Government’s new Carbon Reduction Scheme risks penalising rather than incentivising energy efficient IT companies and could potentially stunt growth in the UK market

The Government’s new Carbon Reduction Scheme risks penalising rather than incentivising energy efficient IT companies and could potentially stunt growth in the UK market, according to UK technology trade association Intellect.

The Government's Carbon Reduction Commitment Energy Efficiency Scheme is designed to improve energy efficiency in large public and private sector organisations.  Targeted at organisations that spend over £0.5 million a year on electricity, business and public sector bodies will be required to purchase CO2 allowances, monitor their energy use and report their emissions.  It is expected that by 2013 Government will cap the number of allowances available each year and all allowances will be auctioned.
However, the CRC league table will rank companies according to changes in their absolute carbon outputs without taking account of changes in their operations or structure such as significant business growth.  This effectively means that the CRC is discouraging growth.  Data centre operators, for example, are likely to be penalised in this way due to the fact that while outsourcing of these functions may increase, the entire carbon liability falls to the utility bill payer, irrespective of whether the bill payer is in fact using the energy. 

In order to achieve the desired outcome – a decrease in absolute emissions – an incentive should be created for an inefficient company to outsource to a more efficient one – but also for an efficient company to accept business from an inefficient one (without the penalty of lower ranking).  The current proposals for CRC do not achieve this.

Laurence Harrison, Director of Energy and Environment at technology trade association Intellect said:

“Whilst we support the Carbon Reduction Commitment's aim to improve energy efficiency, I would urge the Government to look again at the structure of the scheme, and particularly the league table, to make sure it takes account of the wider benefits of IT deployment and pushes companies towards rational decisions about their CO2 emissions.” 

He went on to say:

“As it stands, this scheme will put the IT industry at the bottom of the CO2 emissions league table.  This could damage the UK's IT industry when in fact, as recognised by the WWF and the European Commission, our sector is playing a leading role in reducing carbon emissions across the rest of the economy”

About Intellect
Intellect is the UK trade association for the IT, telecoms and electronics industries. Its members account for over 80% of these markets and include blue-chip multinationals as well as early stage technology companies. These industries together generate around 10% of UK GDP and 15% of UK trade. For more information go to www.intellectuk.org

Further information about the Government's Carbon Reduction Commitment Energy Efficiency Scheme can be found on the Department for Energy and Climate Change website: http://www.decc.gov.uk/en/content/cms/news/pn112/pn112.aspx

Intellect's full response to the Government's consultation on the Carbon Reduction Commitment can be obtained here: http://www.intellectuk.org/content/view/5088/86/

Example:  Unlike a genuine cap and trade scheme, the CRC does not encourage carbon savings to be made in the most efficient way possible - the UK would see a quicker and more significant reduction in total carbon footprint if the legislation encouraged the movement of work to those who could do it in the most carbon efficient way.  Instead it does the opposite.  For example, work moves from carbon inefficient company A (either customer or competitor) to carbon efficient company B, who then go on to perform this same work in a more carbon efficient manner. In this situation the CRC league table and financial penalties will show company A as having achieved significant improvement whilst company B will be penalised in both reputation and financial terms. So, while the overall carbon footprint of the activity has reduced, company B is discouraged from taking on further similar work and continue to reduce the UK’s total carbon footprint.  In fact, the only way for such a company to perform better in this league table is to offshore its activity –  escaping the net, completely contradicting the government's objectives to support low carbon business in the UK and of course harming the UK’s growth.

Case study. Memset is a fast-growing SME that provides managed hosting services to business. It is one of the Deloitte UK Tech Fast 50, and became Britain’s first Carbon Neutral accredited ISP in August 2006. Memset has won numerous awards for quality of service and environmental innovation, especially within the data centre. Memset had been planning to invest in a semi-experimental super-efficient data centre in Surrey, but as a direct result of the Carbon Reduction Commitment legislation they have shelved those plans.  The CRC means that it makes no sense for them to own a data centre.  It is better for them to outsource that element to a third party who can then bear the reputational damage of the proposed league tables. 

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