Under the Government’s Carbon Reduction Commitment (CRC) scheme, announced last May, from next year every organisation that consumes more than 6,000 megawatt hours of electricity in 2008 or about £500,000-worth will now buy carbon allowances.

The mandatory cap and trade scheme will affect 5,000 large companies and local authorities in Britain and is aimed at slashing the country’s total carbon emissions by an extra 1.2 million tonnes a year by 2020. (Source: The Times, March 31, 2009)

However, in a struggling financial climate, can UK businesses afford the time and expense in delivering what may be viewed as ‘another layer of bureaucracy’? 

Unfortunately, in the UK’s recently launched economic rescue package, there appears to be “negligible” spending on green measures – as campaigners claimed in a report published today.

According to Andrew Simms from the New Economic Foundation, only 0.6% of the promised £120m government stimulus package to offer businesses the incentive to create and deliver a low-carbon economy was delivered. 

Compared with the £775m bonuses paid to staff at the Royal Bank of Scotland and £2.3bn handed to the car industry, the environmental sector has been short changed.

Gordon Brown has claimed that around 10% of the stimulus package is directed towards “environmentally important technologies”, thus this figure not only conflicts with the amount of 0.6% offered, it also does not meet the proposed funding targets by Lord Stern, a target of 8% of Gross Domestic Product annually in green stimulus spending.  (Source: guradian.co.uk – March, 30 2009)

As businesses are driven by the new CRC target to invest in carbon saving measures, it appears that the UK green stimulus package is not doing the same.  In fact Boris Johnson was seen to be halving his Environmental team in London this week, setting the tone for difficult environmental times ahead.

But is the CRC really compromising the bottom line of businesses, or in fact creating financial savings through less energy consumption over time?  It appears that the financial impact of the CRC scheme will grow in the longer term, with an introductory phase due in April 2010, under which all allowances will be sold at a fixed price, and from April 2013, allowances will be allocated through auctions, with the number of credits available being reduced over time.

The proceeds of these auctions will be paid back later to businesses (based on their performance during that year) and ranked in a league table based on carbon reduction actually achieved. (Source: The Times, March 31, 2009)