By Claire West

Expanding the current loan scheme for small businesses and providing incentives for firms to green their buildings are just two of the measures that Government must look at in order to achieve the UK's tough carbon emission reduction targets, according to a new report from the Federation of Small Businesses (FSB).

The UK is expected to reduce its carbon emissions by 20 per cent by 2020 and the report, ‘Making sense of going green — small businesses and low carbon economy', looks at the many opportunities which will allow small businesses to play their part.

The FSB believes that to get small business owners to proactively embrace energy efficiency, the Government needs to make going green economically viable. While many small businesses understand the benefits of green investment, the upfront cost is a huge disincentive.

Currently, small firms can access a zero per cent loan scheme for energy efficient equipment which the FSB urges the Government to reform and expand. The scheme allows firms to ‘pay as you save' so firms can realise a genuine cost saving through energy efficiency, without having to make an upfront cost.

With 47 per cent of the UK's carbon emissions from buildings there is an urgent need to engage with the private sector to tackle this problem. Furthermore, with 44 per cent of small businesses renting their business premises, many for less than five years, neither the landlord nor the business would see the benefit of making the building as environmentally friendly as possible.

The FSB believes this can be done by incentivising private sector providers to pay the upfront costs of major building energy efficiency upgrades, and guaranteeing ‘pay as you save' repayments through energy bills.

John Walker, National Chairman of the Federation of Small Businesses, said: "The need to cut carbon emissions and the predicted increase in the cost of energy over the coming decade means that the move to a low carbon economy is more of an economic imperative than ever".

"In order to achieve the tough targets set by the Government, it must ensure that it makes economic sense for the UK's 4.8 million small firms to go green. Small businesses can play a huge part in the UK's fight against climate change and we urge the Government to harness this potential when it publishes its Energy Bill, expected later this Parliament".

"If the correct policies are put in place now, then small businesses will have the potential to significantly reduce carbon emissions while also delivering the substantial economic growth that the UK economy desperately needs."

Mike Childs, Friends of the Earth's Head of Climate, said: "As this report sets out, small businesses have much to gain from cutting their emissions - insulating offices and producing clean energy will save thousands on fuel bills, and there's going to be plenty of new job opportunities as loft-laggers, roofers and technicians are needed to improve the UK's woefully inefficient buildings".

"Increasing zero-interest loans and more ambitious incentives for green energy for businesses would make going green more financially rewarding, but businesses also need certainty about what will be expected of them in the years ahead - which means getting regulations and taxation right".

"The Government's immediate priority should be to set all areas Local Carbon Budgets, encouraging councils and businesses to work together to cut emissions, save energy and transform the places in which we live and work".