There are also other alternative that the government is suggesting to avoid or reduce the tax payment from the climate change levy by taking part in Renewable Energy Strategy using renewable energy for example wind power, tides, solar energy and many more. Business will not have to pay tax on such energy but at the moment the cost of renewable energy still more expensive than non renewable energy and is less efficient. Many organisations has been set up by government like carbon trust, carbon footprint, department of energy and climate change to help and give advice to companies on how to reduce greenhouse gas. Large businesses have also start investing in low carbon technology or having their own energy farm, massive amount of small business have also started to use energy saving light bulbs in the stores. In the building industry have been greatly affected by the Building Regulations 2000 as it creates many new regulations to building for example, limit the predicted in-use carbon emissions by the building design, imposing minimum construction quality criteria. For larger building it include: type of work which triggers the need for ‘consequential’ energy efficiency improvements to the rest of the building and criteria for their feasibility. “Guidance on the efficiency measures required when extensions or conservatories are added, when there is a material alteration or change of use or when services are upgraded or expanded. Guidance on dealing with ‘thermal elements’ (walls, roofs and floors) to limit heat gains and losses” (www.carbontrust.co.uk), and many more. All of these regulations will affect on the cost and time of building a new building, having to submit a full plan application waiting for it to be processed. They will also need to renew energy performance certificates every 10 years that measure the intrinsic energy performance of the building.
The polices that affect the manufacture industry the most will be the climate change levy, this policies is made to reduce greenhouse gas emission by taxing on industry, commerce, agriculture, public administration and other services. Things that will be taxable is electricity, natural gas, petroleum, hydrocarbon gas and coal; things that is not taxable will be oil, road fuel gas, heat, steam, waste as defined in statute. As everyone knows in manufacture industry most products will be produce with machinery which is run with electricity or coal. For that reason the cost of manufacturing in UK is very high and in the past decade manufacture factories in UK has been decrease greatly so many manufacturers has move their factories overseas mainly to undeveloped or developing counties creating a large deficit in the economy. The government soon created a climate change agreement for companies to join in order to reduce the 80% of the climate change levy charge, doing so the companies must achieve “challenging targets for improving their energy efficiency or reducing their carbon emissions.” (www.decc.gov.uk) Many firms will decide to take part in this agreement however most aluminium, glass, steel, paper and many more manufactures are still going beyond their given limit of pollutant emission. This will decrease their quantity of products being made and will lead to a decrease in profit. Firms could purchase more pollutant emission through the emission trading system (EU) which started in 2005; firms with left over amount of pollutant emission could sell their leftover to other firms, the price is set by government, in “April 2006 the price is €30 per tonne which was the highest ever and in September 2007 was €0.10” (www.emissionstrading.com). When this scheme first started the cost were too high for firms to purchase as global emission starts to reduce so did the cost.
The forestry industry plays a large role in the climate change programme as forest should be use to help achieving the Kyoto Protocol as trees act like a lung to the environment but at the same time there is a high demand on timber. An organisation named ‘confederation of paper industries (CPI)’ is form working on behalf of all the UK paper related industry to defend its interest in the same time helping the environment. In the paper industry they were constantly ask about their carbon footprint figures on their products which they calculated constantly and try to reduce it by recycling paper and reduce landfill waste which is their key element to help to reach the target of Kyoto Protocol aim in 2012. Recently the European trade association also created a new framework documents to “allow paper manufactures to calculate the figures of carbon footprint on each product on regulate basis” ( www.paper.org.uk), so that there will be a guild line for the manufactures to follow, whether they should invest their money on planting more trees, new recycle technology and cutting down on quality of paper they are making. All of the CPI members are involve in the climate change agreements already and about to take part in the carbon reduction commitment scheme which will start in April 2010 which “will require participating organisations to purchase and submit sufficient allowances to meet their annual emissions covered by the scheme, all carbon emission allowances will be sold at a fixed price of £12 per tonne of carbon dioxide at the start by April 2013, allowances will be auctioned by the government, with fewer available each year.” (www.carbontrust.co.uk) The CPI is also involve in EU emission trading scheme “involved with 43 paper mills in EU by advising them on steps needed to comply with the Environment Agency’s rigorous monitoring and reporting procedures, and by arranging and coordinating annual verification activities.” (www.paper.org.uk) CPI has participate in the 3 main climate change programme polices helping its members to reduce taxable charges through climate change agreement and raising the limit of pollutant emission through carbon reduction commitment and emission trading scheme with a fair price, doing this will not only raise the profit margin at the same time helping to reach the reduction of greenhouse gas. Many paper industries also agree to plant two trees on every tree they cut down.
Many representatives from non government organisation argue the government should change the current policy method to a more efficient way to help the climate change issue rather than increasing a large amount of tax on industries. Some says that “raise level of taxation would encourage investment on energy efficient technologies” (Houses of Parliament (2004), Number 213) but this might just decrease the competition of companies and in return will just lead to increasing the power of remaining firms being able to raise the manufacture good’s price. They should put tax on carbon emission rather than energy being use as carbon emission is the main objective to eliminate making the message clearer. Currently the climate change agreement and the Carbon Reduction Commitment is only available to business that use more than 6,000MWh per year representative argue that “this should be available for everyone as the cost of pollution should applied equally to all businesses” (Houses of Parliament (2004), Number 213) rather than just big businesses or calculating the energy usage over 5 years rather than 1 year. “In 2002, the CCL generated £837 million. A recent analysis estimated that government reinvested £70 million into direct funding for business-related schemes encouraging low carbon energy choices.” (Houses of Parliament (2004), Number 213) The money generated by the policies is very unclear of its use, larger amount of money should be put directly into energy related schemes doing so will improve the levy into a better programme and the achieving the Kyoto Protocol target sooner. Many firms also argue that this scheme is way too complex and is lacking a large amount of technologies; “Business leaders favour a simpler scheme, for example direct grants for buying energy saving equipment.”(Houses of Parliament (2004), Number 213), this will lead investors to hesitate weather to invest in this project for low carbon technologies being uncertain where the investment will go. The current policy over focus on operational business emission (business that use the energy) but they did not take account on the firms that produce the energy, there are also greenhouse gas emission during the manufacture and transport of the raw material that creates the energy. They should take account of the whole business cycle rather than just the production stage. Consumer should also be charge for an energy tax on a product similar to a VAT tax. The government should also developed a low carbon good and services raising the public awareness towards low carbon good therefore firms will start to have a competition on low carbon goods creating greener products.
In conclusion the climate change programme has affected business greatly but mainly on the manufacture industry and building sectors as this two sectors uses most energy on their work. The climate change programme all started from the Kyoto Protocol in 1997 which is an international agreement to create a framework to help the climate change issue aiming to reduce 5% greenhouse gas by 2012 compared to 1997, individual countries then start developing their own policies. The three most important policies and legislation in the UK will be the climate change levy, climate change agreement and the EU emissions trading scheme, a new policies Carbon Reduction Commitment will be introduce in April 2010 which will also be a major policies for big organisation. After policies has been brought in businesses start to have been given many restriction on how much they can produce or use each month which will reduce the profit and if they wishes to go beyond the limit they will have to purchase quota from other firms. Many business organisation leader and non government organisation have an aversion to the whole programme thinking it is inequitable and many query of where the money is being used. On the other hand the programme is achieving their objective of reducing greenhouse gas emission.
Reference
Houses of Parliament (2004), Number 213 Climate change and business, The Parliamentary Office of Science and Technology, London.
