On 22 November 2013, the Draft CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2013 (Draft Allocation Regulations 2013) were published.
The Draft Allocation Regulations 2013, which are due to come into force on 1 February 2014, will revoke and replace the CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2012 (SI 2012/1386) (Allocation Regulations 2012).They will apply to the sale of CRC allowances from 1 February 2014 onwards. The last sale of CRC allowances for the First Phase will be governed by the Draft Allocation Regulations 2013 but will take place at the same time as specified in the Allocation Regulations 2012.
The Draft Allocation Regulations 2013 provide for two fixed price sales of CRC allowances for each annual reporting year (ARY) (a cheaper forecast sale and a more expensive retrospective compliance sale) but do not yet specify what the price differential between these sales will be.
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Background: sales of CRC allowances
A participant in the CRC Energy Efficiency Scheme (CRC) must surrender CRC allowances equal to its CRC emissions for the electricity and gas supplies declared in its annual reports by the last working day of October following the relevant annual reporting year (ARY). Each CRC allowance is equivalent to one tonne of carbon dioxide (t/CO2).
In the First Phase (1 April 2010 to 31 March 2014), CRC allowances were sold to participants in retrospective fixed price sales at the end of each ARY, starting from July 2012 for the 2011/12 ARY. The CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2012 (SI 2012/1386) (Allocation Regulations 2012), which were amended by the CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) (Amendment) Regulations 2013 (SI 2013/1097), provided for three sales of CRC allowances in June to July in 2012, 2013 and 2014 for the 2011/12, 2012/13 and 2013/14 ARYs.
The price of CRC allowances was £12/tCO2 in the 2012 and 2013 sales. In the 2012 Autumn Statement, the government announced that the price of CRC allowances would rise to £16/tCO2 in 2014-15 and would increase in line with the Retail Prices Index (RPI) from 2015-16 onwards, (see Legal update, 2012 Autumn Statement: environmental implications: CRC).
The Draft Allocation Regulations 2013, which are due to come into force on 1 February 2014, will revoke and replace the Allocation Regulations 2012 from that date onwards.
The Draft Allocation Regulations 2013 will:
Set the times when requests for CRC allowances can be made to the Environment Agency (EA).
Set the price of CRC allowances.
Govern the payment and issue of CRC allowances, including the consequences of late payment and a transfer of excess CRC allowances.
Give the EA the power to charge fees to cover the cost of allocating CRC allowances.
The Draft Allocation Regulations 2013 are due to come into force before the end of the 2013/14 ARY and therefore before the last fixed price sale for the First Phase is held between 2 June and 31 July 2014. As the Draft Allocation Regulations 2013 will revoke the Allocation Regulations 2012 and do not contain any saving provisions for the last sale of CRC allowances in the First Phase, it is assumed that is being replaced by the first compliance application period under the Draft Allocation Regulations 2013, which will run for the same period. The forecast application period, which will run from 1 April to 30 April 2014 will apply to the sale of CRC allowances for the 2014/15 ARY but the compliance application period held during June and July 2014 will apply to the sale of CRC allowances for the 2013/14 ARY.
The Draft Allocation Regulations 2013 do not yet specify what the price differential will be between the forecast and compliance sales although draft regulation 7 will provide this information once the pricing has been announced.