Are you ready for the new streamlined energy and carbon reporting framework?

 

Businesses are generally now used to the CRC scheme and are coming to grips with ESOS (the Energy Savings and Opportunity Scheme) but from 1 April 2019 a new regime will apply, which to a certain extent replaces the reporting elements of the CRC scheme.  The CRC scheme will end on 31 March 2019 with the last allowances having to be purchased and surrendered under that scheme in October 2019.  The revenue from the early closure of the CRC scheme is to be recovered by increasing the main rates of the Climate Change Levy.

 

The Government published its Streamlined Energy & Carbon Reporting (SECR) consultation in October 2017 inviting responses as to the closure of CRC and looking at combining elements of the CRC and the mandatory greenhouse gas emissions (GHG) reporting for UK quoted companies into a new reporting requirement.  The Government has now published its response to that consultation together with draft regulations to introduce the new SECR framework for reporting.  The regulations are due to come into force and have effect in respect of financial years beginning on or after 1 April 2019.

 

The draft regulations will require reporting on GHG emissions (note that the scope of these is wider than under CRC), energy consumption and energy efficiency action and will apply UK wide.  It will apply to:

 

  • UK quoted companies – new requirements re energy consumption and energy efficiency action
  • Large UK incorporated unquoted companies – note this uses the Companies Act 2006 definition of “large company” and not the ESOS definition. So it will cover companies that meet 2 or more of the following  criteria within a financial year:
    • the company has at least 250 employees, or
    • an annual turn over greater than £36million, or
    • an annual balance sheet greater than £18 million.
  • Limited liability partnerships (LLPs) who meet the above criteria – through the equivalent of a directors’ report, to be called an energy and carbon report.
  • Unregistered companies that are already required to prepare a directors’ report

 

The Government decided not to use the CRC threshold of 6,000 megawatt hours of annual electricity use as the criteria for the new regulations but by making the criteria differ to the threshold for ESOS this does add another complication for businesses to wade through.  It should be noted that organisations who consume 4,000 megawatts or less during the 12 month period will be exempt from the SERC reporting framework.  Companies will also be exempt if the disclosure requirements would be seriously prejudicial to the interests of the company or the LLP.

 

The reporting requirements do differ depending on the type of organisation.  For UK quoted and unquoted companies they will be required to disclose scope 1 (direct) and scope 2 (energy direct) greenhouse gas emissions and an intensity metric, i.e. an expression of the company’s annual emission in relation to a quantifiable factor associated with the company’s activities, e.g. emission per sales revenue.  UK quoted companies additionally will be required to disclose global energy use.

 

Unquoted companies will be required to disclose total UK energy use.  In addition companies caught by the regulations will be required to provide a narrative commentary on energy efficiency action taken in the financial year, if any,  but will not be required to disclose ESOS recommendations and actions, which under the ESOS regulations are not publicly disclosable.  The reporting requirements for large LLPs mirror those that apply to large unquoted companies.

 

There is no prescriptive method of reporting and guidance is not expected until January 2019 but businesses should start to put in place now systems for monitoring and capturing the relevant data so that they will be able to comply with the regulations as from 1 April 2019, bearing in mind that the scope of emissions covered by SERC is broader than that under the CRC scheme, e.g. transport is included.

 

It will be an offence to fail to meet the SERC obligations with the imposition of fines for such failure.

 

For more information and assistance in complying with the new SERC regulations, or any energy efficiency regulations, please contact Linda Fletcher.