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News Release from: KPMG
Edited by the Manufacturingtalk Editorial
Team on 30 January 2004
EU pollution crackdown targets UK SMEs
A host of smaller UK manufacturers are set for an unexpected surprise when emissions allocations under the EU's Emissions Trading Scheme will compell smaller companies to reduce CO2 emissions.
Industry advisors at professional services firm KPMG believe that more than one thousand manufacturers may find themselves compelled to reduce their levels of carbon dioxide (CO2) emissions Failing that, they will have to purchase allowances to cover emissions over and above their allocation under the National Allocation Plan (NAP)
This article was originally published on Manufacturingtalk on 6 Jan 2004 at 8.00am (UK)
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Despite not considering themselves to be serious polluters or producers of CO2, these manufacturers will find themselves caught out by the new lower emissions threshold which necessitates entry into the ETS.
John Guy, Head of Industrial Products at KPMG, explained: " Many manufacturing businesses will have treated the ETS as something which will pass them by and need not concern them.
However, the truth of the matter is that their own, on-site - albeit small scale - energy generation activities will be captured by the scheme." "The reason for this is that any site which generates more than 20MWth of its own energy will automatically be included within the remit of the ETS.
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As that generation threshold would encompass just about any manufacturing site which has its own Combined Heat and Power plant (CHP), the number of sites affected will be more than a thousand.
In fact, it could even extend to hospitals or other large-scale sites which employ their own on-site CHP.
If those businesses and installations remain ignorant of the fact, then they will eventually find themselves with new CO2 targets which they had little or no consultative influence over." The ETS is due to be launched on 1st January 2005 and, through the NAP, participants will receive an allocation of allowances.
It will be mandatory to hold sufficient allowances to match CO2 emissions.
This can be achieved by reducing emissions internally to the allocated level or by purchasing additional emissions allowances on a commodity market.
Each EU member state is in the process of setting their plans for national allocation of emissions allowances and must submit these plans by 31st March 2004.
KPMG's concern for the smaller manufacturers stems from the fact that their inclusion in the scheme may come as a complete surprise.
They point out that the affected businesses must apply for a permit to emit CO2 in order for them to receive an allocation from the Environment Agency.
Failure to do so may result in an installation receiving a lower allocation than could have been the case through prompt application for a permit.
As compliance will be mandatory, failure to hold sufficient permits to cover emissions will attract a penalty of EUR 40/tonne plus the need to surrender sufficient allowances.
Many businesses will have to react very quickly to prepare for the scheme starting in January 2005.
Guy continued: " Once these manufacturers have realised what they are obliged to do, their thinking will have to turn very quickly to what their options are.
How do they then go about cutting emissions by the required amount? The new, modern equipment already at use in so many generating installations will mean that simply upgrading the technology in use may prove insufficient so other means will have to be found.
If they are unable to do so, they will be forced into the open market to buy other companies' surplus emissions credits or to buy in some of their power from external sources." " On top of all this, manufacturers of all sizes will need to ensure that their CO2 emissions related planning takes into account information on what the business' strategic goals are.
If they are able to cope with their current problems and then find that the business is expanding or acquiring more sites which add to their emissions levels - and for which they are unprepared - they could be back to square one.
Businesses which fail to plan accordingly could be due for even more nasty surprises further down the line.
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