Energy Efficiency - Profiting From Uncertainty

Posted on 19. Mar, 2009 by Ross in Corporate Policy, Government Policy

Whilst acceptance of the link between climate change and human activity is now almost universal across the world’s political spectrum, and the need to act to halt the rise of global carbon emissions is still high on governmental agendas despite the economic slowdown, how to go about saving the planet remains a source of debate and disagreement at both national and international levels.

This week’s diplomatic spat between China and the USA is the latest round in the torturous process of cementing international action on carbon emissions. The US had announced that it was considering applying a carbon tax to goods imported from countries which failed to levy carbon taxes upon their own industries, primarily as a way of ensuring that its own industries were not put at a massive disadvantage from national cap-and-trade schemes. China responded by declaring the actions as overtly protectionist, and countered by demanding that Western countries should take responsibility for carbon emissions incurred by the production of goods destined for Western markets. European climate negotiators then added their two cents worth by noting that such responsibility should come with the legaslative jurisdiction to control those emissions - something China is unlikely to concede.

All the while that governments continue to squabble over the mechanisms of controlling carbon dioxide emissions, businesses are left wondering just what framework they will have to operate within in the future. The uncertainty surrounding the likely future cost of carbon, the effect of higher renewable energy sources on the price and availability of electricity and the interference of related legislative measures on efficiency, product sustainability and R&D incentives is leaving companies unsure of their future commitments and requirements. This in turn is causing many businesses to defer investing in energy efficiency projects until the playing field takes shape.

By failing to invest in energy-efficiency technology now, though, companies are missing the strong business case that such measures present. Many businesses pay more in energy bills than they do in taxes, and by investing in energy efficiency projects they are able to make substantial monetary savings, helping to protect their bottom line. On top of the instant savings that can be made, one thing is certain: whatever international agreement results from deliberations on climate change, the cost of energy and the associated cost of carbon will increase. Investing in energy efficiency projects now is a sure way for businesses to mitigate future cost increases whilst bolstering short-term profits.

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