Cash flow warning over carbon legislation

BUSINESS advisors KPMG have warned that Government plans to introduce legislation which makes businesses measure, report and pay for the carbon emissions from their energy usage will have a significant affect on cash flow.

Carbon Reduction Commitment (CRC) – which comes into effect in just over a year – will affect hundreds of Yorkshire organisations whose annual electricity bill is £500,000 or more.

The CRC, part of the Climate Change Bill, is due to receive Royal Assent this autumn and organisations will have to begin formal measurement in October 2009, not only reporting their usage to the Government but paying for the emissions their energy creates.

However, advisers at KPMG argue that companies should begin measurement earlier as electricity consumed in 2008 will determine qualification for the scheme, and to allow reliable cash flow forecasting.

The Government expects to achieve an annual saving of 4.4 million tonnes of CO2 by 2020 through the scheme.

From 2011, it plans to publish a league table that will recognise the best performers while naming and financially penalising the worst.

Dean Harris, head of KPMG’s carbon advisory group in Yorkshire, said: “For many organisations, measuring their total energy usage across all their operations will be very unfamiliar territory and a real challenge. Those operating across multiple sites, or that have franchises, or groups of companies in private equity ownership for example will not find measurement easy. They should be addressing this now in order to be ready for the scheme’s introduction and so that they can take action if they fear they may come out towards the bottom of the pile.”

KPMG has published a guide to the Carbon Reduction Commitment, Step by Step.

For more information visit www.kpmg.co.uk/advisory/cag/