New carbon trading legislation that came into force yesterday could increase some companies’ annual energy bills by 20 per cent over five years.
PricewaterhouseCoopers (PwC), the accountancy firm, says energy costs for businesses could rise by 4 to 6 per cent a year between now and 2015.
The Government’s Carbon Reduction Commitment (CRC) scheme — which will include household names such as Sainsbury’s, Tesco, John Lewis, Barclays, HSBC and Hilton — will rank organisations according to their success in reducing energy use.
A poor performer in the scheme with an annual £1 million energy bill could suffer extra costs of £500,000 over five years. However, companies that plan ahead and reduce their consumption could see their energy costs reduced by more than 8 per cent in 2015. For a business with a total energy bill of £1 million, this would be worth more than £85,000 in 2015 alone, or £150,000 over the next five years.
David Walters, PwC partner for sustainability and climate change, said: “The bottom line is that the scheme will cost businesses in year one. Long-term, the scheme is an incentive to encourage low-carbon growth, but it’s a complex one. A growing business has more energy needs. The reality is that if you want to avoid additional costs, you need to grow in a low-carbon way.”
Research by several organisations has raised concerns over the bureaucracy of the CRC and shows that businesses are far from ready to take part. However, PwC warns that the real impact of the scheme, on cashflow and reporting requirements, will be felt in 2011.
The decision to link the scheme to a league table of performance might also be a worry for companies, whose reputations could be damaged.
PwC is to move into a new energy- efficient building in 2012, but ironically it expects its position in the league table to fall as the CRC includes only energy that a company buys directly. PwC is currently in temporary offices, and so its switch to new headquarters on the South Bank of the Thames will increase its energy footprint under the scheme.
A spokesman said: “Despite moving into the most environmentally high-performing building in the UK, we will actually cause our CRC emissions to rise. Our ranking will recover after 2012 due to investment in energy reduction in other buildings, but we have to be aware of the financial and reputational anomalies of the tables.”
Tony Grayling, head of climate change and sustainable development at the Environment Agency, said: “The table is a very public judgment on how seriously you take your environmental responsibilities. If organisations don’t take up the challenge, there is a risk to their reputation and their pockets.”
The biggest carbon savings are likely to come among hotels, restaurants and retailers and in the public sector. The Environment Agency says that most of these organisations could achieve quick results with better management of heating, lighting and computers.
David Pollock, group chief executive of the Electrical Contractors’ Association, said: “Conforming to the CRC will bring forward investment plans across the commercial and public sector. The CRC puts us on the threshold of a ‘dash for energy efficiency’.”
-The Times
