LEGISLATION designed to encourage companies to reduce their energy consumption and so help the UK to meet its carbon reduction targets comes into effect next month.

The new CRC Energy Efficiency Scheme — formerly known as the Carbon Reduction Commitment — is the UK's mandatory climate change and energy saving scheme.

It is accompanied by swingeing fines if companies affected by the legislation fail to register their energy metering with the appropriate Government agencies.

Failure to do so can lead to an immediate fine of £5,000 with a further £500 penalty for each subsequent working day. At the highest level, these fines can escalate to £50,000 with the possibility of imprisonment of culpable directors.

The Government already knows where all half-hourly meters in the UK are located — because the energy companies have already told them — and an enforcement team will audit 20 per cent of these each year to ensure compliance.

So it's a good idea for everybody unfamiliar with CRC to establish what their legal liabilities actually are.

CRC will affect large organisations in both the public and private sector, including all businesses with half-hourly meters. Organisations that meet the qualification criteria, which are based on how much electricity they were supplied in 2008, will be obliged to participate in CRC.

Organisations will have to monitor their electricity usage and purchase allowances initially sold by Government for each tonne of CO2 they emit.

The more CO2 an organisation emits, the more allowances it has to purchase, so there is a direct incentive for these organisations to reduce their emissions.

As well as reducing carbon emissions, by increasing energy efficiency, the Government believes that the scheme will help organisations save money by reducing their energy bills and that these savings should be well in excess of the costs of participating in the scheme.

Annual comparative performance league tables will eventually be published shaming those at the bottom and rewarding those at the top by recycling revenue from selling allowances back to the better performing participants.

Government estimates indicate that around 20,000 public and private sector organisations will be required to participate in some way. The majority of these will simply be required to make a disclosure once every few years providing information on energy consumption.

Around 5,000 larger organisations will be required to participate fully in the scheme involving recording and monitoring their CO2 emissions and purchasing allowances and carbon trading, equivalent to their emissions each year.

Details of the first three-year introductory phase of the scheme include:

Any business that wishes to know more about CRC and its legal obligations to comply can consult the Department of Energy and Climate Change's website www.decc.gov.uk.