Carbon trading maze will make businesses pay for emissions

Published:  15 June, 2009

LONDON: Business groups are to publish a guide for firms covered by the carbon reduction commitment (CRC), a mandatory cap and trade scheme that could have significant costs for companies, government departments or public sector bodies who fail to control their carbon emissions.

The guide is backed by the Department for Energy and Climate Change and also supported by the country's leading energy firms, npower and Centrica, which owns British Gas.

Ministers have said that the scheme will be 'revenue neutral', meaning all funds will be recycled between the scheme's participants depending on how they perform.

Despite the fact that the scheme starts in April 2010 across the UK, research shows that the vast majority of companies are unprepared while many don't know about it at all.

Firms consuming more than 6000mW hours of electricity in 2008 (around £500 000) will have to pay out an estimated £1.4bn for the allowances when they go on sale at the end of the scheme's first year in 2011.

Although this will impact on cashflow, because the funds are recycled, this won't be a net cost. The price of carbon will initially be fixed at £12/tonne.

After three years the cap on emissions is applied with the price likely to increase significantly.

Over 54% of companies do not know if they are affected by the CRC scheme, while 50% do not currently measure their carbon emissions.

The 'polluter pays' principle of CRC works by making the energy user purchase allowances for the energy they consume.

Everyone in the scheme is entered into a league table.

At the start of the scheme, those who perform well and use less energy than when the scheme started will rank at the top of the league table and will be awarded a payment that is calculated by reference to a 10% bonus, while those who perform badly will rank at the bottom of the table and will receive a payment that is calculated by reference to a 10% penalty.

"CRC puts the fight against global warming on balance sheets by hitting firms where it hurts – in their finance directors' chequebooks," said Liz Peace, chief executive of the British Property Federation.

Joan Ruddock, Energy and Climate Change Minister said: "The CRC is set to save businesses £1bn on fuel bills by 2020. This is welcome news in these difficult financial times, and those who save the most energy will be rewarded financially."

The guide will be launched at Eversheds' London office. It has been published by the British Property Federation (BPF) in conjunction with the British Retail Consortium, BCSC, British Council for Offices, the UK Green Building Council, Royal Institution of Chartered Surveyors and the Investment Property Forum. 

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