Carbon Reduction compliance catches firms unaware

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Carbon Reduction compliance catches firms unaware

Alex Scroxton
The industry is calling for more clarification over the impact of the government's little-publicised Carbon Reduction Commitment cap-and-trade scheme, which came into effect on 1 April. 

The scheme initially affects any businesses using over 6,000MWh per year of electricity - equivalent to an annual bill of around £500,000 at current rates according to the Carbon Trust - so will at first be a concern for enterprises, approximately 5,000 of which meet the initial criteria.

However it is widely expected that up to 20,000 businesses will soon be forced into the mandatory programme.

For the first 12 months participants will merely be reporting their emissions, but from next April businesses will have to start buying carbon allowances from the government. Businesses will be ranked against each other, with penalties and rewards for the bottom and top performers.

For the first two years business will be able to buy unlimited allowances for £12 per tonne of carbon emitted, but from 2013, when phase two starts, a fixed amount will be traded.

The scheme forms part of the government's commitment to cut UK carbon emissions by 80% on 1990 levels by 2050.

Figures from accountancy firm Pricewaterhouse Coopers (PwC) suggest the scheme could add 4% to 6% to energy costs in 2011, and in the long-term poor performing companies could add nearly 20% to their annual energy costs over five years.

On the other side of the coin, good performers could see their energy costs slashed by 8% in 2015, amounting to a saving of £85,000 based on an annual bill of £1m.

"Nobody is going to rip out their data centre infrastructure today as a result of this," said Paul Phillips, Brocade regional manager for the UK and Ireland. "But for new projects it should now be taken into consideration. We're publicising it [the scheme] on product spec sheets and through resellers."

Phillips said that given the large proportion of enterprise emissions that the average data centre was accountable for, the channel had a duty to help educate and inform end-users.

"What's good about the CRC is that the government will start slapping penalties on companies that miss their targets and reward those that do," he said. "If they are severe enough it will force businesses to make changes earlier than they otherwise would have done."

David Walters PwC partner, sustainability and climate change, added: "Businesses need to get on top of the long term energy, cash flow and reporting requirements. Underestimating the impact will hit companies' bottom line at a time when they can least afford it."

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