Government publishes new plans on business energy and carbon reporting

Details have emerged this month on what may replace the unpopular CRC Energy Efficiency Scheme (“CRC”).

Abolition of the CRC from 2019

Under the CRC, companies consuming significant amounts of electricity must report their energy consumption to the Government through purchase of allowances. Such companies are also required to collate data on their energy use and CO2 emissions and to report such data on an annual basis.

In 2016, following sustained criticism of the complexity of the scheme, government announced that the CRC was to be abolished, effective in 2019.

New Plans

The consultation published this month proposes to replace the CRC scheme with a new energy and carbon reporting regime. If these proposals are realised, qualifying companies will be required to include discrete reporting on energy and carbon emissions within the annual reports filed with Companies House.

Which companies will have to report?

The proposed reporting requirements apply to the following companies:

1. Quoted companies. Quoted companies will continue to be required to report on their greenhouse gas emissions. It is proposed that they should also be required to disclose total global energy use across all energy types. Reporting will continue to be done through companies’ annual reports.

2. Unquoted companies. The government is seeking views on whether the qualification threshold for obligations to report on certain emissions and energy use to apply to unquoted companies should be that the company:

    • is large, either as defined under sections 465 and 466 of the Companies Act 2006 or as defined under the Energy Savings Opportunity Scheme. The consultation explores the impact of using either of these different definitions;
    • meets the existing CRC qualification threshold of over six gigawatt hours of electricity per year, through settled half-hourly meters, excluding Climate Charge Agreements and EU Emissions Trading Scheme supplies. The government notes that the CRC qualification threshold is complex; or
    • meets a different threshold of energy use. For example, the government could set different energy thresholds for each energy product, and a company or group would qualify if it met any one of them.

3. Companies and groups eligible for the small companies regime under sections 382 and 383 of the Companies Act 2006 will potentially be exempt from the new reporting requirements.

Beyond unquoted companies there is an open question as to whether Limited Liability Partnerships (LLPs) should be required to participate. The consultation does not propose extending reporting requirements to the public sector. Public sector organisations are currently subject to the CRC (if they satisfy threshold requirements).

Conclusion

It is clear that the new proposals intend to expand the reporting requirements beyond what is currently covered by the CRC. This will mean an expansion in the number of companies required to include emissions and energy consumption in their annual reports as well as the need for any company of significant size to have careful regard to its obligations, otherwise penalties are likely for those who fail to comply.

Companies that have current obligations under the CRC or that might qualify for a new scheme by virtue of size or energy usage should monitor developments and consider inputting to the consultation.

The consultation closes 4 January 2018.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.