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New carbon reduction plans ‘friendlier’ to businesses

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Business groups have given a guarded welcome to the government’s response to its consultation on the Carbon Reduction Commitment (CRC) scheme.

The scheme is designed to help the UK achieve its commitment to reduce carbon emissions by at least 80 per cent below 1990 levels by 2050.

It will apply to all companies with an annual energy bill of more than £1 million as from April 2010.

Under the scheme, businesses can trade in the emissions allowances they will be obliged to buy. More energy efficient firms will be able to sell their unused allowances and will receive bonus payments.

As a result of the consultation, businesses will not be required to buy allowances until year two of the scheme. The first year of the scheme will involve reporting only.

The British Retail Consortium (BRC) described the changes as “more business-friendly than earlier proposals”.

Tom Ironside, the BRC’s environment director, commented: “It’s good news that the government has listened to us and recognised that businesses need to hold on to as much working capital as possible as we emerge from the recession and that the first phase of the scheme will be a learning process.

“Agreeing that year 1 will be reporting only and that allowances only need to be bought from year 2 will halve retailers’ costs in spring 2011 to around £170 million – equivalent to over 11,000 retail salaries.”

The EEF, the manufacturers’ organisation, had expressed similar concerns over the CRC’s impact on cashflow.

Gareth Stace, the head of environment policy at the EEF, said: “Purchasing allowances, compliance, registration and annual fees are all extra costs, additional to any money invested in energy efficiency measures.”

Mr Stace, too, welcomed the government’s decision to not seek auction payments in the first year.

The EEF was also pleased that companies which have already taken action to reduce emissions will not be penalised. Under the original proposals, businesses that had made historical savings could only benefit from their policies in the first two years of the scheme. This has now been extended to three years.

However, the CBI warned that too many firms are still unaware of the CRC scheme and the impending legislation.

Neil Bentley, the CBI’s director of business environment, said that firms support the principles behind the CRC, which will help them reduce emissions, improve energy efficiency and cut costs.

But he added: “Many firms are still unaware of how this new legislation will affect them and that they will be hit with fines of £5,000 for failing to register.

“The government needs to step up efforts to raise awareness of the legislation, so that firms have time to prepare before next April. It also needs to ensure that the process for measuring emissions is clear and simple to minimise the bureaucratic burden for companies.”

The final government guidelines on the scheme are expected to be published at the end of the month.