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Roundtable on CRC energy efficiency scheme

13 October 2010 by

On 30 September, around 20,000 organisations had to register for the CRC Efficiency Scheme - new legislation aimed at cutting carbon emissions - or risk facing fines. However, experts who gathered at a recent Caterer roundtable event agreed that the Government has not done enough to publicise the new regulations. Daniel Thomas sat in on the discussion.

On 30 September, the deadline expired for complying with what has been described as the most important green legislation to hit the hotel sector and other large businesses for many years.

Around 20,000 organisations had to register for the CRC Efficiency Scheme (formerly known as the Carbon Reduction Commitment) - new legislation aimed at cutting carbon emissions - or risk facing fines.

Were you aware of it? If the answer is no, you are not alone. Up to 5,000 of the 20,000 qualifying organisations - broadly, those whose electricity is metered by at least one half-hourly meter and which buy on the half-hourly market - are thought to have missed the deadline, with lack of awareness one of the major stumbling blocks.

Experts who gathered at a Caterer roundtable on the CRC Efficiency Scheme in London last month agreed that the Government has not done enough to publicise the new regulations.

While the scheme administrator, the Environment Agency, has written to all qualifying organisations and set up workshops, much more could have been done, according to Peter Ducker, chief executive of Carepar, the carbon emission benchmarking company for the hotel sector.

"I think there will be a lot of organisations who were supposed to have registered that will not have," he said. "The Government has not done a brilliant job of communication on the scheme. It hasn't brought people on board in a way the CRC should have done."

Compared with the level of discussion that took place between Government and hoteliers ahead of changes to the Disability Discrimination Act in 2004, little has been done on the CRC, Ducker added.

"They had so many conversations with hoteliers about new properties and what needed to be done," he said.


WHO QUALIFIES?

The qualifying organisations are split into those whose half-hourly metered electricity supply was 6,000MWh or more between 1 January 2008 and 31 December 2008, which will have to comply fully, and those whose half-hourly metered electricity was below 6,000MWh for the 12-month period, which will have to make an "information disclosure".

Brakes said the low levels of compliance could be down to some of the latter group failing to grasp the regulations. "Some of the smaller operators probably didn't look beyond the headline figure of 6,000 MWh," he said.

Another issue has been the sheer complexity of the scheme. Last month, MPs on the Committee on Climate Change called for the Government to simplify the system, describing it as "too complicated, distracting and unfair to do the job needed". The call was backed by business group CBI, which warned: "Many firms' experiences of complying with the scheme have been slow and arduous".

For Eleanor Richardson, associate at law firm Davies Arnold Cooper, the main problem with the CRC is the issue of who is responsible. "It is supposed to be the ‘parent company'; if you are a brand owner then you are responsible," she said. "But the law only gives the brand owner the right to ask their franchisee for the information."

The hotel industry, with its "bricks and brains" ownership structure, will inevitably fall foul of this, with brand owners that do not own any property potentially facing difficulties. Jens Hallman, general manager of Rezidor's Radisson Blu hotel at Stansted Airport, explained: "If there is no control from head office, this has to be sold extremely well to franchisees."

Hotel operators have previously raised fears that publishing a league table on how companies are performing on reducing carbon emissions unfairly penalised those firms that had already made good strides before the 2008 starting point defined by the CRC legislation.

But Alex Flach, head of construction at Whitbread, insisted the league tables were fair, even though his company is likely to drop down when participants are graded more on growth than early action.

"It is bringing the environment in to everyone's vision," he said. "We didn't go green for the sake of it; it saves money."

This point was picked up by Hallman, who said the push to address carbon emissions is bigger than just the legislation. "If you can clearly demonstrate the financial incentive, you will bring people on board," he added.

However, Hallman's chief engineer at the Radisson Blu Stansted Airport, Matthew Burke, said staff buy-in can be difficult. "The stumbling block is training," he said. "Take recycling, for example. I might want to reduce waste, but it is hard to get staff to do it."

INDUSTRY CHURN

Brakes agreed, suggesting that the high turnover in hospitality was a major factor. "The churn within the industry is such that every five or six months you will have a whole new set of staff," he said. "Training can be difficult as a result so getting people to think about it has to come at the induction stage."

Hallman said buy-in has to come from all parts of the business. "There must be a clear message from the chief executive, but it's not about being top down - it has to be lateral movement up and down within the business," he added. "We build our brand around this."

Typical measures to address carbon emissions include toilets flushed with recycled water from showers and baths, low energy LED lighting with motion sensors, and flow restrictors on showers.

At the Tamworth Premier Inn, which Whitbread has used to trial these and other green initiatives since it opened in 2008 following an investment of £7m, the company made some interesting discoveries, revealed Flach.

A SURPRISING DISCOVERY

"While you would expect peak water usage to be first thing in the morning and last thing at night, we installed a half-hour meter for water usage and found that the peak was in the middle of the day when the cleaners went in because they were leaving the taps running and repeatedly flushing," he said. "As a result, we launched something called Project Flush, stopping them from flushing five times - and it saved us £1m a year."

Whitbread achieved its target of using 80% less carbon than a typical hotel at the Tamworth property, which illustrates what can be done by addressing the issue, according to Flach. "We weren't sure you could build a hotel with 80% carbon which is why we did it - it costs a lot of money but it can be done," he said. "And the costs are coming down."

Whitbread opened its second "green hotel" in September, in Newport, with another to follow in Burgess Hill, Sussex in November.

Sustainability also remains at the top of the agenda for Rezidor, which aims to get all properties recognised by the Green Tourism Business Scheme, following the gold award given to Hallman's Stansted property last year.

Other operators will have to follow suit because of the demand from the market, said Nigel Turner, director of public sector and industry affairs for the UK at corporate travel booker Carlson Wagonlit Travel. "Sustainability has not been mentioned during the recession but it will come back strongly and become a decision point," he said.

And the experts at the roundtable agreed that the CRC scheme - while by no means perfect - will be a key driver for improving sustainability in the hospitality sector.

"CRC is a good scheme, which will raise the green agenda and encourage companies to look at it," Brakes concluded. "As a vehicle, it will do the job."

CRC TIMELINE

2009
A consultation on the draft order to implement the Carbon Reduction Commitment was published on 12 March and closed on 4 June. The response to this consultation was published on 7 October. Later that month, the Environment Agency sent out a letter to organisations that were supplied with electricity through at least one settled half-hourly meter during 2008.

2010
The scheme begins with a three-year introductory phase. The first compliance year (April 2010 - March 2011) is the "Footprint Year". The registration period is the first six months of the Footprint Year. Organisations who qualify must have registered or made an information disclosure between 1 April and 30 September. The financial year 2010-2011 is also the qualification year for the second phase of the CRC. Firms must ensure that they monitor their half-hourly electricity consumption during this period. They can request a statement of consumption from suppliers.

2011 First sale of allowances takes place in April. Participants can buy allowances at a fixed price of £12 per tonne of CO2. Participants will only have to purchase allowances to cover their forecast emissions for 2011/12. The first annual report and first footprint report, both based on the 2010/2011 period, are due on 31 July 2011. The first league table will be published in October. Organisations will then receive the first revenue recycling payment. The publication of the league table and the revenue recycling will take place each year in October.

2012
Participants will be required to surrender allowances for their actual emissions for the 2011/2012 period in July 2012 along with their annual report.

2013
First capped phase begins. Auctioning of carbon allowances begins in April.

CRC AT A GLANCEWHAT IS THE CRC ENERGY EFFICIENCY SCHEME?
The CRC Energy Efficiency Scheme (formerly the Carbon Reduction Commitment) launched in April 2010 and is a new mandatory energy-saving and carbon-emissions-reduction scheme for the UK.

It aims to ensure organisations contribute to the UK's emissions reductions of at least 34% on 1990 levels by 2020 through improved energy efficiency.

The Environment Agency, which is running the scheme, estimates that 5,000 companies will have to register fully and about 20,000 firms will be required to participate in some way. Eligible organisations that failed to register by the 30 September deadline may be fined a fixed penalty of £5,000, and an additional £500 for each subsequent working day to a maximum of 80 working days, together with a publication of non-compliance.

However, it is thought the Environment Agency is unlikely to be draconian in the early days, instead working with firms to help them register. Only those who persistently fail to register will be punished.

Organisations will appear in a league table, with their position determined by how well they perform. The league table will be published after the end of each annual reporting year on the public pages of the CRC registry.

HOW DOES IT WORK?
All public and private sector organisations that had at least one half-hourly meter (a meter that records energy every 30 minutes) during 2008 must register or make an information disclosure.

If an organisation consumed at least six gigawatt-hours of qualifying electricity through all of its meters during 2008 - equivalent to an annual electricity bill of around £500,000 - then it will need to participate in the scheme by monitoring energy consumption and purchasing allowances equivalent to their emissions each year. If an organisation consumed less than this amount, it would need to make an information disclosure and will not have to monitor and report its annual energy use or purchase allowance.

HOW WILL THIS BENEFIT OPERATORS?

According to the Environment Agency, employers who are successful in reducing energy consumption will save money on energy bills and will need to buy fewer allowances. The highest-ranking organisations in the league table will receive the greatest financial reward as all of the revenue raised from selling allowances is "recycled" back to participants six months after the sale of allowances. The league table position affects how much of the revenue each organisation receives, via a system of bonuses and penalties.

WHO IS RESPONSIBLE?
In the case of landlords and tenants, energy supply in leased buildings is the responsibility of the customer who has the contract with the energy supplier. This means that if you rent space for your business and you are billed by the supplier, you are responsible for that electricity under CRC. If you are a landlord organisation and you pay the bills, then you are responsible for the electricity use.

Under CRC, franchisors are responsible for the energy supply of all their franchisees - even if the franchisee is legally owned by another CRC organisation. The franchisor must consider the supplies for all its franchisees to determine whether it meets the qualification criteria. A franchisee is obliged to provide its franchisor with such reasonable assistance as the franchisor requires, in order to participate in CRC.

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