What is the UK Carbon Reduction Commitment?

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The UK Carbon Reduction Commitment may sound fairly innocuous yet it represents legislation with some fairly significant and sharp teeth. The Department for Energy and Climate Change is quite serious about the implementation of this new law and there are hefty penalties ahead for those who, either way, do not fully understand or do not fully comply with its requirements.

Over the last few years there has been a lot of activity as part of a rush to address the issues of global warming and climate change. Greenhouse gas emissions must be curtailed, it is reasoned, or significant additional harm will be caused to our overall environment, impacting all forms of life on the planet.

The UK Carbon Reduction Commitment is a British based initiative, which is anticipated to provide a model for the rest of the world. The US Environmental Protection Agency announced shortly after introduction by the UK Department that they plan to introduce a similar scheme.

The new laws set out to ensure that the greenhouse gas reduction targets established by the Climate Change Act are adhered to. The Commitment establishes an auction-based emissions trading scheme and its reach is mandatory.

Many commercial enterprises within the UK seem somewhat confused. It is estimated that 20,000 UK firms will have to submit an information disclosure and a significant portion will have to pay fees and participate in full by the summer of 2010. As such, to avoid hefty penalties, all enterprises within the United Kingdom should consider whether they are are affected by these new regulations.

The government requires that it be notified by eligible businesses about their energy consumption needs and it will be necessary to buy credits from the government to cover anticipated requirements. This process will take place on an annual basis. For each credit that is purchased, one credit will be lost per tonne of greenhouse gases admitted through the enterprise’s use of energy. It will be possible to trade the company’s unused credits to other participants in the scheme or to put them into a “bank” for future use.

All participants are encouraged to demonstrate a saving in their energy consumption and will be eligible for a cash bonus provided by the government should they do so. Either way, performance records will be made available in a highly publicized set of reports. The entire concept is expected to be “revenue neutral” to the Chancellor of the Exchequer, the British government’s revenue chief.

Companies, charities and government bodies should sit up and take notice to see whether they are affected by these regulations. Even though the full details of the regulations are still not 100% clear, each enterprise should immediately determine whether they are affected, whether they must participate and then should start to prepare for the collection of necessary information.

The UK government is fully committed and intends to ensure that the business world is similarly engaged.

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