Regardless of the recent changes in government and cabinet positions, the UK government has recently put into force binding legislation that pledges to reduce its carbon emissions by 57% from 1990 levels by 2030. These are bold and important targets if we are to meet our Paris COP 21 commitments and keep warming below 2 degrees.
The government will need the help of business to achieve these ambitions. It can encourage businesses to make these carbon reductions by using various policy levers (both stick and carrot). Many see this as unnecessary red tape, but done correctly this could be an opportunity for businesses to reduce their costs, increase resilience and get ahead of the regulatory curve.
However, these large users can get significant discounts on these rates, but only if they agree to make legally binding cuts to their emissions. In essence, companies that cut carbon early can reduce their energy costs and also reduce their likelihood of facing future tax increases by being ahead of the carbon legislative curve.
Do the easy stuff first – A surprisingly large amount of this is still left
There has been around a 2-5% annual reduction in carbon emissions per year since 2012, but the vast majority have come from the greening of the electricity market as clean renewables have replaced aging coal stations. Surprisingly little has come from energy efficiencies in the private sector. However, that is not because there is not scope to do this. During 2015 we worked with over 60 clients, large and small, to help them meet their ESOS compliance obligations. This resulted in Carbon Clear finding over £27.6mn of savings for these companies, with an average payback of just 2.1 years.
We are now helping many of these companies realise the savings.
These savings are not particularly difficult to access, but it does require focus to go after them. Often the easiest way to access this is to set up green teams across the business. These can focus on switch off campaigns, reduced paper wastage, and improved recycling. It may sound simple but there are large savings to be had at very limited up-front cost.
For those with a more developed reduction strategy, lighting retrofits may be suitable. We often found through carrying out our clients’ ESOS audits that companies could reduce lighting costs by 60-70% and achieve a payback of 3-5 years by upgrading to LED lighting. In many cases, the initial capital costs could be funded externally, making the measure cash flow positive from day one.
More sophisticated measures, such as improvements to building management systems, heating and cooling processes, and monitoring and targeting programs can also provide excellent returns on investment, even before considering expected increases in taxation.
However, a strategic approach is needed. It’s all too easy to adopt a strategy of investing in the latest technology, but failing to properly implement it, or to get buy in from senior management often leads to project failure. A proper business case for the expenditure must be made prior to investment clearly showing the required rates of return. Once implemented, a reporting regime that clearly shows that these hurdles are being met must be in place.
There are many advantages to making and reporting on energy savings, ensuring resource and costs savings for your business and ultimately making your operations more sustainable.
Find out more about the steps towards intelligent sustainability in our next blog – How do I differentiate my business from competitors?
The policy back drop
Large energy users will already be aware of government initiatives to push businesses to reduce carbon emissions with schemes such as the Carbon Reduction Commitment (CRC) while mid-sized businesses were captured by new Energy Savings Opportunities Scheme (ESOS) legislation during 2015. To further focus minds, the abolition of the CRC scheme in 2019 will go hand in hand with significant increases in Climate Change Levys (CCL) on large users’ bills, with 1:1 parity of gas and electricity charge expected by 2025.