Paper warns non energy intensive businesses: 'don’t delay cuts in carbon emissions'
Peta Hodge
4th March 2009
Businesses with energy bills in excess of £500,000 per annum should not be tempted to wait until March 2011 to start cutting carbon emissions, according to a new paper by climate change and energy consultants AEA.
Organisations with this level of energy usage will have to comply with the Carbon Reduction Commitment (CRC) from April 2010, the UK’s first mandatory carbon ‘cap and trade’ scheme for non energy intensive businesses, such as hotel groups, retailers and telecoms companies.
The CRC will require organisations to purchase their annual carbon allowance upfront each April.
If, at the end of the year, carbon emissions have been reduced, it will be be possible to carry over excess allowances to the following year or sell them on; if, on the other hand, emissions exceed the allowances purchased, more will have to be bought from the secondary market, probably at an elevated price.
Because the total pot of allowances will be distributed in proportion to an organisation’s carbon emissions in the year from April 2010, the AEA paper – ‘Carbon Reduction Commitment – Getting Behind The Big Questions’ – suggests that some organisations might delay taking action until after March 2011 to ensure a higher baseline allowance and therefore a higher share of recycle revenues.
This would be a mistake, it suggests. The company has developed a calculation method that demonstrates that the financial benefits of delay are outweighed by the costs of buying excess energy.
Other factors such as reputational damage also militate against delay, it suggests.
Daniel Waller, knowledge leader at AEA offered affected organisations the following advice: “The first thing [you need] to do in advance of this legislation is to understand your liability to the scheme and work out your total value at stake. This will help inform your strategy and help you understand the relative benefits of the early action metrics. The company then needs to assess its current energy situation and work out a detailed energy efficiency and energy reduction strategy to be implemented from 2010."
He added: “One thing is clear, if your energy bill is above £500,000 a year, you need to act now to not only minimise the impact to your bottom line, but maximise your advantage over your competitors.”