Managing Carbon Emissions Reduction

Achieving carbon and cost reduction through energy demand management

The UK government has a range of measures that are designed to deliver carbon reduction in the UK. In addition to measures to reduce carbon produced through energy generation, the government has a range of policies to encourage more efficient use of energy and so to reduce demand.

These measures vary from increasing the standards for new products such as vehicles and buildings, though tax incentives and other regulations on the use of energy. These aim to contribute both to reduction in carbon emissions and an increase in energy security.

Carbon regulation for large energy users

Apart from specific product requirements, there are two broad carbon regulations in the UK. These are the Climate Change Levy and the Carbon Reduction Commitment.

The Climate Change Levy (CCL) is added to the energy bill of the energy user. It has been in force since 2001. The UK Government is currently reviewing this policy measure having criticised this policy in opposition.

The Carbon Reduction Commitment (CRC) has recently been introduced in April 2010 and is also undergoing amendments. More details on the current changes can be found here.

What are the impacts of the regulations?

Both regulations increase the cost of energy to encourage organisations to reduce energy demand. When combined with the impact of regulations and incentives schemes for energy producers, there could be increases in energy costs.

Additionally the current design of the CRC will have reputation impacts for organisations. The CRC includes a published league table that compare participants’ performance against specific CRC metrics.

What should organisations be doing?

Organisations need to understand and prepare for this regulatory environment. Whilst there are a number of different approaches that can be adopted, we would suggest organisations should adopt the following broad approach

1. Understand the carbon intensity of existing operations and the associated operating costs moving forward.
2. Implement carbon efficiency programmes to reduce carbon and cost in existing operations.
3. Incorporate the impacts of the costs in current investment decisions to ensure assets are fit for future operating environment.
4. Consider low carbon infrastructure investment to future proof operations against cost increases from carbon regulation.

How can PwC help?

PwC can help organisations through this process. We can bring to bear carbon policy specialists alongside strategy, operational consulting, assurance and tax specialists. This approach delivers reduction programmes that are embedded in the operation and management of businesses. From understanding the details of the Carbon Reduction League table through to the economics of low carbon energy supply, we have professionals who can help you exploit the opportunities in these changes.