THE immediate concern from the current energy crisis has understandably been around the cost of living, and for business owners, the cost of doing business.
The crisis also serves to highlight the long-term savings and benefits of decarbonising heating and moving away from volatile fossil fuel price increases. Affordable and viable energy alternatives must be provided to allow us to transition to a low-carbon economy.
Proposals for Northern Ireland to achieve net zero emissions (achieving a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere) by 2050 were accepted at Stormont earlier this year, while the Department for the Economy published a new energy strategy, ‘Path to Net Zero Energy’ last December.
That is only the start. Northern Ireland must take a comprehensive approach to the climate crisis. The journey to climate neutrality will require significant societal change, and individuals and communities need support from Government to make these changes. People and businesses need to be incentivised to switch to low-carbon technologies.
In a survey of Chartered Accountants across the island of Ireland, 96 per cent of respondents expressed concern about environmental issues and their businesses’ ability to tackle them; in particular, they cited a lack of understanding of environmental, social, and governance (ESG) risks facing companies.
There is an ongoing requirement for clear and coherent guidance from Government to ensure that each sector of society, including the business sector, is aware of what it needs to do to help achieve the carbon targets. Individual firms will want direction on what to do, what the advantages are, and the activities they can take to support net zero.
Chartered Accountants Ireland would like to see closer engagement between Government and representative bodies to help businesses to understand their role in the decarbonisation agenda. When it is restored (hopefully sooner rather than later), the Northern Ireland Executive could create and lead a forum where professional bodies, Government agencies and other industry bodies meet regularly to collaborate in communications to the enterprise sector.
The net zero message will likely be a difficult one to deliver while many companies, SMEs in particular, struggle to bounce back from the Covid-19 pandemic, as well as weathering the more recent challenges. Those struggling to survive in the short to medium term may be less well-disposed to receiving messages urging them to invest in change creating benefits for the longer term.
As well as an effective and supportive message to business from Government, climate change and the drive to net zero will increasingly influence tax and budgetary policy. Carbon and climate objectives must feature significantly in future UK budgets. Tax policy can be used to help drive behavioural change which in turn should have the desired result of decreasing carbon emissions.
Businesses, particularly SMEs, have a crucial role in meeting the UK’s net-zero emissions targets. However, they will only be able to deliver if they are supported by the right policy framework. The UK tax system could be used to accelerate business commitment to net-zero targets by implementing policies such as:
• Requiring the amount of carbon tax paid to be clearly stated on receipts while also setting out environmentally healthier alternatives on the same receipts;
• Re-introducing the 100 per cent enhanced capital allowances regime for products on a refreshed and annually updated energy technology list, including the payable tax credit, and promoting the scheme to encourage greater uptake;
• Providing a higher rate of enhanced R&D tax relief, say 150 per cent, for SMEs undertaking innovation in green technology; and
• Allowing enhanced tax relief for investors in renewable energy generation under the Enterprise Investment Scheme, the Seed Enterprise Investment Scheme and the Venture Capital Trust Scheme.
There is no doubt that the current energy crisis is a daunting challenge. There is, however, now a chance to establish new policies that consider the current economic climate as well as encouraging the journey to climate neutrality, which may be the most important challenge of our lifetime.
The Next Financial Year position paper, which details over 100 individual recommendations to optimise the business environment, including sustainability, can be downloaded in full at the Chartered Accountants Ireland website.
:: Zara Duffy is Northern Ireland head at Chartered Accountants Ireland
