Environmental compliance and reform on the horizon

11th November 2019

What changes are being made to my organisation’s energy obligations?

What is the Energy Savings Opportunity Scheme (“ESOS”)?

The EU Energy Efficiency Directive requires Member States to introduce requirements for “large undertakings” to carry out an energy audit to identify ways to reduce energy consumption. Here in the UK, it has been implemented through the Energy Savings Opportunity Scheme Regulations 2014 (“ESOS”). A “large undertaking” is one with 250 ormore employees or which has a turnover of €50 million and a balance sheet exceeding €43 million.

When should organisations that qualify for ESOS submit a notification of compliance?

Organisations that qualify for ESOS must submit a notification of compliance (including a compliance report) to the Environment Agency (“EA”) by the 5 December 2019 in relation to Phase 2 of the scheme (phase 2 runs from 6 December 2015 to 5 December 2019). Whilst the EA appeared to take a light touch approach to enforcement for Phase 1 of the scheme, it is expected that for Phase 2, a tougher line to enforcement will be taken.

What continuing obligations do CRC Energy Efficiency Scheme (“CRC”) participants have?

In the March 2016 budget, the government announced that the CRC Energy Efficiency Scheme(“CRC”) would close from 31 March 2019 (being the end of the phase 2 compliance year). In our 2018 Key Date article, we outlined how the impact of this would be revenue neutral due to increases in the main rates of the Climate Change Levy, effective from 1 April 2019.

Notwithstanding that the Scheme has been abolished, CRC participants have ongoing obligations that they must have complied with, namely, submitting an annual report for the 2018/19 compliance year by the 31 July 2019, ordering allowances between 1 June 2019 and 31 July 2019, paying for these allowances between 2 and 19 September 2019. Sufficient allowances must be surrendered by 31 October 2019. Additionally, participants must continue to update contact details in the CRC registry until 31 March 2022 and maintain an evidence pack until 31 March 2025. Regulators will continue to carry out compliance audits after April 2019.

What reporting requirements do participants have under the Streamlined Energy and Carbon Reporting Framework (“SECR”)?

Although not a direct replacement for CRC, CRC participants may be subject to similar energy reporting requirements under the new Streamlined Energy and Carbon Reporting (“SECR”) Framework which applies in respect of financial years beginning on or after 1 April 2019. The regime requires additional reporting on GHG emissions, total global energy use and information relating to energy efficiency action by UK quoted companies, large unquoted companies and large limited liability partnerships. This information is to be included in the relevant companies’ Directors’ Reports disclosed at Companies House.

For the purposes of qualification for the SECR, “large” means companies that meet two or more of the following criteria in the relevant year: at least 250 employees, annual turnover greater than£36M and/or an annual balance sheet total greater than £18M. There are however smoothing provisions that apply where a company crosses over one of those thresholds. There are also limited exemptions relating to low energy use and circumstances where making such reports is not practical or would prejudice the company or LLP’s interests.

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What changes are being made to my organisation’s energy obligations?
 

 

 

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