HRD's pocket guide to... carbon pricing

The HRD’s pocket guide series offers an explanation of areas outside day-to-day HR that business-savvy HRDs need to have a handle on

Why do I need to know about it?

The planet is overheating, and warnings about carbon levels (particularly those produced by industry) have become increasingly urgent. In June this year, then prime minister Theresa May committed to net zero UK carbon emissions by 2050. As well as reducing emissions and trying to offset them by planting trees, one way of achieving this is to effectively ‘tax’ businesses for how much carbon they produce. This is known as carbon pricing.

“Carbon pricing is a policy tool that imposes a price on greenhouse gas emissions, and it is considered one of the most cost-effective ways of combating climate change,” explains Michael Mehling, professor of practice at the University of Strathclyde.

“By increasing the price of polluting activities – such as fossil fuel use in transportation, heating or electricity generation – a carbon price creates a powerful incentive to switch to cleaner alternatives. A simpler way to think of it is that carbon pricing ‘makes the polluter pay’ for the environmental damage caused.”

What do I need to know?

As with many policy areas, the Brexit debacle has thrown the future of carbon pricing in the UK into uncertainty. As a member state of the EU, the UK has had to abide by prices set out in the EU’s Emissions Trading System (EU ETS) since 2005. If/when it leaves the EU, the UK may be able to set its own prices.

“Under a no deal, the EU ETS will be replaced with a Carbon Emissions Tax of £16 per tonne in 2019. For the power sector there is also a domestic tax of £18 per tonne of carbon, which we know is set out to March 2021,” says India Redrup, policy manager at trade association for the energy industry Energy UK.

This uncertainty makes futureproofing and long-term planning particularly difficult for sectors that are typically polluters, such as manufacturing, transport, and utilities. The government is advising businesses to keep a close watch on policy development and to make their opinions known where possible.

“Keep an eye on the government’s plans for a domestic ETS and get involved in any consultations,” recommends Robin Teverson, member of the House of Lords and chair of the EU Energy and Environment Sub-Committee. “There are all sorts of elements – like the number of allowances, exemptions and the design of correction mechanisms – that could make a real difference to individual businesses.

“And if there isn’t a deal, make sure you’ve read the government’s guidance on ‘meeting climate change requirements if there’s no Brexit deal’, because it explains how the new tax will work.”

Where can HR add value?

HR is often accused of not ‘speaking the language’ of the business, or of being too siloed. Bringing the issue to the attention of the board (if it’s not on the table already) could earn HR some valuable kudos with the C-suite.

Operating costs will go up for every organisation, regardless of sector. There may be areas under or closely associated with HR’s remit where carbon savings (and therefore monetary savings) can be made, such as fleet and facilities management.

“Switching to a renewable energy company, changing company car fleets to electric vehicles and generally looking at the carbon footprint of the goods/products a company uses in its supply chain or on the premises can be quick and easy ways of cutting emissions,” highlights Redrup.

Making sure employees are aware of the environmental impact of both the organisation’s and their own actions is also HR’s job. “It is important to sensitise staff and management across all levels of this new cost factor, not unlike building awareness of the cost of electricity or water, and the need to use these efficiently,” explains Mehling.

Good internal communications will be key here, and you may want to consider a multi-platform approach (for example, intranet blogs and posters in the workplace) to reach as much of the workforce as possible.

Anything else?

Businesses don’t have to deal with the complexities of carbon pricing (and lowering what they pay) alone. “The government has announced £1 billion of funding for corporate energy efficiency measures in its response to the Committee on Climate Change’s progress report. This is a great opportunity for all companies to take advantage of government support for reducing their carbon footprint,” says Redrup.

This piece appears in the December 2019 print issue. Subscribe today to have all our latest articles delivered right to your desk