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Retail sector to be hit by carbon reduction commitment

Savills has advised that both landlords and retailers will be impacted by the governmentÂ’s Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.

GENERAL MERCHANDISE

Retail sector to be hit by carbon reduction commitment

The new initiative, which aims to deliver £1 billion a year in energy savings and save more than 4.4 MtCO2 of annual emissions by 2020, could see a typical 500,000 sq ft (46,451 sq m) shopping centre realise a cost implication of up to £65,000 pa in the first phase (2010-2013).

The international real estate advisor warns CRC will impact approximately 5,000 medium to large organisations with moderate levels of energy consumption being affected, including retailers. Savills advises both landlords and tenants on the key guidelines of the scheme.

Daryl Pope, associate director in Savills building consultancy team, comments: “For the retail sector the CRC represents an opportunity to focus on implementing sustainability going forward to reduce bottom line costs. The financial impacts for participants may provide new opportunities to improve business performance whilst becoming more transparent with regard to energy and carbon reporting. Both landlords and tenants maybe effected, therefore it is essential to have an understanding of CRC allowances as early as possible.”

The criteria for the CRC participation is companies that consumed more then 6,000 megawatt hours (MWh) of electricity on a half hourly meters in 2008. Savills advises effected organisations to act early by taking the following actions:

• Retail landlords and tenants need to be having clear and transparent discussions regarding participation going forward.
• A secure framework of understanding and delivery is essential to ensure that energy reduction targets are being met.
• Landlords may find that incentivisation is key to encouraging tenants to sign up to new contracts regarding CRC.
• Organisations need to implement CRC technologies such as Automated Meter Reading (AMR), Sub Metering, and Third Party Independent Carbon Emissions Verification. These technologies will help companies achieve the Early Action Metric on the performance league table.
• A consultation held on the CRC in October introduced a new policy in which large significant entities within larger organisations can participate in the scheme separately. Eligible retailers should consider the benefits and risks of individual participation.

Phase one of the scheme, operating from 2010 to 2013 will set a fixed price allowance of £12/tCO2, while phase two, starting in 2013 will operate via a market auction price arrangement. The CRC will measure and report performance and emissions on a league table using three “metrics,” Absolute, Growth and Early Action. Companies that fall under the Early Action category will earn the most credit for their participation.

Daryl continues: "Whilst the new CRC Energy Efficiency Scheme may be viewed by some retailers as an additional administrative and financial burden, participation has the potential of adding significant value to existing and future retail business operations.  Retailers should adopt an approach that takes advantage of carbon reduction opportunities thereby delivering both cost reductions and emissions transparency. With so many well known brands in the sector it is likely that customers will continue to recognise and support organisations that make an effort to participate in the scheme and cut their carbon emissions.”

With only five months left until the scheme begins both landlords and tenants need to be familiarising themselves with the scheme and reviewing data submission requirements. Organisations must register their participation by 30 September 2010 or face a penalty of £5,000 plus £500 per day for non compliance thereafter. The government has confirmed it will publish the final CRC Order by the end of 2009.

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