1. Carbon Reduction Commitment AEA is the Government adviser contracted to develop the CRC scheme Daniel Waller, Knowledge Leader, Carbon Management 0870 190 6297, daniel.waller@aeat.co.uk A world leading energy and climate change consultancy

2. Global business supporting public and private sectors -Energy and climate change -Air and water quality -Risk management and due diligence -Resource efficiency -Sustainable transport -Innovation and knowledge transfer -Sustainability -Information technology and environmental management About AEA AEA is supporting DECC as it develops the regulations for CRC

3. Mandatory auction-based emissions trading Climate Change Bill commitment Public and private sector Applies at highest UK parent organisation level Purchase allowances to match emissions from Government at 12/tCO 2 Receive money back +/- bonus/penalty dependent on relative performance What is the CRC?

4. No Yes You are covered You are not covered No Total HHM electricity use > 6000MWh/year? You are not covered Yes Qualification Process - Mandatory half hourly metered (HHM) electricity? Declare qualification status April – Sept 2010

5. Landlords may be responsible for tenant emissions Energy Service Companies may be responsible for customer emissions Key issues for landlords: Uncontrolled CRC exposure and possible net costs Incentives for emissions savings Cost recovery or measures to reduce exposure Person that is the customer of a supply contract and receives the supply from the energy provider under that contract Emissions responsibility

6. Franchisor takes on CRC liability (Responsible Person) Franchisee has “reasonable assistance duty” (Associated Person) Particularly relevant for: Fast food, retail, telecoms, petrol stations, car dealerships, trade associations, some Universities Challenges: Data management Scheme economics – pass through of costs / benefits Delivering energy management Agreement between parties where franchisee sells or distributes goods, or provides services, and equips or presents its premises as instructed by “the franchisor” Franchises

7. Parent Organisation - Subsidiary 2 - Subsidiary 3 - Subsidiary 4 Subsidiary 1 Principal subsidiaries - Identified in reporting and annex to league table - Eligible for baseline updates - “Designated Changes” (>6,000 MWh in 2008) Principal Subsidiaries

8. Joint ventures/PFI - Where no majority shareholder Company participates in its own right – if it qualifies - Otherwise grouped with majority owner - Subsidiary 2 Parent Organisation - JV 1: 50/50 Ownership - JV 2: 70:30 Ownership - Subsidiary 1 (>6,000 MWh in 2008) Joint Ventures / PFI

9. What’s covered - ‘Footprint’ Core sources Non-core sourcesEUETS emissions CCA emissions Based on emissions in the period April 2010 to March 2011 Reporting will be by 31 st July 2011 Based on emissions in the period April 2010 to March 2011 Reporting will be by 31 st July 2011 All energy consumed for non-transport purposes Electricity Gas Oil, diesel etc

10. Financial year compliance cycle Evidence pack and source list Apply rules for renewable generation, export of power from own generation, heat from CHP Report this by end July after the year end and surrender allowances Audit not verification Annual reporting

11. Civil Penalties Failure to register (£5,000 + £500 per day) Failure to disclose information (£1,000) Failure to provide footprint report (£5,000 + £0.05/tCO 2 /day for 40 days) Failure to provide annual report (£5,000 + £0.05/tCO 2 /day for 40 days then doubled) Incorrect reporting (£40/tCO 2 for emissions incorrectly reported) Failure to surrender sufficient allowances (£40/tCO 2 for each tCO 2 shortfall) Failure to keep adequate records (£5/tCO 2 )

12. In summary - what to do and when Registration Preliminary Report Annual compliance 01/0807/0801/0907/0901/1007/1001/1107/1101/1207/12 Emission period Reporting period Emission period Reporting period Key HH Electricity All energy EUETS, CCA Annual emissions, turnover, early action Annual emissions, turnover

13. Capped phase (auctions) Sales and recycling April 2010 April 2011 April 2012 April 2013 Scheme starts First sale (double) First recycle (double) Second sale (single) Second recycle (single) First auction (single) Introductory phase (£12/t sales)

14. Early action Growth metric Absolute emissions Early action Growth metric Absolute emissions 0% 10% 20% 30% 40% 50% 60% 12345 Year Max bonus/penalty Percentage emissions reduction - absolute Percentage reduction in emissions/turnover - growth Early action, prior to April 2011 Performance is assessed against a 5 year rolling average The league table

15. Emissions metrics Absolute metric % change in emissions compared with previous 5 year average Growth metric % change in emissions/turnover compared with previous 5 year average Early action metrics % AMR coverage % CT Standard coverage -Revenue applied for Local Authorities/Universities rather than turnover -Based on available data until 5-year history established

16. Early action – by March 2011 The Carbon Trust Standard -Measure your footprint (more than required by CRC) -Demonstrate reduction (absolute or relative > 2.5% p.a.) -Demonstrate good carbon management Is it worth it from a CRC perspective? Early action – CT Standard

17. Automatic Meter Reading (AMR) Electricity and gas There will be a minimum standard -Capture storage and retrieval for data -Half hour frequency -Software for data manipulation Early Action Metric - AMR Participants should consider AMR as part of a metering, monitoring and targeting strategy – not just for CRC in isolation

18. Your action plan - today Understand your liability -Understand Organisational structure (CCA/EU ETS) -Meter audit – H/H electricity will determine liability -2008 HH Electricity data Sources of emissions (core and non-core) -At least 90% of total emissions to be included -Costs/Benefits of including >90%?

19. Your action plan - today Understand your abatement options -Prepare a MACC? What do you want out of the scheme? -Compliance? -Financial rewards – Energy vs. Carbon? -Brand rewards? Evaluate early action metrics

20. Work out your organisation structure Know your emissions exposure Understand your compliance obligations Make sure your systems are in place to gather and manage data and forecast emissions Understand your abatement opportunities Take a proactive approach to the opportunities the scheme presents Preparing for the CRC - Summary

21. Carbon Reduction Commitment Daniel Waller, Knowledge Leader, Carbon Management 0870 190 6297, daniel.waller@aeat.co.uk