Regulations for large organisations
More than ever before, larger organisations need to demonstrate they are leading on energy and climate change issues.
There are financial and legislative penalties for failing to conform to energy and climate change legislation and responsibilities.
But this is not just about legislative compliance – it’s also about making sure organisations respond to growing customer interest in green issues.
Legislative drivers relevant to large and energy intensive organisations
Businesses are increasingly recognising the need to tackle climate change, and many are making voluntary commitments to cut emissions.
Measures addressing businesses’ greenhouse gas emissions are also developing rapidly. This is a constantly evolving space with new regulations proposed and considered on an ongoing basis.
The Government’s Climate Change Bill sets out the overall framework, and during 2008 a new Committee on Climate Change will set overall carbon budgets for the UK for the next 15 years (covering three consecutive 5 year periods).
Though the Bill is not yet in place a number of measures have already been introduced and new measures have been proposed:
- The Climate Change Levy (CCL) was introduced in 2001 to encourage businesses to reduce energy demand. The Levy is a tax on the use of non-renewable energy in industry, commerce and the public sector, with offsetting cuts in employers’ National Insurance Contributions and additional support for energy efficiency schemes and renewable sources of energy. Exemptions are available for energy from renewable sources and ‘good quality’ combined heat and power. The aim of the Levy is to encourage users to improve energy efficiency and reduce emissions of greenhouse gases. Following the introduction of the Levy, the EU made it a requirement for all Member States to tax the business use of energy. To maintain the levy’s environmental impact, from 1 April 2007 CCL rates are being increased on a yearly basis in line with inflation.
- Enhanced Capital Allowances for energy saving equipment were introduced as an integral part of the CCL package. Under the scheme, businesses can claim up-front tax relief on their capital spending on designated energy-saving plant and machinery. There are 14 technology categories that qualify, including heating and ventilation controls and lighting.
- Climate Change Agreements (CCAs) allow energy intensive business users to receive an 80 per cent discount from the Climate Change Levy, in return for meeting energy efficiency or carbon saving targets. There are Agreements in place with over 50 industrial sectors. The current agreements will run until 2013. To ensure the carbon reduction targets remain challenging but realistic, they are periodically reviewed and the current 2010 targets will be reviewed in 2008. Subject to State Aid approval, participants meeting their 2010 targets will continue to receive the CCL discount until March 2013.
- The EU Emission Trading Scheme (EU ETS) has been operating since 2005 and covers emissions from energy intensive sectors such as the power sector, iron & steel and the chemical industry. Phase II of the ETS starts in 2008 and is set to deliver 8 mt carbon savings annually in the UK. Emissions from aircrafts are likely to be included in the ETS by 2011 and it may be applied to other sectors in the future.
- Government has also committed to introduce a mandatory cap and trade scheme for large commercial and public sector organisations not covered by the EU ETS or substantially covered by CCAs. This is called the Carbon Reduction Commitment (CRC). It will target CO2 emissions from organisations, or groups of affiliated organisations (and therefore may be relevant to small businesses). Though details are still being finalized, the scheme is expected to apply to organisations whose mandatory half hourly metered electricity consumption is greater than 6000 MWh per year and whose energy use is not already substantially covered by a Climate Change Agreement. The scheme will generally capture organisations with annual electricity bills above £500,000. The scheme is expected to begin from 2009, and further detail will be set out as part of the Climate Change Bill.
- Government will also consult towards the end of 2007 on the requirement to display Energy Performance Certificates (EPCs) in business premises in England and Wales. These Certificates will provide an energy rating (from A to G) for these buildings and will set out what steps can be taken to improve their energy efficiency. The information will be an important aid to businesses in meeting their climate change commitments, whether regulatory, such as through the EU ETS or the new CRC, or through voluntary action.
There are resources in place to help large organisations comply with current regulations and policies organizations – visit the Carbon Trust website.
For information about forthcoming regulations and legislation, visit the Defra website.
