The CRC, a new UK carbon trading scheme, comes into force in just over one month’s time.  The H&L sector is a major consumer of energy and faces particular challenges under the scheme.

Broadly, H&L businesses with electricity bills over £500,000 in 2008 will qualify for the scheme, for which registration starts in April.  Once in the scheme, these businesses have to buy allowances to cover their annual indirect emissions (or total energy consumption).

To work out which parts of your business qualify, you have to aggregate energy consumption across your "Group" and, in the case of franchise operations, your group is deemed to include the operations of your franchisees (as the regulations attach a special meaning to franchises, it may be that some brands fall outside the scope of the CRC).

The costs of the scheme could run into millions of pounds a year, but we have been working with clients on innovative ways to mitigate these costs.

Certainly, it is going to be critically important for owners, operators and brands to understand how aggregation will work for them and to decide how this should be addressed in management and franchise agreements in the future.

If you would like more information on the CRC and how we can help you with this, please speak to Michael Hutchinson of our Environment Group in London (tel: +44 20 3130 3164; email: or your usual Mayer Brown contact.