Up until the fall of 2008, businesses in the European Union (EU) and in particular the United Kingdom (U.K.) were preparing for new legislation on the emission of green house gases. When the global financial crisis struck, carbon lost its number one spot at the top of the list of corporate priorities. It didn’t take long, however, for businesses to realize that being ‘green’ by reducing energy use (and thus CO2) also saved them money. As a result, the financial crisis gave many CO2 programs a new lease of life, an injection of momentum from the senior execs charged with cutting costs.
The U.K. was the first country in the world to pass into law carbon reduction legislation targeting secondary emitters of carbon. Policymakers wrote the U.K.’s Carbon Reduction Commitment Energy Efficiency Scheme (CRC) as a result of this law. The CRC became fully effective in April 2010. The EU has had carbon cap and trade for almost three years now but it was targeted only at the primary emitters of carbon, the power generation companies, and extremely large industrial emitters of carbon (iron and steel smelting for example), rather than everyday businesses that happen to use a great deal of energy. U.K. CRC is designed specifically to target that second group.
The advent of carbon trading on an international scale means that it is only a matter of time before almost every energy-intensive nation has a plan similar to the CRC. Many proponents say carbon trading has much more to do with energy security than climate change. The scientific evidence around climate change is hotly disputed, and while global warming provides a nice public relations cover, most western governments worry about the continuity and scarcity of raw materials with which energy can be generated.
Remaining fossil-fuel supplies are limited, and much of that supply can be found in impoverished or politically unstable countries. Alternatives need to be found, and technology needs to be made viable for nations such as the U.S., which is the world’s largest consumer of oil.
The question is whether mechanisms such as U.K. CRC are the right way to go about slowing down consumption of energy as well as reduce greenhouse gas emissions. Can regulatory mechanisms have any material impact on the growth in energy use and poor energy-efficiency figures published every day, particularly in the ICT and data center sector?
First, U.K. CRC targets organizations based on their energy consumption. If a business draws more than 600 kilowatt (kW) instantaneous load across the enterprise (roughly 6000 MWh per annum) then the organization is captured within CRC and required not only to report its carbon emissions but also to purchase carbon allowances from the government. Interestingly this applies across all sectors, private, public, education, health care, etc. The only real escape clause is for organizations already signed up to a climate change agreement, a sector-based agreement to reduce green house gases, or for organizations already within the European Emissions Trading Scheme (EU-ETS).
ICT and data centers are not specific targets of the CRC but inevitably fall foul of the rather low energy consumption trigger that puts organizations into the scheme. Enrollment requires annual reductions of carbon emissions, and even though some growth is permitted (for growing businesses) the growth metric, as it’s called, is capped at 25 percent per annum.
The CRC does not allow businesses to pass on carbon liability. A colocation provider, for example, is liable for all the energy (and thus carbon emissions) produced. These obligations cannot be passed down to customers. Basically, the company incurring the energy bill is the one legally required to report and reduce carbon emissions under the scheme.