IN MAY, 2007, the Government published the Energy White Paper which heralded a decision to implement a new emissions trading scheme. The scheme is called the Carbon Reduction Commitment, or CRC, and on April 1, 2010, this scheme is set to become law.
CRC is a mandatory emissions trading scheme which aims to cut CO² emissions by ensuring that qualifying organisations purchase allowances which will (initially) be priced at £12 per tonne of CO². The idea is that allowances are purchased at the start of the year, equivalent to the intended energy usage that year.
From April, 2013, allowances will be traded on the open market and the amount of allowances available will be steadily reduced, meaning that the price per allowance increases over the years.
Qualifying organisations that reduce their CO² output will be rewarded by having to purchase fewer allowances and may receive a recycling payment, dependent on their position in a league table. The introductory phase of the scheme will apply to larger retailers or businesses whose electricity use through half-hourly meters was greater than 6,000 megawatt hours during 2008. Starting next month, all commercial buildings with half-hourly meters will be contacted. Businesses will need to engage with their energy suppliers in order to provide the data required for registration.
Almost certainly, commercial landlords with large property portfolios will at some point fall within the scheme, and serious thought does need to be given now to what basis they plan to pass on the cost of allowances to their tenants. It may be that existing leases don’t allow for that, which may leave the landlord a gap in the recovery of their own expenses. Further difficulties are expected in apportioning responsibility for scheme payments on the sale of investment properties. A landlord who is part of a scheme might not look favourably on bringing an investment into their portfolio where the leases within a particular building don’t provide for recovery of expenses.
The implications of the CRC scheme will be with us in no time, and landlords and tenants now need to prepare.
