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New carbon reduction commitment rules come into force today

New rules came into effect today pitching the UK’s largest organisations against each other in a drive to cut carbon dioxide emissions.

For the first time large non-energy intensive organisations, which account for about 10 per cent of UK CO2 emissions, will be legally bound to closely monitor and report their emissions from energy use in preparation for carbon trading.

The scheme will pit major construction firms against household names from other UK industries ranking them according to reductions in energy use and improvements in energy efficiency.

Public sector organisations such as NHS trusts, local authorities and government departments will also be ranked.

The Environment Agency said that the scheme could reduce CO2 emissions by up to 11.6 million tonnes per year by 2020 - the equivalent of taking four million cars off the road.

It is also expected to save organisations money through reduced energy bills - benefiting the economy by at least £1billion by 2020.

More than 20,000 organisations will have to register with the Environment Agency by the end of September this year.

Around 5,000 of these organisations - those that used at least 6,000 Megawatt hours (MWh) of half hourly metered electricity in 2008 - will have to report their emissions and, from 2011, buy allowances for every tonne of CO2 they emit.

During the introductory phase in 2011 and 2012, allowances will be sold at a fixed price of £12 per tonne of CO2.

All the money raised from allowance sales will be recycled back to participants according to their energy performance. The best performers will get more money back than they paid, while poor performers will get less.

From next year, the Environment Agency will publish an annual league table highlighting the best and worst performers in CRC.

From 2013 a cap and trade system will be introduced. This will limit the total amount of carbon dioxide these organisations can emit by capping the total number of allowances available and selling them at auction.

A further 15,000 organisations that use less than 6,000MWh, but still have at least one half hourly electricity meter, will be obliged to register and declare their electricity use.

Jonathan Wiese of law firm Rochman Landau said: “The subtlety of the scheme revolves around the pressure which, it is hoped, will be exerted by consumers who wish to avoid organisations which lie in the bottom half of the table.

“Clearly such pressure is likely to be passed on to the construction industry by organisations that require increasingly energy efficient buildings.

“It will fall to the construction and engineering industry to be alive to this likely trend and to ensure that it is ready to advise developers of the need to incorporate energy efficiency into projects from design to construction.”