Are you geared up for dealing with the Carbon Reduction Commitment – Energy Efficiency Scheme which comes into force on 1 April this year?  The Scheme is not 'just another' national carbon reduction initiative.  It is an energy efficiency tax scheme with real teeth that can have a serious impact on an organisation's bottom line.  The government has just released the final Order and User Guide.

Non-compliance with the Scheme will attract serious financial liabilities and potential criminal penalties, but there are significant financial and PR benefits in taking early action.  Poor performers will be 'named and shamed' in a national league table.

Few organisations are ready for the big changes ahead and a lot of work is needed to ensure compliance in the short time frame.

Your company could be directly affected by the new rules if it has a large energy bill (as a rule of thumb, at least £500,000 per year).  Before the start date those companies must assess their relevant energy use and must calculate what allowances they need to buy (based on an emissions estimate) for the first phase commencing 1 April 2010.  Group companies will be considered in aggregate.  Smaller commercial tenants could also be affected if their landlord is part of the Scheme.

If you are directly affected, then you should have already drawn up your CRC “coping strategy” as soon as possible.  There are civil (and some criminal) penalties for non-compliance and inaccurate reporting.  If you are a landlord you should start talking to your tenants about compliance.  The Government hopes that landlords will put pressure on tenants to reduce their energy use, and some landlords may seek to vary leases to incorporate the mechanics of the new scheme – so the sooner you agree an approach with your tenants, the better.

If you are a tenant, you should check whether your landlord will be subject to the new regime.  If it is, it might try to pass compliance costs on to you and a review of your lease may indicate whether it will be entitled to do so.

Start discussions now to avoid unpleasant surprises. And if you are in the throes of negotiating, or are about to negotiate, a new lease, make sure that you bear the CRC Scheme in mind and that responsibilities are clearly drawn, to avoid arguments, and expenses, in the future.

For more information on these issues please contact

Jon Ely

or your usual Lewis Silkin contact