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OVERVIEW
Changes to the CRC Energy Efficiency Scheme (CRC EES) have been
announced as part of the 2010 Government Spending Review. The
potential implications for your business could be significant:
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Carbon allowance payments are now a direct business cost.
- The
focus of the league table is now brand value driven, which changes
the benefits of Early Action Metrics.
- The
first sale of carbon allowances has been postponed to 2012.
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"If business
leaders think that the CRC's impacts will be purely financial -
then they are mistaken. Those who meet the challenge will gain an
advantage over their competitors by ensuring the longer term impact
of the scheme is minimised.
We think businesses who exploit this opportunity need to act and
invest quickly and have as many quick wins implemented as they can
in the next 16 months."
Stefan Foster
Managing Director, Inbuilt |
INBUILT'S OPINION
For scheme participants the CRC EES will add approximately
10%1 to your annual electricity spend Combined with
increasing or volatile energy costs this places
significant risk on your bottom line.
Further clarification is required to determine whether the
allowance payments will be accounted for above or below the bottom
line. An energy levy (i.e. above the line) will impact on share
prices and therefore more likely to encourage the energy savings
originally intended by the scheme. It will be much more than
a simple accounting procedure for businesses.
The Government's move to simplify the scheme suggests the
eligibility threshold will lower to capture less energy intensive
businesses. Those below the current threshold have already declared
their energy consumption as part of the administration process,
making it relatively easy for the Government to identify new
participants.
On a positive note, the delay in the purchasing of allowances will
provide participants with more time to plan how to most effectively
reduce these costs.
STEPS TO FUTURE PROOF YOUR BOTTOM LINE
- Identify
opportunities to reduce your carbon footprint and prioritise by the
most relevant constraints facing your organisation.
- If you have
already budgeted for purchasing CRC allowances use this to
implement quick wins.
- Understand
whether your CRC costs are directly related to your customers
activities and ensure you have a mechanism in place to pass these
on.
- Review your
supply chain to ensure that any related carbon impact to your
business is as low as possible.
- Implement
appropriate energy and carbon management business processes and
procedures to provide you with long-term cost reductions and
performance improvement.
- Move quickly
towards a strategy that will maximise your income-generating
opportunities under the Feed-in Tariff and Renewable Heat Incentive
to reduce direct energy costs.
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