In July 2018 the UK government announced its proposed approach to simplify the energy and carbon reporting framework for business and industry. This is being put in place to replace the CRC Energy Efficiency Scheme with a new streamlined energy and carbon reporting (SECR) framework.
Why is the SECR framework being implemented?
Currently, the energy policy framework is complex, as organisations can be in scope of multiple policies such as CCL, ESOS & MGHG reporting, EU ETS, CCAs, CRC.
The new SECR framework’s purpose is to simplify the policy landscape and reduce administrative burdens on participants. A package of changes was announced at Budget 2016, consisting of the following:
- The closure of the CRC Energy Efficiency Scheme (CRC), from the end of the 2018-19 compliance year.
- The increase in Climate Change Levy (CCL) rates from April 2019 and rebalancing CCL rates for gas and electricity.
- The introduction of a SECR Framework.
Closure of CRC and increase in CCL
The government announced its decision to close the CRC following the 2018-19 compliance year, (ending in April 2019). Organisations will report under the CRC for the last time by the end of July 2019, with a surrender of allowances for emissions from energy supplied in the 2018-19 compliance year by the end of October 2019.
At Budget 2016 the Government announced that the main rates of the CCL will increase from April 2019 to offset the loss of revenue from closing the CRC.
|Taxable commodity||Rate from 1 April 2017||Rate from 1 April 2018||Rate from 1 April 2019|
|Natural gas (£/kWh)||0.00198||0.00203||0.00339|
|Any other taxable commodity (£/kg)||0.01551||0.01591||0.02653|
This involves the ratio of the electricity CCL rate to the gas CCL rate changing from 2.9:1 to 2.5:1 from April 2019. In the longer term, the government announced its intention to rebalance CCL rates to reach a ratio of 1:1 (electricity:gas) by 2025.
Who needs to comply with the SECR framework?
The SECR framework will apply to an estimated 11,900 companies across the UK, which compares to around 4,000 businesses that responded to CRC Energy Efficiency Scheme.
The following businesses will need to comply with the new reporting requirements:
- Quoted companies. This is the same group companies already required to report under mandatory GHG reporting requirements.
- UK registered, unquoted large companies. This refers to companies that fulfil at least two of the following conditions in the financial year they are reporting:
- at least 250 employees;
- an annual turnover greater than £36m; and/or
- an annual balance sheet total greater than £18m.
- Organisations which are not registered as companies, for example public sector organisations, some charities and some private sector organisations, may not be in scope.
When can a company be exempt from reporting?
- A statutory de minimis for companies that can confirm their energy use is 40,000 kWh or less over a 12-month period.
- If it is impractical for a company to obtain some or all of its global energy use then this does not need to be reported, so long as the excluded information is clearly stated, with justification of why this has been done.
- In some cases, publicly reporting on energy use could be deemed to be commercially sensitive information. This can be used by the Directors as justification for an exemption.
What will companies need to report?
- Continue to report their global scope 1 and 2 GHG emissions and an intensity metric, and additionally start to report their global total energy use.
- Report their energy use and emissions relating to gas, electricity and transport, and an intensity metric, through their company’s annual reports
- Provide a commentary on any energy efficiency action taken in the previous financial year.
How will companies report?
Qualifying companies will need to report in line with the SECR framework in the directors’ report or equivalent section contained within their annual report for financial years beginning on or after 1 April 2019.
Electronic reporting for SECR will currently be voluntary from 2019, as it is currently not mandatory to for directors’ reports to be submitted electronically. However, the government intends to keep this under review and mandatory electronic reporting could be an option in the future.
What affect will the SECR framework have?
- Companies that are not eligible to claim a climate change agreement will be most affected by the changes and will see increased CCL rates (offices and SMEs).
- The increase in the gas CCL rate and planned future increases, relative to electricity, is likely to drive organisations to substitute gas energy for electricity, thereby reducing associated emissions.
- CHPQA accredited CHP stations are exempt from CCL charges – this makes then more attractive as they will generate greater savings.
- Organisations which are not registered as companies, for example public sector organisations, some charities and some private sector organisations, may not be in scope of the SECR framework.
Carbon Architecture can provide assistance in the deciphering of carbon taxes. If you would like any further information or advice please contact Tim Roebuck (firstname.lastname@example.org).