Member Article

The British Property Federation (BPF) has published a guide for landlords and tenants explaining the Government's proposed Carbon Reduction Commitment (CRC), and illustrating how expected additional costs might be shared.

Around 5,000 large public and private organisations are likely to be full participants in CRC, and it has been estimated that energy costs will increase between 7% and 15%. The introductory phase is due to start in April 2010.

The basic premise is that organisations with significant energy demand should pay for the carbon emissions they produce, following the 'polluter pays' principle.

If a landlord is a full participant in CRC and the energy contract is in the landlord's name, the landlord will have to account for the emissions even though the energy has been used by its tenants.

An organisation will be a full participant in CRC if it has one or more half-hourly electricity meters settled on the half-hourly market and its total half-hourly metered electricity use in 2008 was at least 6,000 MWh.

Subsidiary organisations and their parents are grouped together for CRC. The highest UK parent body will need to consider the energy use of all its subsidiaries to assess whether the group as a whole is included in the scheme.

Once in the scheme, an organisation will have to account for emissions from gas and other fuel types such as coal, LPG and diesel, as well as from electricity.

CRC targets carbon emissions at an organisation level not at site level, so there will be a further administrative burden on landlords to calculate the additional cost involved on a site-by-site basis. This may deter some landlords from attempting to allocate the cost of CRC participation amongst its tenants. Also, the wording of existing leases may prevent landlords from recovering this new cost.

The BPF guide considers how the cost of CRC can be apportioned between landlords and tenants and issues that are likely to arise when the ownership of a building changes. No drafting is suggested at this stage because the final form of the regulations for CRC will not be known until October.

 

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