Get ready for carbon revolution

Oct 27 2009 by Sarah Green, The Journal

WHEN it comes to the big issue of climate change, the hot topic right now is the Copenhagen summit, where global leaders will be seeking to do a deal in December.

But companies also need to be getting ready for something much closer to home: regulations coming next year that are aimed directly at cutting carbon from business operations here in the UK, and the Carbon Reduction Commitment (CRC). We know about the overall UK targets (80% reduction in emissions by 2050) but sometimes it’s difficult to get a handle on what this means for us.

The CBI has long argued that securing a low-carbon future at an acceptable cost requires economy- wide carbon pricing. The cost of carbon needs to be made explicit across economic activity and up and down supply chains, so the necessary trade-offs become clearer and businesses are encouraged to invest in carbon-cutting options. Carbon needs to be priced into business decisions – which is exactly what the CRC aims to do.

This mandatory carbon cap-and-trade scheme, starting in April 2010, will require businesses and public-sector organisations to measure their energy use and take steps to manage and reduce it. Companies that use energy more efficiently have much to gain – reduced energy bills and a lower carbon footprint. But, as with any regulation, it’s not without risks. Corporate reputations will be put on the line through a public league table.

As an academic exercise, the CRC seems to tick the boxes – introducing a financial and reputational reason for firms to be green. The Government wants this to be as simple as possible, but with around 6,000 organisations involved it’s understandable businesses want to make sure the scheme is designed well.

So what does the CRC mean for businesses? In the short term, it’s about putting systems in place to measure and monitor energy use, and budgeting for carbon allowances. Then attention will turn to deciding whether and how to reduce energy consumption, while finance directors will have to get to grips with carbon trading.

We’d like to see the Government making a concerted effort to ensure this is as straightforward as possible for business. While the CRC has the potential to cut carbon, its success will depend entirely on how businesses respond, and so government must make getting business buy-in a priority.

Sarah Green is regional director of CBI North East