With new legislation on reducing carbon emissions due to come into force, the industry is still trying to find out how it will work in practice. Daniel Thomas reports.
One of the most significant pieces of green legislation to hit the hospitality industry in recent years - the Carbon Reduction Commitment (CRC) - comes into effect next April. But despite the Government issuing its final guidelines on the implementation of the new law earlier this month, serious questions remain about how it will work in practice.
The CRC is designed to help the Government meet the 80% greenhouse gas reduction target set out in the Climate Change Act. It is a mandatory, auction-based emissions trading scheme targeted at large, non-energy-intensive companies including hotel groups.
About 20,000 companies will have to submit a CRC information disclosure to the Environment Agency by next summer, while roughly 5,000 will have to pay registration fees and participate fully in the scheme.
Under these rules, organisations must calculate and report their carbon emissions annually. From April 2011, participants must buy CRC allowances to cover their anticipated emissions for each year - emissions will be based on electricity, gas, fuel oil, liquefied petroleum gas (LPG) and solid fuel. Initially, the scheme will be uncapped and it is expected that the allowances will be £12 per tonne of CO2.
The revenue raised from the scheme will be "recycled" back to operators on the basis of a league table - so that those who are making the most improvements in energy efficiency will be financially rewarded, and will receive recognition for their achievements.
The Department for Energy and Climate Change (DECC) expects the CRC to cut annual corporate energy bills by nearly £1b by 2020 as organisations find the most cost-effective ways to reduce their emissions.
But before these far-off benefits can be achieved, hotel operators are keen to see how the CRC will work in practice.
Tim Cordon, general manager for Rezidor's Radisson SAS Portman in London, heads up the hotel group's responsible business programme in the UK. He says the guidelines leave some questions unanswered.
"There is the issue with hotel management companies - who is responsible for buying the carbon credits, the property owner or the franchisee?" he asks.
"And the league tables are going to be an issue - is it fair to compare the carbon emissions of a new building in the City with a Grade-II property in the Cotswolds?"
This question over who exactly is responsible for the CRC is taken up by Gregor MacNaughton, property manager at BDL Management, who called for further clarification on the issue. "The DECC needs to tell each of our sites who they believe holds responsibility," he says.
"We have 10 InterContinental franchised hotels, 10 Wyndham franchised hotels, two Best Western franchised hotels and four unbranded hotels under the BDL umbrella. Most hotels operate under different company names based on the variety of investors and shareholders but they are all led and managed by BDL. This is a lawyers' field day."
MacNaughton said the scheme could prove unfair to the individual owners of franchised hotels. "For example, a small 70-bedroom Holiday Inn Express will not consume anywhere near the amount of energy needed to qualify," he says. "In many cases cash-flow, especially in this recession, is an issue and many owners may decide to cancel their franchise agreements."
There are some harsh punishments for non-compliance with the CRC. The 5,000 or so organisations required to participate fully will face an immediate fine of £5,000 if they do not register by the deadline, and an additional fine of £500 for each subsequent day of delay.
Failure to provide a footprint report by the deadline also results in an immediate fine of £5,000, and a further fine of 5p per tonne of CO2 per day, rising to 10p per tonne of CO2 per day after 40 days.
With this level of punishment - described as "draconian" by Cordon - it would not have been unreasonable to expect a torrent of information from the Government, but the CRC has been "under the radar of a lot of people", according to the Rezidor executive.
"I gave a speech to the Hotel Booking Agents Association recently, and most of the delegates didn't have a clue about it," he says. "It wouldn't be unfair to compare the impact to the Disability Discrimination Act, which was talked about a lot. Some additional communication would be welcome."
Ranjith Rosa, group director of engineering at the Landmark London, agrees that the lack of information is a concern and criticised the vague nature of advice from the DECC.
"At a recent seminar, the representative from DECC said that the intention of the scheme was to leave some of the finer details to be worked up by the organisations themselves," he says. "Who, then, is responsible for CRC?"
Then there is the issue of how the league table rewards operators for reducing energy usage. Peter Caddy, chief engineer at the Cavendish London, points out that the CRC will not recognise those operators who have already made strides in the area.
"If you are a business that has done nothing in terms of reducing energy usage and environmental impact you can start now, make some great improvements and reap some financial benefit," he says. "However, if like us you have already picked the low-hanging fruit over the past few years, any further improvements are going to be much smaller and you are going to be effectively penalised for not making significant savings."
This is one of MacNaughton's major gripes. "We feel we have been doing more than a lot of our competitors and see this as another tax that penalises those who have already accepted change - another serious flaw in the scheme."
These hotel industry figures - all members of the Considerate Hoteliers Association - are also critical of the requirement to pay for carbon credits up front, although this blow was softened slightly by the Government's recent announcement of a delay in introducing the payments.
The original plan had been to sell carbon emissions allowances to organisations based on their energy use in 2008. However, the DECC has now said that "to smooth the introduction of the scheme and ease the upfront costs", organisations will only have to report emissions in the first year (2010-11) without having to buy the allowances.
But despite all the concerns, businesses are broadly supportive of the aims of the CRC - they just need more support from the Government, according to Neil Bentley, director of business environment at the CBI.
"The Government needs to step up efforts to raise awareness of the legislation so that firms have time to prepare before next April," he says. "It also needs to ensure that the process for measuring emissions is clear and simple to minimise the bureaucratic burden for companies."
CRC OCTOBER UPDATE
In the latest statement from the DECC on the CRC, following the final stakeholder consultation, the main change is the period from which companies will have to purchase permits to cover their carbon emissions.
Rather than the previously stated double purchase in April 2011 to cover the emissions retrospectively for 2010-11 and in advance for 2011-12, companies will now only have to purchase the credits going forward from April 2011.
Companies will still have to register for and comply with the scheme starting in April 2010, but although this will now become a monitoring year, they will still need to report on carbon emissions from that point.
It will still be essential to assess whether an organisation qualifies for the scheme and how well prepared it is to implement the early action measures to ensure that they can best benefit from the recycling payments when the credit trading begins.
Source: Carbon Clear
Green500 is another Government-led initiative aiming to address carbon emissions. Under the scheme, which is backed by London Mayor Boris Johnson, 500 of the largest businesses in the capital are being encouraged to cut their carbon output by 1.5 million tonnes a year by 2011 - equivalent to a saving of about £1.5m in energy bills.
Green500 provides advice on matters such as reducing carbon emissions, improving energy efficiency, water usage, waste management and transport plans.
Two of the hospitality operators to have signed up to Green500 are hotel group Radisson and Crowne Plaza - the City. They have already taken a number of steps to reduce their carbon output.
Crowne Plaza - The City