbon Trading Day has also helped us understand the process of buying allowances, what it means for Darchem and the potential for how it will work in practice.”
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