The government’s Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES) comes into effect today.

The scheme aims to provide a financial incentive for businesses to improve their energy efficiency and reduce their power consumption. It was developed by the Department of Energy and Climate Change (DECC),

Although the scheme officially launches today, businesses have until September to register. The registration cost is £950, and if businesses have not registered by then, they will receive an immediate fine of £5,000.

Under the scheme, businesses with a half-hourly electricity usage of more than 6,000 megawatt-hours will have to buy ‘allowances’ based on the level of usage. The performance of organisations will then be published as a league table.

According to the DECC, all revenue raised from the sale of allowances will be recycled back to the businesses. Those who have performed the best in increasing energy efficiency, and therefore appear in the top part of the league table, will receive a higher share of this money. Organisations can also sell unused allowances to other participants in the scheme.

The CRC EES has been driven by the government’s aim to reduce UK emissions by at least 34 per cent on 1990 levels by 2020. UK emissions are currently 22 per cent down compared with 1990. However, the government expects the initiative to deliver emissions savings of at least 4.4 million tonnes of CO2 per year, saving businesses around £1 billion per year by 2020.

A recent study, carried out by consultancy Smart Sustainability, claimed that carbon and sustainability data disclosed by companies in the FTSE 350 lack credibility.

Meanwhile, in February, the DECC denied claims made by IT services company Morse, which said that there were ‘loopholes’ in the CRC. The company claimed that the scheme encouraged offshoring by not taking into account the power businesses use outside of the UK.