Revenue goes up in smoke

A new study reveals that 54 percent of UK companies face large fines because they are not ready to comply with new European Union regulations on CO2.

Fifty-four percent of UK companies could face penalties running into millions of Euros because they will not be ready in time to comply with new European Union (EU) regulations on carbon dioxide (CO2) reduction.

According to a European study by LogicaCMG, one in five UK companies have yet to start the process of moving towards compliance with the EU Emissions Trading Scheme (ETS) which has a deadline of 1 January 2005.

The study has revealed that eight out of ten companies do not believe that the regulations will be beneficial to their company. Only one in ten companies anticipate that the scheme will have a positive impact on their profits, whilst a third of UK companies believe that significant investment will be required to comply. Six per cent of UK companies even admitted that it would be cheaper to pay fines than make the investment to meet compliance.

“The good news is that three quarters of European companies said they would make every effort to reduce CO2 emissions,” says Jim Yeats, managing director, energy and utilities, LogicaCMG. “Unfortunately it is apparent that most UK companies have not made much progress towards compliance.

“Despite 74 per cent of UK plcs stating that reducing CO2 emissions is on the board agenda, alarmingly, 64 per cent of UK companies have yet to set a budget to be able to comply with ETS regulations,” Yeats adds. “The challenge is that it’s not just about complying with regulation. The social and economic issues with ETS should propel UK plcs to comply and take advantage of the opportunities.”

The ETS will impose prescribed targets for reducing CO2 emissions on companies from a variety of industries, from power generation to building materials production. It will allow the trading of emissions allowances on an open market. Over 40 per cent of companies acknowledge that ETS will provide “massive” or “significant” trading market. However, 66 percent of respondents do not have plans to become an active trader and are missing significant revenue opportunities.

Companies can choose whether to reduce emissions or purchase spare allowances, but if they are not fully prepared for this legislation they face unnecessary costs and even heavy fines that could run into millions of Euros. Penalties for the largest emitters could run into hundreds of millions of Euros at 40 Euros per tonne of unauthorised CO2 emissions.