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A reminder from the Department for Energy and Climate Change, advising businesses that they have less than two months to register for a new compulsory carbon-cutting regime, clearly came as a shock to many of them. Around 30,000 organisations have until September 30 to sign up with the Environment Agency to participate in the Carbon Reduction Commitment Energy Efficiency Scheme. Yet as the DECC disclosed this week, only 1,200 have done so, and industry analysts expect that 7,500 will end up missing the deadline.

Under the scheme, companies that have annual power bills of more than £500,000, but fall outside the remit of the European Union’s carbon-trading programme for major polluters, will have to buy emission permits. Those that cut their energy use the most will be reimbursed for the cost of the permits and given a bonus. That money will come from the worst performers, who will get back less. At the end of the year, the participants will be ranked in a league table, to “name and shame” the worst performers. To begin with, 5,000 of the country’s largest companies must register fully, while 25,000 firms that are less heavy users of energy must make a more limited disclosure, with a view to netting them at a later date.

It is with these smaller companies that the problems arise. They might not have the resources to make the necessary preparations for the scheme, or to meet the regulatory requirements, yet their owners face heavy fines for failing to register on time and – absurdly – even imprisonment for continued refusal to comply. There are obvious advantages to lower carbon emissions, both for businesses and for the country – even though the Government calculates that the Carbon Reduction Commitment will reduce the UK’s CO2 output by just 1.3 million tons a year by 2020, a mere 0.2 per cent of the annual total.

Yet while encouraging lower energy use is to be commended, it is questionable whether this is the right way to go about it. Regulation is not of itself a bad thing; but it must work efficiently, and there are major concerns about the bureaucracy and complexity involved in this scheme. Greg Barker, the Climate Change Minister, has promised to consider suggestions for simplifying the rules, which will be welcomed by many businesses. He should also ensure that the Environment Agency avoids being overly heavy-handed when they come into force, since smaller businesses will be hardest hit by an excessively punitive approach. Unless it is carefully handled, this unrealistically cumbersome scheme carries all the hallmarks of a regulatory debacle in the making.

The Daily Telegraph, 13 August 2010