The Carbon Reduction Commitment is due to launch in April 2010 and will affect around 5,000 UK businesses. Each business will be required to buy allowances equal to their projected carbon dioxide emissions from energy use. Government will control the number of allowances available.

Ultimately, allowances will be sold via an auction process with  auction revenues being recycled to businesses. Rewards and penalties will be applied depending on performance.

The CRC will apply to approx 5,000 businesses with an annual (half hourly metered) electricity consumption of 6 GWh (6 million kWh) or more. This equates to around £500,000 annual spend at current electricity prices.

The UK government is looking to reduce carbon emissions by 1.2 MtC (million tonnes carbon) from these businesses by 2020.

The CRC is intended to drive businesses to reduce carbon dioxide emissions from energy use by adopting energy efficiency and energy management techniques.

Businesses will be exempt  from the CRC scheme if they are already covered by the European Union - Emissions Trading Scheme (EU - ETS) or if more than 25% of their carbon emissions are covered under a Climate Change Agreement (CCA).

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