Carbon emission reduction scheme comes into effect

Firms will have to buy allowances to cover their energy use

A new scheme to cut carbon emissions from big businesses and other organisations has come into effect.

The Carbon Reduction Commitment (CRC) initiative will require large firms and public sector bodies to buy allowances to cover their energy use.

About 5,000 organisations are having to participate in the scheme, which will see the most efficient rewarded and the least efficient penalised.

A survey by NPower said almost half of firms did not know what was required.

Speaking to 300 companies, the energy group said 49% did not understand what was involved in buying carbon allowances.

A further 44% said the level of advice on the CRC initiative had been inadequate.

A separate study by accountants PricewaterhouseCoopers says the most energy inefficient firms could see their energy costs rise by 20% over the next five years, while the best performers may see bills fall by more than 8%.

'Save money'

The government said an independent survey of 500 expected participants found that 78% had already taken steps to prepare for the scheme.

If organisations don't take up the challenge, there is a risk to their reputation and their pockets Tony Grayling, Environment Agency

Energy and Climate Change Secretary Ed Miliband said CRC would not only reduce emissions, but help firms save money by reducing their energy bills through becoming more efficient.

"It's no longer simply about doing the right thing for the environment, it's now a sure-fire financial investment," he said.

The programme is being managed for the Department of Energy and Climate Change by the Environment Agency.

The firms and public bodies - such as government departments and hospitals - that have to participate spend more than £500,000 on energy per year.

A league table of the 5,000 participants will eventually be published, to show how they are performing.

The Environment Agency's Tony Grayling, who is managing the CRC scheme, said it was "an opportunity for organisations to do their bit for the planet and save money".

"The league table is a very public judgement on how seriously you take your environmental responsibilities," he said.

"If organisations don't take up the challenge, there is a risk to their reputation and their pockets."

A separate government energy scheme is also being launched on Thursday - householders and businesses which install small-scale renewable electricity units such as solar panels can register to receive the "feed-in tariff" payments.

This is designed to make installing such systems more financially attractive.