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Businesses warn carbon rules undermine renewables investment

As energy firms call for greater support for wind industry, businesses write to government demanding reform to controversial onsite renewables rules

A group of more than 40 of the UK's leading green businesses and NGOs have today issued an open letter calling on the government to urgently reform carbon-reporting rules or risk numerous high-profile renewable energy projects being scrapped.

The letter to the minister for energy and climate change Joan Ruddock has been signed by many firms, including BT, BSkyB, EuroStar, Microsoft and Sun Microsystems, which have seen plans for investment in renewable energy undermined by new reporting rules proposed under the Carbon Reduction Commitment (CRC).

Under the rules of the CRC, any company that accesses the government's renewables incentive schemes and has Renewable Obligation Certificates (ROCs) issued for the energy it produces cannot then count the same energy towards a reduction in carbon emissions. Instead, it has to assume the energy from renewable sources has the same carbon footprint as the grid average.

The government has argued that the rules are designed to stop the green energy being "double counted" across different carbon reports. But critics claim that forcing firms to choose between the subsidy and the benefits that accrue from reporting lower carbon emissions seriously undermines the commercial case for buying green energy or investing in onsite renewables.

The latest letter follows similar calls on the government to reform the legislation from the Renewable Energy Association and a group of firms including the Co-operative Group, Dalkia and B &Q, which also wrote to the government calling for changes to the rules.

Sun Microsystems has said it has already suspended plans for solar and wind projects at its campus in Surrey as a result of the legislation, while BT warned last month that it could cancel its high-profile project to build its own 250MW wind farm unless reforms are made to the legislation.

"Businesses are questioning the rationale of investments in green energy if they must surrender either the subsidy or the green benefit," said Peter Young, chairman of green business coalition the Aldersgate Group, which orchestrated the letter. "The letter today not only shows the magnitude of concern among leaders of British industry, but also puts forward a number of solutions that address legitimate government concerns over double counting."

Speaking to, Andrew Raingold of the Aldersgate Group said that there were a number of options the government could take to address the problem, including tightening rules governing green tariffs to guard against double counting, introducing new subsidies specifically for renewable energy projects developed by non-energy companies, or changing CRC reporting rules to allow firms that invest in green energy to notify stakeholders that their real emissions are lower than those stated.

He added that urgent action is required if more renewable energy projects are not to be cancelled. "The general message is that the business case has been altered by the government's framework and a lot of potential investments have been put at risk," he said.

The group of companies is now scheduled to meet with officials from DECC to discuss the issue later this week and is hopeful that changes could be forced through as part of next month's budget.

The letter comes as energy companies are also stepping up pressure on the government to improve support for the wind sector or risk a series of project postponements or delays.

A number of firms have warned in recent weeks that high material costs combined with the depreciation of the pound have undermined the economic viability of several high-profile projects that rely on turbines imported from Denmark and Germany.

The British Wind Energy Association is putting the finishing touches to a budget submission that is expected to call for further support for the industry. However, the organisation today played down reports over the weekend that the sector is to ask for up to £2bn in immediate aid to save projects such as the proposed London Array.

A spokesman for the trade group told that the submission did not set out a specific figure that the industry requires and will instead focus on the kind of incentive and support mechanisms that will be required to tackle high prices and depreciation of the pound and "keep credit flowing through the system".

The industry is likely to propose measures such as loan guarantees or perhaps even the formation of a specific infrastructure bank to support renewables projects, rather than direct handouts.

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