Simplifying CRC: Next Steps Paul Wilson: DECC, Head of CRC team

Policy Landscape Improvements in energy efficiency are needed to deliver our climate objectives UK targets: Reduction of 34% in GHG emissions by 2020, at least 80% by 2050 EU Targets: 20% reduction in GHG emissions by 2020 (on 1990 levels) CRC designed to encourage energy efficiency and address barriers to uptake of cost effective measures Mix of incentives for action Carbon Savings – saving carbon will help us meet our carbon budgets and enhance security of supply

Policy Landscape EU ETS: Phase II (2008-2012), Phase III starts 2013 CCAs: Consultation shortly Carbon Price Floor: £16/t in 2013, rising to £30/t by 2020. Green Deal: Policy under development Intended that Green Deal will be available to businesses as well as households Could help large companies to reduce energy use at lower cost

Key elements of the CRC scheme A league table : reputational incentive Price signal: Allowances sales will provide a clear financial incentive. Reporting: requires thorough investigation of energy use. Board Room Responsibility: A member of the board is accountable

CRC Energy Efficiency Scheme Update Scheme started April 2010 Registration for first phase : Closed 30th September 2010 2791 participants registered First compliance year: April 2010 – March 2011 Annual Report and Footprint Reports should have been submitted Must comply with the legislation as currently drafted CRC is a mandatory scheme – financial penalties for non compliance

Simplification Progress Spending review announcement: Oct 2010 Revenue from allowance sales will not be recycled to participants, First allowance sale in 2012 for 2011/12 emissions Ministers commit to simplify the scheme following stakeholder feedback Legislation changed as of 1 April, following December consultation & Govt to give more time to consider wider simplification measures Removal of approx 12,000 “information declarers”; Delay of start of Phase 2: first compliance year now 2014/15

Simplification Progress Wider simplification measures Engaged in Dialogue with stakeholders regarding simplifying the scheme, specifically: Supply rules Qualification rules Organisational rules Timing and frequency of allowance sales Overlap between energy efficiency/climate change instruments We received extensive feedback this helped shape our proposals in Simplifying CRC: Next Steps

Uphold the original principles of the scheme CBI Feedback Uphold the original principles of the scheme Restore Revenue Recycling or Scrap the CRC Fundamentally review the policy landscape Consider alternative Reputational drivers

Simplify CRC: Next Steps 30th June: Publication of vision for the way ahead for a simplified CRC Scheme which will: provide greater business certainty provide business with greater flexibility reduce the administrative burden reduce the complexity of the scheme reduce overlap with other schemes.

Simplify CRC: Next Steps Key Proposals: Reduce the number of fuels covered by the scheme Move to fixed price allowance sales Simplify the organisational rules Make qualification processes easier Reduce overlap with other schemes Reduce the administrative burden of evidence and records

Going Forward We’re currently receiving feedback on our Next Steps until 2 September. We will then look to draft legislation for formal consultation in early 2012. Simplified scheme in place for the start of Phase 2 in April 2013

Questions/Comments? 12