Worries about flaws in the UK’s Carbon Reduction Commitment (CRC)

Posted by John Stanley

The UK’s data center industry has shown great concern regarding its pending regulation under the government’s Carbon Reduction Commitment (CRC) legislation. Following a March 1 meeting by two major industry groups, the IT industry may instead ask the government to regulate data centers’ carbon footprint under an alternate set of rules called Climate Change Agreements, which apply to certain energy intensive industries. (For readers interested in more details, this is discussed at length in a recent report by The 451 Group.)

While, I am generally wary any time any industry begs the government for special exemptions from environmental rules, the critiques of the CRC raised by UK data center operators make genuine sense. There are significant problems with the CRC’s design that create perverse incentives and could fail to drive genuine emissions reductions.

UK IT industry group Intellect released a document airing some of its concerns last summer (available here), and industry groups like The Green Grid and the British Computer Society (BCS) have also raised critiques. (Several other good posts echo CRC critiques as well–see posts from BusinessGreen, Computer Business Review, and a subsequent post by Intellect.)

There are at least three problems with the rules as they stand:

First, the CRC scheme encourages companies simply to “dump” their carbon footprint elsewhere by outsourcing data centers and other energy intensive operations to places with lax rules. This doesn’t do much for global emissions, and may even worsen emissions if operations move from places with cleaner power to coal-heavy areas like China and India.

Second, the CRC penalizes business growth, even if that growth comes with vast efficiency improvements. So, if you implement efficiency improvements to cut your energy per customer by 1/3, but your customer base doubles, then you still get dinged because your total emissions have gone up.

In addition, the UK’s Climate Change Act rules also disallow data center operators from getting credit for on-site renewable energy, unless they forgo the government subsidies that renewables can often get. (See article in eWeek Europe.)

All of these are legitimate concerns, from an IT industry that appears to have genuine interest in cutting its environmental footprint. However, these concerns also present a public policy conundrum, for reasons I will discuss in a subsequent post.

In the mean time, we’ll see if the IT industry is successful in lobbying the government to be regulated under via the scheme of Climate Change Agreements, rather than the CRC rules.