Emissions trading

UK companies risk fines running to hundreds of millions, due to lack of readiness for emissions compliance.

At the time of this research the European Emissions Trading Scheme and 50% of UK companies are still not yet compliant, despite acknowledging the cost implications of not doing so.

Worryingly, nearly a third admit that they don’t know when they’ll be ready to comply with the regulations, which seek to reduce carbon dioxide (CO2) emissions across Europe.

New research commissioned by Logica reveals that 83% of UK companies have made no financial provision for failure to comply with the ETS or for last minute purchases of allowances if they need to make up a shortfall. Despite this, eight in ten companies have not discussed the impact of ETS with either an institutional investor or insurer, and 44% haven’t even agreed the issue with their accounts department.

By their own admission a half of UK companies recognise that there is a correlation between compliance with the ETS and shareholder value and 48% of them acknowledge that customers would prefer to purchase from a company that was environmentally friendly.

With 40% of the market currently having no verifier onboard to audit their emissions liability and with a fifth of companies having no plans to do so this year – even though practically all companies are aware of the verification process requirements – UK companies run the risk of huge penalties by not being able to report their emissions. Logica estimates that, if no action is taken, these penalties could be in region of a billion euros for UK companies.

For example, a company with an allowance of 2 million tonnes could be fined 80 million euros in the worst case, if it failed to comply with the verification process.

This short-sightedness is also highlighted with 83% of companies saying that they will have to trade to manage their emissions shortfall – even though a third of them don’t know when they will be ready to do so and 20% are currently not investing in the IT systems needed to allow them to comply.