Should energy efficient businesses pay less tax?
According to the British Retail Consortium, this is an idea the Chancellor should be considering.
The retail trade association went public with a proposal last week to overhaul the current business rates system with a range of new measures, including rewarding businesses which invest in energy-saving measures with lower charges.
It’s certainly an interesting suggestion. However, it’s unlikely to be popular among more energy intensive industries.
Indeed, the EEF, which represents UK manufacturers – many of whom are already embracing energy efficiency measures – has expressed concerns that such a system could create greater penalties for those companies already facing a higher burden due to government environmental levies. That said, the EEF does appear in favour of some sort of rates reform.
The British Retail Consortium (BRC) argues that the current rates system is outdated and cumbersome. It believes that charging according to the size and location of a property can deter businesses from expanding their premises and investing in growth. But by basing fees around other measures such as energy usage more accurately reflects usage.
Such a system is likely to create strong incentives for businesses to become more energy efficient. And that, as we know, is a key aim of the government.
Incentivising energy reduction
Electricity Demand Reduction forms part of the planned Electricity Market Reform being rolled out over the next few years to support the UK in making a successful transition to a low-carbon economy. Although it’s not yet clear exactly how this will work, the idea is to provide financial incentives for businesses to reduce consumption permanently.
A £20m pilot is due to launch this June to explore how successful this type of initiative could be. Details are still to be confirmed, but having talked to DECC this week, we understand that commercial organisations will be offered cash payments in return for implementing energy efficiency measures that result in permanent, long-term savings. If it appears the pilot can encourage significant demand reduction, then the scheme will be extended and possibly expanded.
However, even if we don’t see energy-based rate reforms or the EDR scheme permanently implemented, there are still strong incentives for reducing energy use.
Lower bills is obvious. But lower carbon emissions can also enhance your environmental credentials, which retailers know only too well is a key concern for consumers. That’s why we see big High Street names such as M&S and Sainsbury’s leading the way with ground-breaking sustainability programmes.
Here at npower, we’re also reaping the benefits of becoming more energy efficient. Last year, we reduced our electricity consumption by 18% and achieved – 12 months ahead of schedule – our target of reducing the carbon intensity in our offices by 38%, compared to a 2008 baseline.
Not only does this keep our finance team happy, the changes we are making are also proving popular with staff. Offices are becoming more efficient and comfortable places to be following upgrades to lighting, heating and ventilation systems.
Our efforts are not going unrewarded in the wider industry either – we received an award for Carbon Reduction Excellence in last December’s 2013 Energy Awards, as well as gaining the Carbon Trust Standard and ISO 50001 accreditation.
I doubt anyone could dispute the benefits of embracing greater energy efficiency are far reaching. And the British Retail Consortium is clearly keen for more of its members to experience these advantages for themselves.