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Landlords and retailers join forces to prepare for new carbon tax

A campaign to raise awareness of a new mandatory emissions trading scheme for firms with an energy bill of £1 million or more per year is being launched today by BCSC (formerly British Council of Shopping Centres), the British Property Federation (BPF) and the British Retail Consortium (BRC).

The Carbon Reduction Commitment (CRC) is a ‘cap and trade’ scheme which will apply to major retailers, banks and large public sector organisations. The Government will publish draft CRC regulations in a few weeks.

An estimated 5,000 businesses will be affected by the legislation, many of them large landlords such as Westfield and British Land who will have to work with their retail tenants to forecast emissions and buy allowances for those emissions. Similarly, large occupiers, such as Marks & Spencer and Barclays will have to do the same.

Traditionally, energy has not been one of the more significant operating costs for offices and shops. But from April 2010, the CRC will allocate a price of £12 per tonne of CO2 from the start of the scheme making energy costs much more relevant to the bottom line. After three years allowances will be auctioned, meaning the price could rise - resulting in a league table of carbon winners and losers. Depending on where they sit in the table, organisations could face either a net cost or gain of between 1-3% of their total energy bill.

The BCSC, BPF and BRC are today publishing a guidance paper providing a general overview of the CRC as well as setting out the timetable for its introduction. The guide provides simple advice to those affected and points businesses to more detailed information.

This guide will be followed in the spring by further advice for landlords and tenants on how to apportion the costs and benefits of the scheme between both parties.

Jeremy Collins, BCSC president and head of retail development at John Lewis comments: “BCSC welcomes measures that encourage businesses to improve their energy performance, and while we acknowledge that there are significant pressures on the industry in the current economic climate, we cannot afford to be complacent about sustainability issues in the long term.

“We have launched this awareness-raising campaign to try and fill the significant gap in information and understanding about the effect that the CRC scheme will have across the retail property industry.”

Jeremy continues: “Because of the way the CRC has been structured – using the principle of ‘polluter pays’ - there are some quite complex issues relating to the responsibilities of both retailers and landlords. This will be especially challenging in shopping centres where there are multiple tenants and common areas, which is why we will continue to work with the BPF, BRC and other industry bodies to provide quality advice to ensure the scheme is implemented in as practicable way as possible.

“We are urging occupiers in particular to assess whether they will be caught by this scheme and start putting the systems in place to collect their annual energy consumption data.”

Liz Peace, BPF chief executive, said: “Many landlords supply energy to their tenants as a service. In such cases, they will have to work constructively with their tenants to reduce energy use and therefore costs under the CRC. We are currently working with the Government and a range of other bodies to find a practical way for this to happen.”

Charlotte Eddington, CBRE’s Energy and Sustainability Director for EMEA said: "The property industry welcomes the release of guidelines on the CRC. It is going to be a complicated scheme in many respects and raising awareness and educating key stakeholders is extremely important. The sooner that business begin to deal with the implications of the scheme, the easier it will be for them to manage their risks and manage their energy usage accordingly"

The BCSC, BPF and BRC guidance note – The Carbon Reduction Commitment: An Overview – is available to download at www.bcsc.org.uk/sustainability. Further guidance and information on information events will be publicised in the run up to the scheme’s introduction.

The Carbon Reduction Commitment
The CRC applies to large commercial and public sector organisations whose total annual half-hourly metered electricity use is above 6,000 MWh. While the CRC is not the first carbon taxation or emissions trading to affect UK industry, it is one that will affect most businesses and it is the first attempt by Government to specifically target less energy intensive companies with a carbon cap-and-trade scheme.

Starting as early as this summer, the Environment Agency will begin contacting companies that it has identified as candidates for the scheme, and they will be required to participate. These businesses will have to buy ‘allowances’ for their carbon dioxide output and then will reimbursed according to how well they institute carbon reduction measures.

Businesses that fail to improve their energy performance must purchase additional allowances to cover their activities. But because allowances will be capped from 2013 and the scheme is designed to rank companies against one another, the risks of not performing well are relative as well as absolute.

Notes to editors

BCSC
BCSC represents the retail property industry and was established in 1983 as the national organisation for corporations and individuals interested in the managed retail environment. The organisation now has 2,800 members, representing developers, retailers, agents, consultants, architects and public sector managers, among others. For further information about BCSC visit www.bcsc.org.uk or telephone 020 7222 1122.