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Waning support for ‘unrealistic’ emissions targets

06 April 2010

Last week, the government set in train two of its flagship carbon cutting incentive schemes: the well trailed Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES) for business, industry and public sector organisations, and the Feed-in tariff (FIT) scheme for domestic consumers. The CRC EES has a target of saving around £1billion per year and an annual CO2 reduction of 4.4 million tonnes by 2020, mainly through energy efficiency measures that are not yet being taken up. The government hopes it will provide that extra impetus to change behaviour and encourage large organisations to improve their energy efficiency.

Participants’ performance will be published in the form of a league table - presumably a similar name and shame game instituted for the education sector. Meanwhile, all revenue raised from the sale of ‘emissions allowances’ will be recycled back to participants; those who have increased their efficiency will get some of this money back. A brisk market in unused permits could presumably net a new breed of brokers a tidy sum.

But there is some dissent and consternation in the ranks of organisations that have until September to register. According to the latest npower Business Energy Index (nBEI), which was published on the eve of the official CRC EES launch, nearly half of businesses set to participate in the scheme believe government advice on the new legislation is inadequate. These businesses are also unclear as to how they go about forecasting their CO2 emissions and purchase their emissions allowances, potentially exposing themselves to financial penalties.

npower’s study reveals that 44% of participants believe the level of guidance on the CRC has not been adequate, while 49% said they do not understand what’s required of them to buy carbon allowances, and 44% are also unclear on forecasting their CO2 emissions. This could potentially leave participants faced with unexpected costs further down the line as a result of miscalculation. Allowances are initially fixed at £12 per tonne of CO2, but businesses that buy too few allowances might need to top-up their purchases under the scheme’s ‘safety valve’ mechanism or, alternatively, purchase them on the open market and risk paying a higher price.

The nBEI research 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.

npower believe this indicates 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. Its study reveals the majority of businesses (79%) think the UK’s legally-binding target to reduce CO2 emissions by 80% by 2050 is unrealistic, while only a quarter thinks there are business benefits for reducing emissions - down from 31% in the 2009 index. And in the wake of the economic downturn, 93% of businesses also said they are currently more concerned with reducing costs than carbon, little change from 97% of businesses in last year’s nBEI.

Despite the downbeat opinion on carbon reduction, 69% of businesses said they are likely to increase energy efficiency initiatives in the year ahead and while this was primarily for cost benefit, the same measures would also lead to lower emissions. npower’s David Titterton says it’s no surprise that businesses are relegating emission reduction in favour of managing costs as we come out of recession, but in the longer term it is important that they do not ignore the importance of reducing their carbon emissions.

“With the CRC EES 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 reputation consequences,” he says. “At the moment there is clearly confusion around the scheme and, when coupled with the pressures of a recovering economy, it’s leading to frustration.”

Les Hunt

PS - the latest nBEI is available to download here


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