The carbon reduction commitment (CRC) league table should be scrapped because it provides irrelevant and misleading information and penalises businesses which grow through being more energy efficient.

Set to be published by the Environment Agency in April next year, the league table will rank qualifying organisations depending on their performance under the CRC.

It’s highly likely that this league table will be interpreted by the public, by green lobby groups and by tabloid journalists as a green name and shame list of UK plc. It’s also likely that procurement teams across the country will use the league table as a means to “buy green” and be badly led astray. Indeed, just the name, league table, implies that it is a valid ranking of the organisations listed.

This is wholly unnecessary and very troubling as a business’s place in the league table bears little relation to how green it really is, and here’s why.

The CRC is a government scheme which aims to lower large organisations’ carbon emissions as part of an overall goal to reduce UK carbon. Originally, the scheme was to operate by taxing carbon emissions and then recycling the tax revenue back to the participating organisations based on their performance in reducing energy consumption – hence the need for a league table. The more a business reduced energy consumption, the more it received. In October last year, the scheme changed and the recycling aspect was taken away. The CRC was turned into a straight tax, but the league table remained.

The CRC is flawed in a number of areas. For example, it incentivises companies to launder their carbon because it only measures the energy the business pays for directly and not the energy or carbon it uses through a contract with another party. This central disconnect between the owned and contract carbon in the legislation creates an opportunity for a company to improve its CRC ranking through transferring a carbon intensive area of its business – such as its distribution warehouse – to a service provider. The service provider would pay the energy bill and then lease services back to the original owner without the CRC carbon.

Another significant problem arises because the CRC doesn’t evaluate how efficiently a business uses energy – it compares relative energy use. The CRC tracks annual energy consumption with only a 25% weighting for revenue growth. In other words, it measures the overall increase or reduction in energy and then ranks an organisation accordingly on the league table. Overall, businesses that save less energy than others – for whatever reason – will sink down the league table and those that save more will gain a higher ranking.

However, companies which grow and acquire new buildings and operations will naturally use more energy and those that shrink will use less. Perhaps most worryingly, this also means that under the CRC, any business which grows as a result of being more energy efficient – because it is selling services that use less energy and therefore cost less – will be penalised. This is particularly relevant to my own sector, the data centre industry, because it is energy-intensive and it is very difficult to grow without using more energy.

For example, if a data centre services business uses the most energy efficient and low energy cost technology to offer a competitive service to the customer it may be successful and grow as a result. It may do this at the expense of the competition. However, under the CRC, it will be penalised for this growth with a low-ranking place on the league table because its overall energy use will have risen. At the same time, the ranking of its competitors, who may be losing market share through offering a service based on less efficient technology, will rise.

Clearly this situation is bad all round. The league table is too blunt an instrument to be any use whatsoever – it needs to go. It gives a false indication of a business’s overall carbon efficiency, it creates direct incentives for businesses to disown and launder their carbon and it misrepresents energy efficiency.

The combined issues with the league table, including the incentives for carbon laundering, mean that a position on the league table is not a measure of carbon reduction but instead, a measure of reporting efficiency. This strikes at the heart of the claim to be making a carbon reduction commitment. Unfortunately, the league table drives organisations toward carbon rearrangement instead.

From a market standpoint, these issues with the incentives and league table are also likely to lead to businesses buying less efficient services and products than they otherwise would. The league table then drives carbon rearrangement rather than reduction and may lead to the procurement of less efficient services – the exact opposite of what the CRC was put in place to do.

Liam Newcombe is chief technology officer for Romonet

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