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Consultation: Streamlined energy and carbon reporting

4th January 2018

Liz Watson

The government is currently seeking views on its proposals for Streamlined Energy and Carbon Reporting. We’re looking into the current reporting schemes and how the proposed changes might impact your business.

How did the current consultation come about?

A previous consultation in 2016 concluded that whilst mandatory reporting is important in driving the uptake of low carbon and energy efficiency measures and bringing them to the attention of Board members, the existing policy landscape was complex, and required simplification. The government also agreed to a consultation on a simplified energy and carbon reporting framework. Government research indicates that over £2 million of savings could be achieved annually on business energy bills through implementing cost effective energy efficiency measures. 

Currently, there are a number of regulatory and policy controls in place, which include:

Climate Change Levy (CCL) – Charged on electricity, gas, and other fuels through energy bills. To be increased from April 2019.

Climate Change Agreements (CCA) – Allows a discount on CCL for 53 energy intensive sectors.

Carbon Reduction Commitment (CRC) scheme – Applies to organisations using over 6GWh of qualifying electricity, to both public and private sector organisations. Organisations must monitor, report and buy allowances for CO2 emissions. The scheme will end in the 2018/2019 compliance year.

Energy Savings Opportunity Scheme (ESOS) – Applied to ‘large undertakings’ and their corporate groups. Find out more about ESOS here.

Mandatory Green House Gas (GHG) Reporting – Applies to all UK quoted companies who must report their global GHG emissions annually via annual reports.  

In response to the 2016 consultation, the government announced that CRC would be disposed of, with a corresponding increase in CCL to recover the revenue lost through ending CRC. CCA for eligible organisations will increase to protect energy intensive sectors from the increase in CCL. This change and the implications for businesses eligible for CRC and CCAs were covered in more detail by our blog at the time; read our ESOS blog here.

What are the proposed changes to carbon reporting and who will be affected?

Scheme

Brief description of change

CCL

Increased from April 2019 to ensure the disposal of CRC is fiscally neutral. This will adversely affect organisations currently below the CRC threshold who will still see higher rates of CCL. 

CCAs

No changes to eligibility. Rates will increase in 2019 to protect energy intensive sectors from the increase in CCL.

CRC

The scheme will end in the 2018/2019 compliance year.

M-GHG Reporting

No major change; potential to incorporate into streamlined carbon reporting following the current review.

ESOS

No change; ESOS outputs might be used in the proposed streamlined carbon reporting following the current review.

The consultation proposes that the streamlined carbon reporting framework would apply across the whole of the UK.

UK Quoted companies

UK Quoted companies would continue to report their global GHG emissions in line with M-GHG Reporting via company’s annual reports.

UK Unquoted companies

The consultation proposes that reporting requirements be extended to UK Unquoted companies and their corporate groups and seeks views on which companies should be required to comply:

Discriminator

Description

Size

Should all large organisations be required to comply (if so, should the definition of a large organisation come from the current ESOS definition* or the definition according to the Companies Act 2006Ç.)

Energy Use

Should organisations currently meeting the energy use qualification threshold for CRC (6GWh of electricity per year) be obligated to report. Small companies, with a high energy use may potentially be exempt.


* ESOS definition of a large organisation:

Undertakings: i) which employ an average of 250 or more people in a certain 12 month period, or an annual turnover in excess of €50m and an annual balance sheet total in excess of €43m, and ii) where undertakings do not satisfy the specified employee or financial thresholds, but are either the UK parent of a ‘large’ undertaking, or a UK subsidiary of a ‘large’ UK undertaking, or a UK subsidiary of a parent who has a ‘large’ subsidiary. Derived from the requirements of Article 8 of the Energy Efficiency Directive. 'Smoothing provisions' also apply

Ç Companies Act 2006 definition of a large organisation:

Where two or more of the following criteria apply to a company within a financial year:

  • More than 250 employees
  • Annual turnover greater than £36m
  • Annual balance sheet total greater than £18m. There are 'smoothing provisions' which apply where a company crosses over the size threshold;, a change must persist for two years to have an effect on the company’s classification. These thresholds are set out in sections 465 and 466 of the Companies Act 2006 and are updated from time to time. At group level the financial thresholds are on an aggregate basis.

What would we be required to report?

The consultation proposes 4 options based on scope and the detail of reporting required. These are summarised in the table below. Look beneath the table for further information on key terms.

Scope

Option 1

Option 2

Option 3

Option 4

 

Quoted UK companies (current set up)

Companies using >6 GWh of electricity

Large organisations (see who will be affected above)

Large organisations (see who will be affected above)

Approx. number of organisations

 

4,000

9,100

9,100

Onsite energy use (UK only)

 

Electricity and Gas

Electricity and Gas

Electricity and Gas

Transport energy use (UK only)

 

Yes

Yes

Yes

Emissions from UK energy use

 

Yes

Yes

Yes

*Intensity metric

Via M-GHG Reporting

Yes

Yes

Yes

Global GHG emissions (quoted companies only)

 

Via M-GHG Reporting

Yes

Yes

Yes

Global total energy use (quoted companies only)

 

Yes

Yes

Yes

Scale of, and progress against, energy efficiency opportunities

 

 

 

Yes

How will we be required to report?

The consultation proposes that the information be reported in the annual reports as lodged on Companies House. The government proposes that the information be reported electronically.

Where can I find the full consultation document and lodge my response?

https://www.gov.uk/government/consultations/streamlined-energy-and-carbon-reporting