Business dismay at government delays on carbon reporting

30th March 2012

Earlier this week, the government told Parliament that "no decision has yet been reached" on an issue that it has been looking at since December 2009, even though the move is widely supported by business. Ministers are currently considering the analysis of responses to a public consultation in the summer 2011, the Department of Environment, Farming and Rural Affairs said. "This evidence-gathering process has taken longer than anticipated and the analysis of the results is ongoing as the costs and benefits are fully considered so ministers make an informed decision," it added.

According to Business Green, a decision will be forthcoming in the next few months. The government's consultation outlined three options ranging from a mandatory requirement on all large companies to report their emissions to a continuation of the present voluntary approach to reporting.

Mandatory carbon reporting (MCR) was an idea that drew strong support from business and environmental groups alike, and there was strong condemnation of the delay. WWF was scathing, saying the decision represented "a deplorable lack of leadership". It revealed that unreleased submissions to the consultation, which it obtained through freedom of information requests, showed overwhelming business support for the move. Raymond Dhirani, finance policy officer at WWF-UK, said: "An overwhelming majority of organisations, businesses and investors agree that mandatory carbon reporting is the right thing to do, but the Government is simply fudging a decision. They have known the deadline has been coming for four years. This is yet another delay on MCR that saps investor confidence that the government is serious about a cleaner, greener economy."

There is a serious disconnect here – in the same week that the delay was announced, Defra was urging investors to keep pressure on firms to prepare for climate change. But how are they meant to do that if they can't measure, in a standardised way, the climate impact of companies at the moment? It is the exact opposite of joined-up government.

The business community seemed wearily resigned to the outcome. "This indecision just creates uncertainty for businesses, which cannot be good, and certainly doesn't add to the credibility of the government, its green credentials or the consultation process," said Richard Spencer, Head of Sustainability at the Institute of Chartered Accountants of England and Wales while Rhian Kelly, CBI Director for Business Environment policy, said: "We are frustrated, but not surprised, by this delay."

Mike Barry, head of sustainable business at Marks & Spencer, tweeted: "Shame to see Defra still undecided about mandatory carbon reporting – a simple way to drive carbon literacy/innovation."

Paul Simpson, CEO of the Carbon Disclosure Project added that by failing to make a decision, "the UK Government is not responding to market needs. The collection of accurate and comparable information from UK companies on climate change is a crucial step toward the creation of a low carbon economy. Furthermore, measuring and reporting climate change information is widely acknowledged to lead to performance improvements and reductions in carbon emissions."

One possible explanation, although it is apparently one the government denies, is that ministers want first to sort out the Carbon Reduction Commitment, another green initiative that has been tinkered with to such an extent that it has become virtually meaningless. The CBI, for one, wants to see the back of it. "We urge the Government to scrap the CRC and replace the reporting elements of it with mandatory carbon reporting," said Kelly. "This should prove a key driver in reducing greenhouse gas emissions and provide a less complex, costly and bureaucratic process for businesses."

The scheme currently requires around 2,100 companies to report on their emissions and buy allowances costing £12 per tonne to account for them. In the Budget last week, the Chancellor called for it to be simplified or it would be replaced in the autumn. Energy Secretary Ed Davey has just announced proposals that he says will cut the scheme's running costs by two-thirds.

It is tempting to see these developments as the latest failures of the government to live up to its green credentials. Mr Davey says that the benefits of the CRC are clear. "It will deliver substantial carbon savings helping us to meet carbon budgets, and it encourages businesses to take action to improve their energy efficiency," he claims.

The crossover with mandatory reporting is also clear. DECC says that the CRC requires businesses to report on and pay a tax on energy used. Well, if they have to do that, then they will have to report on the amount of energy used, or to put it another way, their carbon emissions. The CRC review proposes "adopting new emissions factors for the CRC which will align it with GHG reporting processes". The whole situation is a mess – Davey could enhance his reputation considerably by sorting it out.


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