CRC Energy Efficiency Scheme – double purchase of allowances

With the deadline for purchasing CRC Scheme allowances approaching, those participating in both phases of the CRC Scheme (that is the ‘Introductory Phase from April 2010 to March 2014 and the ‘Initial Phase’ from April 2014 to March 2019) should be aware of the potential need to purchase allowances twice in 2014. This is because of the way the first two phases of the CRC Scheme overlap.

Participants will need to order and purchase allowances between June–September 2014 for the fourth and final compliance period (2013-2014) of the Introductory Phase. However, participants could also be purchasing allowances for the first compliance year of the Initial Phase around the same time.

The recent changes to the CRC Scheme and reflected in the current Initial Phase, mean that participants now have two opportunities in each compliance period to purchase government allowances -  the cheaper, forecast sale at the start of the compliance year and the buy to comply sale at the end of the compliance period.

Those participants keen to make the most of the cheaper costs of allowances in the forecast sale, will need to pay for ordered allowances by 20 June 2014.  The price of allowances in the forecast sale is £15.60 per tonne of carbon dioxide/per allowance, which although cheaper than the buy to comply price of £16.40 per tonne of carbon dioxide/per allowance, is still more expensive than the £12 per tonne of carbon dioxide/per allowance in the Introductory Phase.

This potential need to purchase double allowances in 2014 could create cash flow consequences for participants, so they may need to plan accordingly.

Alternatively, participants could instead purchase their allowances for the first compliance period of the Initial Phase, in the buy to comply government sale of allowances between June – September of 2015, thereby avoiding the double purchase of allowances this year. While this may free up cash in this year, participants will end up paying more for allowances overall.

Filed Under: Environment

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