By David Goatman, head of sustainability at Knight Frank

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If you work for a local authority then you will be affected by the Carbon Reduction Commitment, the UK emissions trading scheme that comes into force on 1 April 2010.

Here are five tips for you to focus on:

1) Learn what CRC is

If you are a local authority or a central government department, you will be in the CRC Energy Efficiency Scheme.

This is a compulsory carbon emission cap and trade scheme for all organisations using over 6,000MWh of electricity per year. You will be required to buy an allowance for each tonne of CO2 you emit, initially at £12 per tonne. You will be rewarded for good energy efficiency performance and penalised for poor performance. Over 5 years the bonus or penalty will rise from 10% +/- the cost of allowances to 50% +/-.

2) Look at the opportunities as well as the risks

The scheme uses two drivers to improve energy efficiency (and therefore reduce carbon dioxide emissions): financial and reputational risk.

Good performers will make money out of the scheme. They will get back a greater recycling payment than the cost of the allowances they purchased and they will benefit from lower energy bills. Poor performers will receive less payment back than their outlay on allowances and will have high energy bills.

An average sized local authority will be spending between £1.5m and £2m on allowances in year one of the scheme. This excludes administration and consultancy support costs. This is a significant sum for any public sector organisation and managing cash-flow implications and accurately forecasting emissions to avoid additional allowance purchases on the secondary market will need to be carefully assessed.

3) Remember the CRC league table

In addition to the risks outlined above, an annual league table will be published, giving full transparency to good performers and naming and shaming poor performers.

Clearly, there will be significant competition between local authorities and between government departments. Every public sector organisation should be setting targets as to how they want to perform in the league table relative to peers.

4) Encourage improvements in your schools

One particularly important area for local authorities is the educational estate. For most local authorities emissions associated with the schools in their area will be the majority of their total CRC emissions.

You should look closely at how you can incentivise good energy efficiency in school buildings and what level of managerial control you have over individual and cumulative school performance. This may involve a sharing of the risks and rewards inherent in CRC with headteachers and school management.

5) Start taking action immediately

You will need to register for the scheme with the Environment Agency between April and September this year. You will also need accurate energy usage data from the footprint year April 2010 to March 2011.

In the first year of the scheme league position will be decided by the early action metric more than anything else. So, to do well in year one you should be getting automatic meter reading across as many of your properties as possible. You should also investigate whether you can achieve the Carbon Trust Standard.

Organisations that perform well against the early action metric will be top of the league table in year one of the CRC.

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David Goatman is partner and and head of sustainability at Knight Frank

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