Are you paying the right carbon tax?

What is CRC?

The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) is a tax on high carbon dioxide emissions.

RSM found that in over 30 reviews conducted into compliance with CRC, there have been errors in every case. The most common errors included:

  • incorrectly recording the energy supply as actual rather than estimated;
  • incorrect estimation techniques;
  • recording the meter profile/ type incorrectly such that the supply is included/ not included;
  • meter failure; and
  • typographical error.

What are the repercussions for inaccurate reporting?

There are imposed fines for late delivery of, and inaccurate annual reports. Fines for inaccuracies are charged at £40 per tonne, considerably higher than the tax rate.

Alongside this financial burden however, is the reputational damage caused by publically failing to pay the right amount of tax.

So how confident are you in the accuracy of your energy data?

The amount of tax paid is dependent on energy used and reported to the Environment Agency. Energy use is determined from a number of sources:

  • invoices;
  • annual supply statements; and
  • meter readings.

These sources allow cross checking of data; however there is always scope for error when dealing with multiple supplies and locations.

Involvement in the scheme is determined by an organisation’s energy use. Companies therefore need to monitor their energy use and report their energy supplies annually. The Environment Agency’s reporting system then calculates carbon dioxide (CO2) emissions based on this information.

Participants must purchase and surrender allowances for their emissions. Allowances can be bought at annual fixed-price sales, or traded on the secondary market. One allowance must be surrendered for each tonne of CO2 emitted. The tax rate in 2016/17 is likely to be £17.20 per tonne of CO2 emissions for annual fixed price sales and £16.10 for traded sales.

Have you audited your evidence pack?

The Environment Agency (EA) requires all participants to keep evidence of how they have determined the energy use they submit in an evidence pack which must also be audited. This should outline individual supplies that contribute to a participants' energy use, which supplies are excluded from CRC and how estimated energy use has been calculated. The evidence pack should include the following sections:

  • summary of key emissions data and qualification data;
  • organisation structure;
  • responsibilities (includes nominated officers and written procedures);
  • emission sources (list of supplies and suppliers);
  • annual report (energy supply data, estimated readings, historical reports);
  • special events and changes (changes to officers, supplies, suppliers, company structure, faults and breakdowns; and
  • exclusions (from supply list, transport, domestic and not for own use supplies).

The EA provides comprehensive guidance for participants in CRC including what evidence needs to be recorded. The EA has also provided a series of templates for recording and referencing the evidence. The use of these templates makes it easier to conduct the internal audit as it makes it clear where the evidence can be found. It also makes it easier for the Environment Agency to carry out its own audit.

If you would like to know how RSM can help your organisation better meet its climate change commitments please contact Graham Dalrymple or Marc Mazzucco.