There are 48 days to go and only 1229 of the large public and private sector organisations required to register their businesses under the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) have thus far done so. As noted by Citi’s Meredith Gibson last month, the data management requirements of the UK Environment Agency’s new mandatory carbon emissions trading scheme are fairly complex, involving the tracking of the reference data on the assets firms hold and those held by their subsidiary entities, which could be a reason why many financial institutions have failed to register.
Under the new scheme, which kicked off in April this year, the UK Environment Agency is asking firms to register their organisational structure in order to determine their carbon emission allowances. The deadline for registration with the agency is 30 September and the UK’s Energy and Climate Change Minister Greg Barker has already sounded the warning call for those lagging behind.
“This new coalition government wants to boost energy efficiency in business because we know that saving energy saves money. The CRC will encourage significant savings through greater energy efficiency and importantly will make carbon a boardroom issue for many large organisations. My message to businesses today is to register now. I understand the original complexity of the scheme may have deterred some organisations and I want to hear suggestions as to how we can make the scheme simpler in the future,” he said earlier this week.
It is hoped that the CRC will help to ensure that organisations play their full role in contributing to the UK’s emissions reductions of at least 34% on 1990 levels by 2020 through improved energy efficiency. But this necessarily requires firms to go through the reference data nightmare of determining their current standing with regards to their carbon allowance by registering what they own and where.
As indicated by Barker, the scheme has also come under fire for its perceived complexity and the vagaries around entity ownership. As noted by Citi’s Gibson, who is senior vice president and counsel at the firm, the ‘ownership’ appears to sit where it is easiest to track, but possibly not where it ought to sit in terms of legal ownership. This is likely a key point of feedback that should be filtered back to the Environment Agency in order to highlight the reference data impact of the scheme.
Moreover, for financial institutions faced with a barrage of new regulatory requirements, the CRC’s reference data project doesn’t directly involve customers or instruments such as securities and therefore has to stand alone. The scale and complexity of the projects will also depend on how each institution has structured itself and the type of activities it is involved in. Those firms with a lot of investment activity will probably find it trickier than those with a simpler corporate structure.
Given that the Environment Agency is not looking to be punitive in the first instance but it has warned that it will be visiting and auditing people, a large number of financial institutions will likely opt to wait and see how long they can get away with non-compliance.