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The Next Economy
Small Businesses Key to UK's Low-Carbon Transition

New research from the Federation of Small Businesses (FSB) warns that the UK risks failing to meet its climate obligations without the help of small businesses.

FSB’s latest report, The Price of Power: Energising small business in the next UK Carbon Plan, shows how with improved incentives and fewer barriers, small firms can be key to closing the carbon gap. It calls on the Government to produce urgently a new carbon plan that includes a specific strategy on crucial areas such as microgeneration and energy efficiency across the UK’s small business community.

FSB research found that ‘security of supply’ is the biggest energy concern for most UK SMEs (60 percent). Nearly nine in 10 (86 percent) small businesses believe the UK is too reliant on imported energy.

Making it easier and more attractive for small firms to contribute to the generation of green energy would both help to meet carbon targets and make the UK more self-sufficient with supplies.

“The UK energy sector is facing the greatest transformation since the Industrial Revolution. But the whole system for incentivising and subsidising infrastructure lacks transparency, consistency, direction and ambition. It needs a strategic overhaul,” asserted FSB National Chairman Mike Cherry. “The Government should produce urgently an updated carbon plan, looking specifically at small businesses as an audience. Without the input of an engaged and empowered small business community, the UK risks failing to meet its binding emissions targets.”

There’s more reason to worry that the UK won’t meet its emissions-reduction targets: While recent research from the World Economic Forum pointed out that renewables, specifically wind and solar, are fast becoming just as competitive as fossil fuels, and 2015 was the first year on record in which the majority of global power-generation capacity addition was in renewables, an analysis by UK-based think tank Green Alliance of the government’s latest pipeline of planned major infrastructure projects found that £1 billion of future investment in renewable energy projects disappeared over the course of 2016. According to the think tank, this reduction is not due to the falling renewables costs, but rather a shrinking pipeline of projects. For the period of 2017 and 2020, investment in wind, solar, biomass power and waste-to-energy projects will further decline by 95 percent, it added.

A slowdown in clean energy investment was expected after ministers cut several subsidy schemes over the last year and a half, but to see the numbers laid bare is somewhat shocking, especially in light of the UK’s 2030 goal of cutting carbon emissions by 57 percent of 1990 levels, as well as its Paris agreement pledge.

Meanwhile, FSB says roughly a quarter (27 percent) of small UK firms believe that a low-carbon economy would create more opportunities than threats for their business. One in 10 (12 percent) of the 1,996 small businesses surveyed generate their own energy, mainly using solar panels. But more needs to be done to encourage the other 88 percent. FSB’s research also shows three in five (58 percent) small firms have improved the energy efficiency of their business. But again, many are disempowered or not given enough incentives to make further improvements.

“Our research shows small firms want energy security to be a priority,” Cherry said. “Brexit raises yet more questions about the UK’s future power supply. Infrastructure costs must be shared out equitably, with small firms playing a pivotal role in securing Britain’s energy future.”

FSB contends the next UK carbon plan should promote microgeneration, including for the roughly half (46 percent) of small businesses who rent their premises. There also needs to be a review of the effectiveness of subsidies and incentives to help small firms climb over the hurdles to energy investment.

“The UK’s massive investment in energy infrastructure will come at a heavy price to customers, so it’s important that the benefits are fair and accessible for small businesses,” Cherry continued. “Poor investment planning could place the greatest cost burden on those that can least afford it and restrict new opportunities to a lucky few. Many small businesses are willing and capable of becoming more energy efficient, and even generating energy. With the right support, they can play a critical role in helping the UK reach its green targets and shore up supply.”

Increased attention is being paid to the role of SMEs in alleviating climate change: Last year, the World Bank refocused its financing efforts on tackling climate change through the lens of SMEs. In November, it launched a Climate Business Innovation Network to help commercialize and diffuse clean technologies through developing countries. Last month, the Carbon Trust announced it has teamed up with the World Bank in support of the new network, which aims to help 12 developing countries across Africa, South East Asia and the Caribbean in their transition to clean energy and other climate-smart paths by building local capacity and linking small businesses to global sources of technology, finance and expertise.


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