How Complex Green Scheme will Impact Firms’ CSR Efforts

UK businesses are angry that money they pay under a scheme to reduce energy use and pollution will now go to the Government.

Originally, funds raised through the Carbon Reduction Commitment (CRC), would have gone to firms who managed to cut the energy bills the most. Many non-energy intensive companies had already made energy reduction a CSR priority.

The mandatory scheme will apply to all large businesses and public sector organisations – with electricity bills of over £500,000 a year. In this year alone, it is expected to raise £715 million.

A Government consultation is now underway so organisations can comment on the proposals.

The CRC was devised for positive CSR reasons. The sectors targeted by the scheme generate over 10% of UK Carbon Dioxide (CO2) emissions, around 55 MtCO2. It aims to reduce carbon emissions from these organisations by at least 4 million tonnes of carbon dioxide per year, by 2020.

However, critics argue that the CRC will not, in fact, reduce pollution as 87% (over 90million tonnes) of the emissions saved through the CRC by 2020 will actually be emitted elsewhere, due to an overlap between the CRC and the EU Emissions Trading Scheme.

The organisation, Carbon Retirement, has produced a report based on data from the UK Government, and its independent Committee on Climate Change. It points out that this overlap could put paid to well-intentioned CSR efforts.

The CRC will apply to companies that are not currently covered by the EU Emissions Trading Scheme. (This applies to ‘heavy’ industry – which is the most polluting). In its current form it will oblige firms to measure and report their greenhouse gas emissions (which will mostly come from gas and electricity use). They will then pay £12 per tonne of CO2 they produce.

However, companies buy electricity from power providers which are covered under the EU scheme and hold permits for the CO2 they produce. There are a limited number of these permits – and all firms covered under the scheme are entitled to them. If they use less they can simply sell on their permits to someone else. This will not reduce the amount of pollution.

Firms which are putting time, effort and money into reducing their own emissions, are rightly angry at the thought that this will simply give others a licence to pollute.

Firms which are focusing their CSR efforts on green solutions for their business are also annoyed that the CRC gives no credit for sourcing renewable energy.

The consultancy KPMG has pointed out that the CRC meant businesses were paying several times for their emissions.

Ben Wielgus of the firm’s climate change and sustainability practice told the BBC: "We find CRC participants in the difficult situation of paying for carbon emissions three times - once through the CRC, once through the climate change levy (CCL) and once through the cost of carbon charged by their electricity companies through energy bills."

The UK government consultation is open until 11th March.

Photo credit: Peter Grima