What does the Climate Change Bill mean for businesses?

Norwich Union Risk Services' technical services manager Ted Kenrick looks at the draft Climate Change Bill, and explores what it might mean for British businesses

THE GOVERNMENT unveiled its draft Climate Change Bill this week amid much pomp, ceremony and political debate.

The move was generally welcomed by environmentalists, businesses and opposition parties as a step in the right direction towards tackling global warming, although there was some disagreement over the best ways of achieving the overall aims of the legislation.

Primarily, the Bill will make the UK the first country in the world subject to legally-binding cuts in carbon dioxide (CO2) emissions - with reductions of between 26% and 32% by 2020 and of 60% by 2050 targeted.

The targets in the Bill would be enforceable through judicial review, meaning that campaigning groups such as Friends of the Earth and Greenpeace could apply to the courts if the aims were, or appeared likely, to be missed.

Judges would be able to take steps such as "naming and shaming" Government by issuing a warning, or in serious cases insisting it buys extra emissions credits through the Kyoto trading scheme.

A system of "carbon budgets" would see emissions capped over five-year periods, with plans set three budgets in advance to provide greater certainty for businesses and individuals.

A new independent body will be created to advise on setting carbon budgets, which will report regularly to Parliament on progress.

The new legislation would also mean that the Government would be granted greater "enabling powers" to introduce measures for controlling emissions more quickly and easily.

'Framework' legislation

What is interesting about this draft legislation is that it contains very little in terms of specific measures, other than those affecting the Government itself.

The Government describes it as a "framework" Bill - or one that sets out long-term goals and strategy - rather than listing what the public, businesses and other organisations 'must do'. So on the face of it, the answer to the question 'What does the Climate Change Bill mean for businesses?' is 'not a lot, at this stage.'

However, the significance of "legally binding" targets for cutting greenhouse gases in the UK cannot be underestimated. The Government, with apparent cross-party agreement, is setting out its stall here and will expect everyone else to follow suit.

A section of the draft Bill opens up the option for the Government to introduce a range of emissions trading schemes "in different sectors and to meet different objectives". Within these schemes the Government would be able to "set targets" and define the "level of obligations".

The partial Regulatory Impact Assessment (RIA) accompanying the draft Bill also highlights the considerable costs associated with controlling CO2 emissions - as much as 1% of UK Gross Domestic Product (GDP) by 2050. When you consider that the UK's current GDP is well over one trillion (a million million) pounds, you begin to see the overall picture.

What is also clear is that these new schemes and costs will not only affect larger businesses. The RIA highlights how UK small to medium sized businesses account for "significant quantities" of CO2 emissions, and will therefore be affected by both the Government's wider policy and "specifically targeted measures".

Risk management

What the Climate Change Bill means for UK businesses for now then is nothing specific. But companies should be looking at this Bill from a risk management perspective.

What impact can we expect the legislation to have on the kind of goods that firms produce and the services they offer? How will it affect manufacturing processes, energy use, emissions and waste management? What will be the financial impact?

The Government has made it clear that there will be costs associated with the Bill. Businesses should assess whether taking steps to manage CO2 emissions 'sooner rather than later' would prove more cost effective in the long-term. The Stern report, widely seen as the prologue to the Climate Change Bill, suggests that for the economy as a whole it would be better to tackle climate change now.

Everyone, even those that remain sceptical, should now also recognise that climate change IS going to have a significant impact on companies in the UK - because apart from anything else, the Government is going to legislate for it to happen.

And of course, let's not forget the other risks associated with failing to tackle climate change - increased flooding, coastal erosion, rising energy costs, scarcity of resources, ill health, migration...