Firms demand incentives to go low carbon

Tricia Holly Davis
SOME of the biggest names in British business are ready to revolt against what they claim is a failure of the government’s low-carbon policies.
A report to be published soon will call on Ed Miliband, the energy and climate change secretary, to introduce firm prices for carbon, extra tax breaks and a raft of other incentives, including better capital allowances for green technology investment.
The report, tentatively titled Lessons from UK Climate Policy, is being prepared by a loose coalition of businesses and pro-business lobby groups, representing all sectors of industry from manufacturing to finance.
It is likely to come as an embarrassment to the government, which this month published its eagerly awaited low-carbon transition strategy. Ministers said it would pave the way for a new era of investment, creating 400,000 jobs in green industries. Members of the coalition, however, say the strategy falls short.

“The UK’s current climate policy has some way to go to incentivise businesses to green their operations,” said Walter Todd, vice-president of operations for PepsiCo, one of Britain’s largest food manufacturers and a member of the group.
He believes the government needs to take a carrot-and-stick approach to climate policy. This means providing a stable carbon price, a move that would encourage companies to curb their carbon-dioxide emissions or pay the price. Todd said the model should be the tax that has rapidly increased the cost of sending waste to landfill.
He also wants incentives to make new green technologies financially viable. For instance, the government could provide businesses with enhanced capital allowances, whereby companies can take higher deductions for spending on energy-saving technology.
PepsiCo this year announced plans to convert husks from the manufacture of its Quaker Oats cereal into a low-carbon fuel that would then be used to power one of its plants. This would have cut the annual carbon emissions from Quaker Oats production by 9,000 tonnes.
However, Todd said the plans had stalled because the scheme would cost too much. “Current calculations mean that the payback to business for certain types of green technologies can be up to 35 years,” he said.
“No business can meet its shareholder obligations and do the right thing for the environment, so this is a good example of where government incentives – in this case incentives that help shorten the payback time – would go a long way towards helping businesses justify these sorts of projects.”
Gareth Elliott of the British Chambers of Commerce, also a member of the coalition opposing the government’s plans, said that if the strategy was not rethought, it could cause a migration of British operations to countries with better environmental taxes and subsidies.
He used the government’s planned subsidy for electric vehicles as an example of misguided planning.
“The subsidy doesn’t come into effect until 2014 and doesn’t cover commercial vehicles. This kills off most of the industry until 2014 and also means British manufacturers that produce cars for the commercial market won’t benefit.”
In its report, the coalition will say that by delaying incentives to businesses, the government is slowing down improvements to companies’ environmental impact. Since businesses account for nearly half of UK emissions, this will delay the transition to a low-carbon economy.