Regional development agency, One North East commissioned energy consultancy TNEI Services to run a 12-month simulation of the CRC scheme to give organisations in the region a head start and help them prepare for the new laws. One of the key aims is to reduce the risk of North East organisations incurring unnecessary penalties and accelerating the region’s drive to deliver significant carbon reductions.
Around 30 organisations in both the public and private sector are taking part in the year-long simulation involving energy and carbon reporting, virtual carbon trading days and compilation of performance league tables to practically demonstrate what will be required under the new legislation.
The lessons being learnt from the simulation are helping participating organisations prepare for the legislation and identify “quick wins” that will improve their position in a carbon performance league table that will form a key part of the CRC Scheme, when it goes live next year.
Virtual online auctions held as part of the simulation have revealed that when trading for carbon allowances many organisations could be exposed to unnecessary financial risk and potential cash flow problems. In general, the trading teams have no clear purchasing strategy and lack the purchasing power to secure carbon allowances at a reasonable cost, with the result that if the trading was real, companies would have lost significant amounts of money.
One of the most serious issues identified was how to account for the money needed to buy carbon allowances, which in some cases will amount to hundreds of thousands of pounds, as well as recognising the impact this will have on cash flow and profitability.
Other feedback from the simulation has focused on the need to appoint a “CRC Team” to take joint responsibility for their organisation’s compliance spanning senior management, finance, energy management and possibly the legal department because of the serious liabilities involved in the CRC.
Helen Nisbet, Project Manager for the CRC Simulation at TNEI explained:
“Companies participating in the simulation have shown a foresight and understanding that this legislation needs to be taken seriously. They should be given credit for preparing for the full impact of the CRC and their early action will stand them in good stead for the real thing.
“We would urge all companies and organisations that may be affected by the CRC not to underestimate the resourcing issues of measuring, managing and reporting carbon emissions. Ultimately there will be both financial and resourcing costs that need to be budgeted for.’
There are still opportunities for organisations to identify “quick wins” that will deliver long term savings under the CRC Scheme next year and make a significant impact on their performance in the carbon league table.
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