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Businesses are confused by new emissions scheme
Published:  31 March, 2010

Nearly half of businesses set to participate in the UK`s imminent Carbon Reduction Commitment (CRC) energy efficiency scheme believe that government advice on the new legislation has been inadequate, and are also unclear on how to forecast their CO2 emissions and purchase carbon allowances – two of the scheme’s principal actions – potentially exposing themselves to financial penalties.

The CRC, which comes into effect on 1 April, will affect many leading UK retailers, banks, service businesses and public sector organisations, which will need to purchase allowances to cover their CO2 emissions, priced at £12 per tonne of CO2. The scheme covers around 5,000 organisations whose electricity is metered by the half hour and whose consumption exceeded 6,000MWh in 2008. The higher their emissions, the more allowances required.

With just 24 hours until the scheme starts, a survey by the energy supplier npower has revealed that 44% of participants believe that the level of guidance on the CRC has not been adequate, while 49% say they do not understand what’s required of them to buy carbon allowances. Some 44% are also unclear on forecasting their CO2 emissions. 

This uncertainty could mean that participants will be faced with unexpected costs in future as a result of miscalculations. Businesses that do not buy enough allowances could need to top-up their purchases under the scheme’s “safety valve” mechanism, or buy them on the open market at a higher price. 

npower’s research – part of its annual Business Energy Index survey that tracks business opinion on energy use and carbon emissions – also casts doubt on whether participants will take action to reduce emissions under the CRC. Nearly half (44%) have no plans to take advantage of the scheme’s early action incentives, which reward participants for being the first to adopt measures to improve energy efficiency, such as installing smart meters.

The findings also indicate a general lack of business support for government targets to reduce CO2 emissions and a waning belief in the commercial benefits of a small carbon footprint. The study reveals that most businesses (79%) think the UK’s legally-binding target to reduce CO2 emissions by 80% by 2050 is unrealistic, while only a quarter think there are business benefits from reducing emissions (down from 31% in npower’s 2009 index).

In the wake of the economic downturn, 93% of businesses also said they are currently more concerned with reducing costs than carbon.

Despite the downbeat opinion on carbon reduction, 69% of the businesses surveyed said they are likely to increase energy efficiency initiatives in the year ahead, although this will primarily be aimed at cutting costs. 

“As we come out of recession it’s no surprise that businesses are relegating emission reduction in favour of managing costs, but it’s important that they do not ignore the importance of reducing carbon in the long term,” says David Titterton of npower Energy Services. “With the CRC going live, there is now a direct link between participating organisations’ carbon emissions and their bottom lines and businesses that fail to deliver carbon reductions in the future will face financial and reputational consequences. 

“Our index suggests that the government needs to do more to communicate the benefits and opportunities of the CRC and give businesses the certainty they need to take action to improve energy efficiency,” Titterton adds. “There is clearly confusion around the scheme and, when coupled with the pressures of a recovering economy, it’s leading to frustration.”

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