Join-the-dots energy efficiency policy

Categories: Blog

By Fraser Wallace 

George Osborne, Chancellor of the Exchequer, recognises the private sector is a powerful vehicle to deliver goods and services in a cost-effective manner. In his Autumn Statement (25th November 2015) he stated, there is no growth and no jobs without a vibrant private sector and successful entrepreneurs.’

His Conservative creed embraces business. Whilst his ideological opposites in the shadow cabinet may conceive of capitalism critically as red in tooth and claw, the Chancellor is more likely to approve of competition in commerce. Competition is the force that drives down cost and ensures entrepreneurs eke further efficiencies or improvements from their businesses.

It should also be recognised that Mr Osborne knows ‘information is power’-he cited this expression as far back as 2006 when he gave the Olsen Memorial Lecture. His specific theme in this lecture was ‘Politics and the Media in the Internet Age.’

But how does this relate to the Sustainable Energy Association, or energy efficiency?

George Osborne, we are informed by civil servants at HM Revenue and Customs (HMRC), is the driving force behind the review of the business energy efficiency tax landscape announced in 2015’s Summer Budget.

Some of the most significant proposals within this Consultation (now closed) were for businesses to move to a single reporting scheme (under ESOS) and a single Climate Change Levy (CCL) based taxation system. This latter change requires the winding up of the Carbon Reduction Commitment (CRC).

Originally, the CRC scheme involved a publically available league table which ranked companies by their energy efficiency performance. In a similar vein, the Government’s recent consultation did ask respondents whether they considered ESOS reports should be made publically available (ESOS requires the findings of an energy audit to be periodically reported to executives).

This is where George Osborne’s personal political conceptions and his recognition of the value of information to business collide with the energy efficiency agenda.  It is to be hoped that the Chancellor’s desire for businesses to use information constructively will see the consultation response include a commitment to the public release of ESOS information.

Better access to information with regard to a company’s energy efficiency is good for consumers, investors and business executives. Many consumers seek out ‘ethical suppliers’ – giving their custom to businesses with a small environmental footprint, for example. This ‘ethical advantage’ is perhaps one reason that company social responsibility actions can impact their investor attractiveness. Firms have been shown to experience a share price decline of more than 1.5% when they drop out of the Calvert Social Index (portfolio of ethical company shares) (Doh et al, 2010).

But the most immediate opportunity to be had from reducing energy waste in business is by those very businesses themselves. DECC’s central scenario indicates that ESOS – as stands now-  will deliver a net benefit to the UK and its businesses of between £0.7bn and £2.8bn over the period 2015 to 2030.

Mr Osborne stated ‘information is power’ way back in 2006. There can be little doubt that he also understands that information is powerful. Harnessing the information from ESOS audits in the form of a publically available league table would provide a powerful incentive for businesses to compete to be efficient.

Waste is inefficiency; inefficiency is loss. It can only be hoped that the Chancellor uses his oversight of the business energy efficiency tax landscape review to create a new framework utilising information and competition to drive efficiency and value across the UK.

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