Click here to watch video highlights of this event.

Andrew Raingold, Executive Director of the Aldersgate Group (AG), chaired the event, which was convened to discuss publication of the first league table for the CRC energy efficiency scheme (CRC), a few days before.

Mr Raingold opened, “the AG believes that there are significant opportunities for investment in cost effective energy efficiency measures but we believe the regulatory landscape is too complex and does not maximise opportunities to take advantage of those investments.”

Chris Tuppen, an AG Director, voiced his disappointment at the lack of coverage from mainstream press that the league table had received.

He argued that the point in “a reputational league table is to embarrass those at the bottom and praise those at the top.” The lack of coverage may be partly due to the fact that at this stage, the league table is based not on performance but early action measures such as the Carbon Trust Standard and installation of smart meters. Going forward this will remain an issue, because the league table tracks the improvement in companies’ performance year on year, meaning “those companies that have actually invested substantially and have picked the low hanging fruit around energy efficiency will find it difficult to do well in the league table compared with those” who have not.

Professor Tuppen regretted the removal of the revenue recycling mechanism, which had offered a potential double win for businesses which stood to gain reputational benefit from a good ranking on the league table and to receive back up to 50% of the levy they had paid. “For many organisations that was millions of pounds back as a prize, if you like, and I think a lot of companies saw that as a prize worth going for.”

When looking at the similarity between the CRC and CCL, Professor Tuppen noted that roughly 75% of the companies and organisations captured by the CCL also fall under the CRC. This means that when “you look at the additional cost that the CRC places on top of their current energy bill and also look at the projections going forward for energy costs, it’s marginal additional cost” – in which case, “why not simplify the whole landscape and bring them together into a single tax on companies?”

Professor Tuppen discussed the AG’s strong support for mandatory carbon reporting, a decision on which is expected from Government by the end of March 2012. If implemented, mandatory reporting would create two carbon footprints for companies – one under CRC and one under mandatory reporting, but simplification would offer an opportunity to rationalise the reporting into one which could be reflected by the league table. He advocated that a company’s overall energy consumption should be shown alongside its carbon emissions. “Then I think with all of that you probably capture everything into a single instrument that provides everything that the CRC and climate change levy do.”

Mark Gough, Global Environmental Manager for Reed Elsevier reported that the original revenue return system “made a big difference to our internal management” and acted as a stimulus for innovative thinking.

He feared that this was weakened when the CRC was converted to a tax, because responsibility for its management moved to the tax department. While Reed Elsevier continues to set ambitious climate change targets, Mr Gough viewed the potential of revenue recycling as “a unique offering” which “was a really big driver for us in looking at things in a unique way.”

Mr Gough added his call for streamlining carbon programmes and prices. “Chris was talking about two different carbon footprints. We have 12 different carbon footprints depending on how we cut it; which divisions are in which countries … whether we’re using operational control or financial control, whether we’re using the Defra guidelines or GHG protocol and the CRC is once again different”. There is no data collection tool which allows Reed Elsevier to cover all these aspects, so “I have to have several data collection tools in place ... It took us 80 days to collect the information on this and I know many companies out there who took more than that.”

The best way forward, Mr Gough urged, is to streamline the CRC and CCL and “to look at mandatory reporting as being a requirement.”

Paul Leamy, Special Counsel at Taylor Wessing LLP, reported that his clients’ first reaction to the league table had been “we’re not overly concerned by our position, because you’re not comparing like with like.”

Mr Leamy predicted that the league table “will provide a more useful tool when it’s based upon year-on-year performance as opposed to when it’s just based on an early action metric,” because this year's table fails to provide a proper picture of a company’s emissions reduction strategy.

He urged that the CRC be further amended to accommodate the complications of the landlord / tenant relationship, as under the existing scheme the landlord is responsible for energy consumed by the tenant. “There seems to be, in my view, a misplaced conception that a landlord has the ability to control the energy use of its tenants.” The revenue recycling mechanism provided landlords with an incentive to work with their tenants to develop energy efficiency measures, but taking that away “has now effectively driven a hole through that incentive and I query whether landlords and tenants will now cooperate in the manner originally envisaged.”

Niall Mackenzie, Head of Carbon Markets at the Department of Energy and Climate Change (DECC), acknowledged that “the first year’s league table doesn’t tell you much, other than the people who’ve made the investments in years gone past and are committed to energy efficiency.”

However he noted that “there’s certainly a number of companies - I won’t name them - who have portrayed themselves as very green, who are surprisingly low down the table”, suggesting they are less serious about energy efficiency than their competitors higher up the table. He welcomed the research being undertaken - particularly by the specialist press - in comparing companies in the league table. “It’s getting the reputational drivers starting to be talked about and after two or three years you’re going to see a lot of companies being very concerned as to whether they’re going up or down.”

Mr Mackenzie acknowledged the scope for improvement in the league table and that the CRC scheme, as it stands, is “certainly too complex.” “Much of the complexity of the current league table is based around making sure that revenue recycling was fair. Now we no longer have to worry about that, we can simplify a lot of the regulation”. In this process the Government’s primary goal is that “we mustn’t impose new obligations on you”, even if mandatory carbon reporting were introduced. If a company is reporting under any existing schemes, “the data you have given government for any of those schemes will be deemed as compliant with mandatory reporting. Yes, you may have transport, you may have other things to wrap around it, but you should not be deemed not to be complying when you’ve just handed to a different person or presenting again, information you’ve already given to Government. That would be crazy and we’re not in that game.”

To progress simplification, “I’m not convinced that a straight forward price across all aspects of the economy is the panacea that economic purists would have us believe. That said, we are looking at the whole issue of carbon pricing across the economy to see how it can best change behaviour, particularly taking account of the economic climate at the moment.”

Mandatory carbon reporting was raised by other panellists and Mr Mackenzie warned: “We don’t know if mandatory carbon reporting is coming in yet, the Government has yet to make a decision and under the Act I think it’s got until April next year to decide, or … make an announcement that they haven’t made a decision.” In any case, it should not be assumed that mandatory reporting and the CRC could be merged because they offer different benefits. Mandatory reporting does not offer, “the energy use compared absolutely the same for each company, so there’s a lot more scope for obfuscation.” 

The UK reporting system must fit within international standards and this is a delicate issue. Changes to the EU ETS have to be negotiated with 26 other member states and international standards can be expected to be “very woolly” for a long time. “My view is that you want to have the UK setting very high standards as we do in financial reporting and get others to follow us. If that causes some difficulties for multi-national companies that’s probably a price worth paying.”

This event was supported by Taylor Wessing LLP.