| Sourced From Nebusiness.co.uk |
HUNDREDS of firms could face an administrative nightmare next year when the Government’s Carbon Reduction Commitment comes into force.
A simulation of how the new legislation will impact on 30 North-east companies which volunteered to take part in a One North East sponsored trial showed that the majority of organisations affected will struggle to collect and verify their energy data, risking unnecessary costs, penalties and, in extreme cases, facing criminal prosecution for non-compliance.
It also revealed that when “trading” carbon allowances in a virtual online auction, many organisations were exposed to unnecessary financial risk and potential cash flow problems as the trading teams had no clear purchasing strategy and lacked the power to influence decisions that would be required under the real CRC.
Sara Ragan, spokesperson for TNEI which is conducting the study on behalf of One North East, said the trial had highlighted some worrying issues and forced firms to rethink how they would handle the introduction of the CRC, which will affect companies with an annual electricity consumption of more than £500,000 a year.
“There’s a question over both the financial implications and the amount of resource that individual organisations are going to have to channel into it.
“Although they ultimately get it back in a rebate, the initial hit they take on their cash flow is significant.”
Although it is estimated that 150 companies and organisations in the North-east will become liable under the scheme, not even that was certain since many of the notices sent out by utility companies had not reached the right person.
“No one really knows how many are going to be affected, and that’s part of the problem,” said Ms Ragan, who added that the legislation would impact on organisational structure.
“When it came to the virtual trading day, a number realised that they could not act unilaterally – they had to pull in a team from across the organisation, including facilities management, finance and energy management.
“They also had to work out how they were going to account for this on the balance sheet, because it was a chunk of money going out for a projected cost.”
The study is only one of two conducted in the UK into the impact of CRC and will continue until April next year when companies are allocated carbon allowances before trading begins in 2011.
Initial costs could amount to as much as £500,000.
by Sue Scott, Evening Gazette
