The government has revealed the final rules for the emission trading scheme that will hit 5,000 UK businesses on 1 April 2010.
The government said the Carbon Reduction Commitment would encourage organisations to reduce their energy use and save a total of £1bn on energy each year by 2020.
Businesses that use more than 6,000 MWh of energy on half hourly meters each year - approximately £500,000 - would be covered by CRC, while those using more than 3,000 MWh of energy still need to report in case they one day fall under CRC. Organisations will be ranked in a league table that rewards the best performers and fines the worst.
DECC said it had made changes to the regulations in response to industry lobbying including:
Organisations will only have to report their energy use in the first year - from April 2010 - and not buy allowances.
Extra credit will be given in the second year - from April 2011 - to organisations that take early action to cut emissions.
Subsidiaries will be given the chance to participate in the scheme individually, rather than as part of their parent company.
The CRC has been renamed the Carbon Reduction Commitment Energy Efficiency Scheme.
Joan Ruddock, energy and climate change minister, said organisations and the public sector all had a role to play in reducing energy emissions.
"Large organisations have huge potential to achieve cost-effective energy efficiency savings. There are clear benefits from positive, immediate action to tackle climate change. Investment that takes place in the next few decades will have a profound effect on the climate in the second half of this century and in the next," she said.
The Environment Agency will publish the qualification and registration guidance for potential CRC participants by November.