The consultation issued by Government in early November proposes emission reduction measures targeted at large energy users such as supermarkets, hospitals, large offices, hotel chains and large local authorities with an electricity consumption higher than 3000MWh (equivalent to annual electricity bills over £250,000 at current energy prices). The aim is to encourage investment in energy efficiency.
The measures proposed range from compulsory participation in an allowance trading scheme, to be known as the Energy Performance Commitment (EPC), to voluntary reporting. The consultation also proposes changes to building regulations, industry agreements and enhancement of information provision to business.
The EPC, which would run on annual basis, would consist of a mandatory cap and trade system, in which participating organisations would have to purchase allowances corresponding to their emissions from energy use and then surrender them to a co-ordinator. In the introductory phase the price of allowances may be fixed at £8 per tonne of CO2 with no volume cap. In later phases prices would be set by auction and trading and the number of allowances would be capped. The cap would decline each year so as to help deliver carbon emission reductions totaling 1.2 million tonnes of carbon per year by 2020.
The EPC would only apply to organisations whose sites are equipped with half hour electricity meters, who are outside the scope of Climate Change Agreements (CCAs) and the EU Emissions Trading Scheme (EU ETS) and would not apply to organisations that have more than 25% of their energy use emissions covered under CCAs.
The second proposal given detailed treatment in the consultation is, by contrast with the EPC, voluntary. A system of voluntary benchmarking and reporting of energy use would be introduced, in which participating organisations would agree to report their energy use as well as other information required to make a comparison relative to an energy or emissions performance benchmark. The aim is to focus attention on energy use and improve the availability of information to inform decision-making. The consultation recognises that the challenge will be to achieve the level of participation and enthusiasm needed to deliver carbon emission cuts.
The deadline for responses to the Consultation is 31 January 2007.