Streamlined Energy Carbon Reporting
The streamlined energy and carbon reporting regulations (SECR) tax comes into effect in April 2018, but thousands of companies are oblivious to their requirements under this act.
The SECR will replace the Carbon Reduction Commitment (CRC), a mandatory carbon emissions reporting and pricing scheme to cover large public and private sector organisations in the UK that use more than 6,000-megawatt hours a year of electricity.
The main difference with the SECR compared to the CRC is that energy information must be included in annual reports. The only exclusions for organisations meeting these criteria are for those with very low energy consumption of fewer than 40,000-kilowatt hours a year.
There are no exemptions or exclusions for companies holding Climate Change Agreements (CCA) or participating in EU ETS.
The SECR will apply to all large companies, up to 15,000 in number:
> More than 250 employees
> With an annual turnover of £36 million and a balance sheet greater than £18 million.
Carbon and energy reporting set to be streamlined – November 7, 2017
The government is consulting on a new “streamlined” energy and carbon reporting framework to replace existing schemes. The new framework will aim to improve the way that businesses report their energy use, while providing them with information to identify how they can reduce their bills. It was one of the pledges made within the Clean Growth Strategy, with the consultation also released on 12 October. The proposed package seeks to reduce administrative burdens, raise awareness of energy efficiency, lower bills and save carbon.
The Current Landscape
At present, 5,200 individual eligible businesses and public sector organisations annually report UK energy use and purchase allowances to cover carbon emissions under the CRC Energy Efficiency Scheme. However, this is set to be abolished once the current phase ends in March 2019 – with the government’s simplified framework to be introduced the following month. The Energy Savings Opportunity Scheme (ESOS) also sees large undertakings audit their energy use, while many businesses also voluntarily participate in other reporting schemes – including the CDP.
However, writing in her ministerial foreword, Climate Change Minister, Claire Perry explained that while many companies were reporting emissions, there remained an information gap. This is made pressing with investors wanting greater disclosure so energy and climate risks and opportunities can be accurately priced and factored into their decisions.
The Way Forward
Views are being sought on mandatory annual reporting and disclosure of energy and carbon information, who these requirements should apply to, reporting of cost-effective energy efficiency opportunities and actions taken on them, complementary disclosures and electronic reporting.
The options under consideration include for reporting to remain as mandatory for all UK quoted companies and to then become mandatory for either all large UK companies that are formed and registered under the Companies Act 2006 and their corporate groups; UK companies that use more than 6GWh of qualifying electricity in a year; or UK companies that use a different energy use threshold.
It is likely small companies and groups will be exempt, even if they meet the 6GWh threshold while organisations that are outside the scope of mandatory reporting are encouraged to participate voluntarily. Another approach being considered is targeting mandatory reporting to a subset of businesses, avoiding additional burdens for companies that may not yet be familiar with energy and carbon reporting.
Potential benefits include savings of over £2bn annually on business energy bills. Views are sought by 4 January 2018.
This is another sign the government is looking to target business emissions, in line with the Clean Growth Strategy. Moves towards simplified reporting will be welcomed.
The Catalyst View – Next Steps
The outline of the makes for an interesting proposal, which reinforces the probability that CRC will be abolished and replaced by something much more ambitious.
Whatever the outcome of this consultation process, it is clear that the number of companies that will be required to include emissions and energy consumption in their annual reports is set to grow.
However along with this, we are likely to see an increase in subsidies to encourage the decarbonisation of heating, such as the Industrial Heat Recovery Support Programme or Heat Networks Investment Project (HNIP) currently under review.
For those companies already captured under the CRC or might qualify for a new scheme by virtue of size or energy usage should monitor developments closely.