Firms confused by carbon reduction scheme

Badly implemented efficiency drives could add to annual energy costs

Many businesses are ill-prepared for the Carbon Reduction Commitment Energy Efficiency scheme which comes in to force today, according to consultancy PricewaterhouseCoopers (PwC).

Companies have underestimated the impact that the regulations will have on energy costs, which PwC estimates could rise by as much as four per cent next year.

The firm also said that badly implemented efficiency drives could add £500,000 to the average company's £1m annual energy costs in five years' time.

However, PwC believes that companies using best practice to manage energy efficiencies will turn a profit using the same calculation. Companies with annual energy bills up to £1m would spend only £150,000 a year in the five-year period.

"The bottom line is that the scheme will cost businesses in year one. Long term, the scheme is an incentive to encourage low carbon growth," said David Walters, a partner for sustainability and climate change at PwC.

"But it's a complex one. A growing business has more energy needs. The reality is that, if you want to avoid additional costs, you need to grow in a low carbon way."

The scheme is voluntary but, for those who register, Walters thinks the ride will be bumpy.

"2011 is when the impact on cash flow will really be felt. Businesses need to get on top of the long-term energy, cash flow and reporting requirements. Underestimating the impact will hit companies' bottom line at a time when they can least afford it," he said.