LONDON A proposed UK scheme designed to force some 5,000 businesses to cut carbon emissions by reducing their energy consumption gives companies no reason to buy renewable energy, critics said on Friday.
"Businesses need greater incentives to demand increased renewable power in their fuel mix, not less," said Jo Butlin, vice president at UK renewable power supplier Smartest Energy.
"The UK's Carbon Reduction Commitment proposals partly remove that demand, and with it a great deal of support for the UK renewable industry."
The Carbon Reduction Commitment (CRC) is a mandatory scheme starting in April 2010 that will affect any business that spent more than 500,000 pounds ($744,500) on electricity in 2008.
The Department of Energy and Climate Change (DECC) said it will help Britain cut carbon emissions by four million tonnes a year by 2020, the equivalent of taking one million cars off the road, and save businesses some 1 billion pounds on their energy bills.
The scheme calculates the greenhouse gas emissions of a business by applying the average carbon dioxide (CO2) emitted per megawatt hour of power when purchased from the national grid.
Critics point out that the CRC does not take into account where a company's electricity is generated, for example if bought from a wind farm, nor does it recognize if a company has already voluntarily offset emissions by buying carbon credits.
"As your emissions are based on the grid average, why would you buy renewable energy over investing in reducing your electricity consumption?" Andreas Gunst, an environmental lawyer at DLA Piper, told Reuters on the sidelines of Prince Charles' May Day Summit on Climate Change in London.
A DECC spokesman said the scheme is meant to spur companies to make simple reductions in energy consumption.
"It's not trying to do everything. The main thing is it's trying to pick up that really easy block of energy than can be reduced and save businesses money at the same time," he said.
"We have a scheme for incentivising the production of renewable energy called the Renewables Obligation, and we think people should offset their emissions if they're unavoidable, but that should be a last resort."
In a separate survey, DLA Piper found that 71 percent of bosses were unaware of their company's CRC obligations.
At the end of 2010, companies will have to retroactively buy carbon allowances from the government, starting at 12 pounds per tonne of CO2, to cover their emissions for that year.
Following that, businesses must buy allowances every April starting in 2011, based on their expected annual emissions. The revenues raised will be recycled back to participants at the end of the year based on cuts in energy use.
"You're going to get some money back, but it's essentially giving the government free credit for a year and people are very cynical about that," Gunst said.
The DECC spokesman said the smallest participants would have to buy around 30,000 pounds worth of allowances annually.
In its annual budget announced last week, Britain unveiled 1.4 billion pounds of initiatives to encourage investment in green energy and said it would cut greenhouse gases by 34 percent below 1990 levels by 2020.
The UK on Friday also announced 100 million pounds in funding for companies to invest in energy efficiency.
(Reporting by Michael Szabo; Editing by Anthony Barker)