The European Union’s Emissions Trading Scheme (ETS) has been around since 2005 and accounts for most of the carbon dioxide (CO2) allowances issued to businesses in the world. In the US, President Barack Obama has also thrown his weight behind a cap-and-trade scheme. But few realise the UK will soon adopt a carbon trading scheme of its own in less than two years – the Carbon Reduction Commitment (CRC) that was announced back in 2007.

We believe that up to 6,000 businesses in the UK will be liable to join the mandatory scheme.

UK Businesses are facing huge bills if they remain unprepared.

Datamonitor estimates that UK businesses could face a £1.4bn bill for the carbon credits they need by April 2011, when the CRC permits are first sold.  If the finance director of a company has to write cheques for carbon allowances, they’re going to start asking why those costs are so high.  The CRC scheme will begin next April when the large businesses and public sector organisations, including the NHS and state schools, begin monitoring their emissions and reporting them to the government.  A league table of the participants will be published by October 2011 showing the targets, reductions in emissions and so on.

Based on volumes of electricity and gas emissions, retail businesses will be hit the hardest with over 30% of total CO2 emissions, according to Datamonitor.  The next largest polluters are manufacturers, at 15%, followed by the public sector. “We’re seeing a far greater awareness of the CRC within the business community, but organisations need to start budgeting for these allowances and formulating their carbon strategies now, particularly in light of the recession,” Datamonitor’s Jon Lane said.  “Those that sit on their hands and complain will end up paying more in the long term.”

Several businesses gathered at a carbon and energy summit on Thursday at the Royal Society of Arts in London to discuss how best to deal with the carbon trading scheme.
The UK wants to reduce CO2 emissions by 60% by 2050.  A power cut meant much of the event was held in darkness. One presenter quipped this at least meant that event had a smaller carbon footprint.  Much of the talk was about how the government’s scheme was an opportunity for businesses to reduce their CO2 emissions now ahead of the CRC.

“There’s a significant upside to helping to reduce climate change,” said Henry Garthwaite, a business development manager at the Carbon Trust, a government-sponsored agency that helps businesses lower their footprint. It also helped develop the CRC scheme.

“If the finance director of a company has to write cheques for carbon allowances, they’re going to start asking why those costs are so high.”

Mr Garthwaite said that one business the Carbon Trust had worked with had saved £1m a year off its energy bill just by switching off the screensavers on the computers in their offices.

It was these sort of seemingly small gestures, rather than complete overhauls, that were suggested to make companies more energy efficient, lowering their fuel costs and their eventual CRC bill.

That includes installing smart meters, which show exactly how much gas and electricity is being used.

“You can’t do anything in terms of reducing your footprint if you don’t know what it is,” Mr Garthwaite said.  The government already plans to put one in every home by 2020.

Some in the press have labelled the CRC scheme as another stealth tax on businesses. But few at the conference were keen to do the same. “It is essentially a very good piece of legislation,” said Donna Young, head of climate change at telecoms giant BT. “It just has some difficulties.”

For example, it calculates your allowance based purely on electricity and gas bills in the UK, not taking into account other items such as car fleets or its international businesses.

This leads to filing reports separately for each scheme, such as the UK and the EU’s ETS scheme, and the obvious problem of a company possibly being penalised for the same carbon footprint twice.

There are also the issue of how useful the scheme will be when it actually happens.

Unlike the EU scheme, the participants to carbon trading in the UK can set their own targets and their certify their carbon emissions themselves, rather than the third-party verification that is done on the Continent.

But surprisingly, there was little grumbling about the CRC scheme itself. It seems most businesses are happy to accept that they will be a critical part of fighting climate change.

And there is rare unity among the world’s politicians that carbon trading is the way to do it.

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