Business backs Stern but warns of 'penalising' taxation burden

Business yesterday pleaded with the Government that it should not be hit by extra taxation, in reaction to the publication of the Stern report on the economics of climate change, and called for the burden of emissions reductions to be spread more evenly across society.

The report was welcomed across industry and the City but many demanded that the Government remove obstacles to a lower-carbon economy and "go beyond the rhetoric".

Mark Woodall, the chief executive of Climate Change Capital, an investment banking group specialising in clean energy, said: "We have had opportunities in the past to advance this agenda; it has been blocked by business groups who have used economic arguments as a defence.

"Now we cannot allow such counter-arguments to win the day. The science debate is over, the Stern report has shown that the economic debate is pretty much over. Now the political debate is the only one left."

Business organisations were united in alarm that the Government might react to the Stern report by penalising companies.

The EEF, which represents manufacturers, said that "all sectors of society must now share an equal burden for tackling climate change and, the review must not be used an excuse for the introduction of more punitive taxes on industry".

Martin Temple, the EEF's director general, added: "Domestically there must be measures that will achieve cuts in emissions from the household and transport sectors, where results so far have been disappointing."

Similarly, David Frost, the director general of the British Chambers of Commerce, said that if new green taxes were imposedthere would have to be reductions elsewhere in the fiscal burden on business. "With over 60 million people living in the UK businesses must not be singled out as the ones to pay higher taxes to tackle climate change. Business is showing increased willingness to become more energy efficient and the Government should continue to work with us rather than simply raise taxes. It would be counter- productive for UK businesses to be hindered on the world stage by an uncompetitive tax regime," he said.

The Institute of Directors also emphasised that "global warming must not become an excuse to load extra cost and taxation on business". Instead, business and individuals must be incentivised to improve energy efficiency, it said. Miles Templeman, the director general of the IoD, said: "This is a global issue and we therefore need global action. Without countries like the USA, China or India making decisive commitments, UK competitiveness will undoubtedly suffer if we act alone. This would be bad for business, bad for the economy and ultimately bad for our climate."

Some business groups, such as the UK Business Council for Sustainable Energy, joined non-governmental organisations in calling for a legally binding greenhouse gas reduction targets.

"Businesses are ready to scale up investment in sustainable, climate-friendly sources of energy, and are looking for clear signals that governments are serious about acting on climate change. We also welcome the support for carbon trading and other market instruments - businesses are looking for firmer signs that governments will continue to expand emissions trading activities beyond 2012," the UKBCSE said.

Andy Duff, chief executive of RWE npower, one of the UK's leading electricity generators, said: "We are prepared to invest the hundreds of millions of pounds involved in the new generation of power plant. What we ask of our Government is to work with Europe to seek to extend the EU emission trading scheme in the simplest way possible rather than continue to renegotiate the structure and the baselines which has created so much uncertainty thus far."