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Businesses criticise government for ‘inadequate’ guidance on new emissions scheme

31 March 2010

Nearly half of businesses set to participate in the CRC Energy Efficiency Scheme believe government advice on the new legislation is 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.
These are among the findings of npower’s Business Energy Index (nBEI), an annual survey tracking business opinion on energy use and carbon emissions, which was published on the eve of CRC EES launch.
The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) goes live this Thursday (1st April) and will affect many of the UK’s leading retailers, banks, service businesses and large public sector organisations, who will need to purchase allowances to cover their CO2 emissions.  The higher their emissions, the greater the number of allowances required.
With only 24 hours until the scheme starts, 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 could need to top-up their purchases under the scheme’s ‘safety valve’ mechanism or on the open market, at a higher price. 
npower’s 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.
The finding is indicative of 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.  npower’s 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 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, 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. 
David Titterton of npower Energy Services, said:  “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.  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.  We’re working with businesses to reduce energy consumption and make the most of the CRC, but 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.”
The npower Business Energy Index is available to download here 

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