Department for Environment, Food and Rural Affairs
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Proposals for implementing UK cap and trade scheme launched

Proposals for implementing UK cap and trade scheme launched

DEPARTMENT FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS News Release (196/07) issued by The Government News Network on 26 June 2007

Detailed proposals for the implementation of the UK's pioneering emissions trading scheme for large organisations in business and the public sector were set out by Climate Change and Environment Minister Ian Pearson today.

The Carbon Reduction Commitment, announced in the Energy White Paper in May, is a mandatory cap and trade scheme that will cap emissions from up to 5000 large business and public sector organisations, which are collectively responsible for around 14 million tonnes of carbon each year.

Mr Pearson said:

"We are committed to ambitious targets to reduce the UK's CO2 emissions and this will require contributions from all sectors of the economy and from across all parts of the UK.

"Our aim is to reduce absolute carbon emissions while growing the economy - and the Carbon Reduction Commitment is geared accordingly to help organisations save money through improved energy efficiency.

The Carbon Reduction Commitment is a mandatory, auction-based emissions trading scheme for organisations using more than 6000 MWh/year from mandatory half-hour meters, equivalent to an electricity bill of around £500,000 a year at current prices.

It is designed to drive emissions reductions by giving organisations a financial incentive to do so through emissions trading, combined with corporate social responsibility incentives through publishing companies' performance in a league table. All allowances will be auctioned, with the revenue from the auction recycled to participants based on their performance.

Alongside the implementation of the Energy Performance of Buildings Directive will deliver emissions reductions of 1.2 million tonnes of carbon (MtC) a year by 2020 from organisations such as large retailers, supermarkets, hotel chains, universities and central government departments.

The Government is consulting on the detailed implementation of the policy, including the type of auction and league table design; definition of an organisation; rules to exempt small sources of emissions; the approach to monitoring, reporting and auditing results; and scheme penalties.

More details on the consultation, which will run until 9 October, can be found at http://www.defra.gov.uk/corporate/consult/carbon-reduc/index.htm.

Notes to Editors

1. The Carbon Reduction Commitment (CRC) was announced in the Energy White Paper, published on 23 May 2007, targeting organisations such as large retailers, supermarkets, hotel chains, universities and central government departments.

2. It will target emissions from energy use by large business and public sector organisations, focusing on those emissions not covered by Climate Change Agreements and the EU Emissions Trading Scheme. Organisations with more than 25 per cent of their energy use emissions in Climate Change Agreements would be completely exempt.

3. The CRC is expected to deliver net benefits (at current values) of £755 million, with organisations saving money through lower energy bills as a result of improved energy efficiency, and alongside the implementation of the Energy Performance of Buildings Directive will deliver emissions reductions of 1.2 million tonnes of carbon a year by 2020 from organisations such as large retailers, supermarkets, hotel chains, universities and central government departments.

4. The Government intends to bring the CRC into force in 2010, beginning with a three-year introductory phase, during which allowances will be sold at a fixed price.

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