September 24, 2010 / 12:13 PM / 7 years ago

UK corporate CO2 trade scheme needs revamp: advisers

LONDON (Reuters) - The British government should re-design its scheme to cut corporate energy usage to make it less complex so as to include smaller businesses, a climate advisory body to the government said on Friday.

The mandatory Carbon Reduction Commitment (CRC) energy efficiency scheme was introduced in April to force businesses like banks, hotels, hospitals and schools to help cut Britain's greenhouse gas emissions by 4 million tonnes and corporate energy bills by 1 billion pounds ($1.57 billion) a year by 2020.

"The scheme can raise energy efficiency up the corporate agenda but it is perceived to be complex," David Kennedy, chief executive of the Committee on Climate Change, told reporters.

"I would want the government to make a decision (on the design) in the next months to give clarity to participants."

Under the scheme, around 5,000 businesses which spend more than 500,000 pounds a year on energy must monitor usage and report their emissions annually. From April 2011, they will also have to estimate future emissions and buy carbon permits.

The CRC has been criticized for being too costly, confusing and unfair.

If simplified, the threshold could be lowered to make more businesses eligible for in

"I have made it clear before now that I want to simplify the bureaucracy of the CRC scheme ... Today's report will help inform our thinking on setting the cap for CRC and will feed into our work on simplification of the scheme," said Greg Barker, minister for energy and climate change.

Firms face a September 30 deadline to register for the scheme but as much as 35 percent are forecast to be late, according to consultancy WSP Environment and Energy.

TOO COMPLEX

The committee would not comment on whether the entire scheme should be scrapped in favor of starting from scratch.

However, it did say that different incentives to cut energy use overlapped and suggested policy should be streamlined.

"It is not clear to us that this broader landscape is the right one," Kennedy said.

The committee wants the CRC re-designed before 2013, when a cap on emissions will be set with a fixed number of carbon permits auctioned to organizations.

Auctions would further complicate the scheme, without strengthening incentives for energy efficiency improvement.

Instead, the scheme should continue to sell an unlimited number of allowances at a fixed price, the committee said.

Under current plans, an annual league table will show the performance of all participants. Those which have cut their energy use the most will get a bonus payment from companies which have made the least progress.

However, this could be unfair to the public sector, which has less money to invest in energy saving but still has to ensure the running of essential services like hospitals.

To avoid the transfer of funds from public to private sector organization, there should be separate league tables for the public and private sectors, the committee said.

Editing by James Jukwey

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