Ahead of a Carbon Connect report launch in Parliament, Lord Teverson discusses how government and business can collaborate in promoting energy efficiency.
What was the purpose of the Carbon Connect inquiry, which has resulted in today's report publication?
The report, Energy Efficiency: The Untapped Business Opportunity, is centred around energy efficiency in business, which is somewhat of an unsung area.
Energy efficiency is viewed as being a boring subject and, as energy is a relatively small amount of most businesses' expenditure and there is not always the expertise in those areas, it is sphere in which there are big gains to be made.
We want government, as well as industry to concentrate on this. The estimate from the Environment Agency was that £6bn of energy costs are thrown away each year. Clearly there are big gains to be made, which have a strong impact on carbon emissions.
Could you tell us about Energy Efficiency: The Untapped Business Opportunity? What were its recommendations?
The report strongly recommends collaborative work from government and business in promoting and providing energy efficiency.
One of the report's main recommendations was that government and industry should look at a 'hierarchy of energy management'. This idea is based on a similar structure for waste management and advocates a more coherent approach to monitoring and analysing the management of energy resources.
Firstly, we would suggest seeking to avoid energy usage at all – for example, by video conferencing rather than travel.
If energy usage cannot be avoided then businesses should attempt to reduce the use of energy through the types of energy efficiency that we are already familiar with, such as better insulation.
Again, if this cannot be done then substituting different low-carbon technologies or compensating through offsetting may be appropriate.
Another recommendation is having an 'energy champion' on the board of large companies, to argue in favour of green business decisions and the implementation of more environmentally sound corporate policies.
We also recommend Energy Performance Contracts. This is where capital providers supply money upfront for investment in energy savings.
The capital provider will provide investment and the organisation in question will pay for this through all of the energy savings that are then made. Despite success in the USA, this has not worked that well in the United Kingdom up to now.
On a similar note, the Carbon Trust's Business Loan scheme, which goes up to £100,000, should be made available much more broadly, as this has been shown to be very effective in allowing companies to put in upfront investment in order to save money downstream.
How can government and the private sector work together to ensure energy efficiency?
At the moment we don't have energy targets at the European statutory level and this would be very useful. If we had also extended the 0% Carbon Trust scheme more broadly, that would have worked.
Through local government, and also through business rating, there should be some way of rewarding companies that improve their energy efficiency. Perhaps rebates on business taxation? That sort of thing has worked very well at a consumer level.
One of the priority issues in the commercial sector is that nearly all business premises have a different landlord to the people who actually operate in that business. We want to see the ability to transfer tax allowances on expenditure on energy savings, so that landlords can take advantage of actually investing in energy savings in their buildings.
At the moment a number of landlords are excluded from this due to the way their properties are funded, often overseas or externally. We need to get around that in a positive way.
Do you believe that the private sector will be receptive to the report's recommendations?
Absolutely. Ultimately these recommendations will increase the bottom line. These ideas will make businesses more competitive – and more money.
A key challenge is to get these recommendations discussed at senior management level so that change takes place; this is why an energy champion at board level is so important.
Ofgem is forecasting that energy prices are expected to go up 40 per cent over the next decade. Clearly this is not just the cost here; costs are going up much higher than inflation, so you are future-proofing your business by getting involved and giving the emphasis to energy savings.
In terms of Corporate Social Responsibility where companies can say, in terms of greenhouse gas emissions, which will most likely work in parallel to energy use, the company is showing that it is bringing down its carbon emissions as well.
Carbon-emission reporting is another area where we think that government should make up its mind. Government has an obligation to make a decision that will ensure proper greenhouse gas emissions-reporting by next year.
Do you believe that the coalition government is seeking to implement any of the report's recommendations?
The good news is that Chris Huhne, the energy secretary, is coming along to the launch of this report and will be keynote speaker.
Something that I do congratulate the coalition government on is that they have concentrated more on this 'less interesting and less headline-grabbing area' of energy efficiency. The government understands the importance of energy efficiency and I believe it will be receptive to this report.
Government needs to focus on the big gains and enable business to make the most of it. Energy efficiency is a win for business, a win for government targets and a win for financial savings.