Carbon Reduction: What does it mean for business?

From April 2010 British businesses will be legislated into the front lines of the country’s battle to reduce its carbon footprint.

As world leaders begin to stack up in the hotels of Copenhagen and the final rounds of backroom diplomacy reach fever pitch, it is becoming clear that deeper international targets for the reduction of developed nations’ carbon footprint beyond 2012 will have to be agreed. The problem is that for all the vaunted ambition of the Copenhagen talks, someone has to deliver the cuts, and here in the UK, where there’s already a legally binding target of 80% reduction by 2050, that task will inevitably fall most heavily on a business community that, according to a recent simulation, is still unprepared to deal with the government’s chosen mechanism for doing so.

The mechanism, “ The Carbon Reduction Commitment Energy Efficiency Scheme” which begins in April next year, will set mandatory carbon emission limits from 2013, for all businesses using more than 6000 MWh (roughly equivalent to £500k per year) of electricity. These organisations will fall into a carbon trading scheme allowing heavier polluters to buy permits from those companies whose emission are below the limit.

Critics of the scheme claim it is overly complex, difficult to administer and potentially very costly, whilst its supporters, amongst them Michaela Wright, head of CSR at the HSBC subsidiary First Direct see the scheme as an opportunity for responsible businesses to see real financial returns on their sustainability programmes. According to Wright, “The real issue isn’t one of complexity; it’s one of readiness and uncertainty.

“So far there have only been two simulations, both on a small scale and both have brought to light different issues. What is clear is that we really don’t know how much people know about the CRC Energy Efficiency Scheme and that is something that should be addressed.”

In some ways it is unsurprising that there is a certain degree of apprehension. While the UK’s heavy industry has been covered by the European Emissions Trading Scheme since 2005, the CRC EES trading scheme is the first of its kind to target a ‘demand side’ reduction in energy use from large service businesses and public sector organisations.

The world is watching and, for any government initiative, that will always up the ante, but according to Harry Morrison, general manager of the Carbon Trust Standard , there are reasons to be positive.

He points out that for many forward thinking organisations, the scheme is more of an opportunity than a threat.

“For the majority of organisations covered the financial benefits of reduced energy consumption, which result from the carbon emission reductions the scheme seeks to impose, will significantly outweigh the costs. By taking early action before the scheme starts businesses can also reduce compliance costs, through installing smart metering and by achieving certification with the Carbon Trust Standard. Forward thinking organisations will also secure the reputational benefits of a leadership position within the published league tables in 2011, and in advance of this we are already seeing those businesses being rewarded by their customers for demonstrating good carbon credentials”

Common sense or not, the CRC will be one of the most important pieces of environmental legislation to hit the statute books in the last decade. Even more so if it works. With a world economy struggling to balance its priorities between recovery and sustainability, two agendas which so often seem to contradict each other, a template which brings the two together could be, just could be, world changing.

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Mark Hanson is a contributor to Independent.co.uk and is working on the CRC Energy Effeciency Scheme. For more information visit www.cutcarbon.biz