Hello and welcome to BusinessGreen.com's all new blog, which we'll be using to report live from next week's Corporate Climate Response conference in London.

On Tuesday we'll be blogging on the countdown to the Carbon Reduction Commitment, before posting on the food industry's steps to tackle climate change on Wednesday.

It may come as something of a surprise to many, but the UK is just over 18 months away from the introduction of one of the most daring and potentially influential pieces of environmental legislation in history.

The catchily-titled Carbon Reduction Commitment may have not have been widely publicised - in fact, some critics, myself included, would argue it has barely been publicised at all – but it is no exaggeration to claim that it could redefine many businesses relationship with both energy use and climate change.

Defra may have recently got cold feet over plans for personal carbon trading, realising that such a move would represent another act of political suicide at a time when plenty of voters would already like to see the prime minister metaphorically retire to the drawing room with a bottle of scotch and a pistol. But it is still fully committed to extending carbon trading across vast swathes of the economy.

In essence the CRC, to give it its acronym, is a basic cap-and-trade scheme whereby firms' carbon emissions are capped at a set level with those exceeding that target having to buy in extra emission credits from those who do not use up their full allowance. But while it is tempting to portray the system as simply an extension of the European Emissions Trading Scheme (ETS) it is far more wide reaching and complex than that.

Whereas the ETS focuses on heavy industrial polluters and energy companies - all of which typically have a relatively small number of sites to collect emission data from - the CRC will cover any firm or organisation with an electricity bill in excess of half a million quid. That equates to around 5,000 of the largest organisations in the UK, including supermarkets, hotels, multinationals, government departments, hospitals and... well, you get the idea – a lot of people are going to be affected.

Moreover, the CRC starts now.

From this year these 5,000 or so organisations will be legally obliged to report electricity use and associated emissions from all their facilities, in order to provide Defra with the information it needs to set the emission caps at the right level when the scheme starts in earnest. Then, from 2010 they will each have to fork out £12 per tonne for enough carbon credits to cover their expected emissions, before buying in extra credits if they exceed their cap.

Of course, it would all be far too simple to just leave it at that with a system in place designed to ensure each firm pays based on the carbon it emits. So, in order to avoid the charge that it is guilty of imposing an extra tax on businesses, the government has designed the CRC to ensure it is broadly "revenue neutral". In practice, this means that at the end of each year firms will surrender their carbon credits to Defra and get their money back.

However, to further incentivise the firms involved to actually start cutting their emissions the money that is returned will be adjusted to include a bonus or penalty payment based on how they have performed in a "CRC league table" set up to track their emission reduction efforts.

Initially, the companies that perform worst will see up to 10 per cent of the sum handed over to the government at the start of the year disappear, while the best performing firms will get a bonus payment similarly worth 10 per cent of their initial outlay. In short, those firms that cut emissions will make money, those that don't will face fresh costs on top of their energy bills.

Which all sounds great, expect unfortunately, as with all government legislation since time immemorial, there are flaws.

As we have previously reported at BusinessGreen.com, the scheme will focus on energy use rather than carbon emissions and as such does not recognise where firms use renewable energy. The rather perverse result is that some firms that procure green energy could end up paying more under the CRC than those firms that buy standard energy from the grid.

Moreover, the initial sums involved in the penalty and bonus payments are so paltry as to undermine any sense that those firms that fail to curb their energy use will soon face significant financial hits. In fact, in the first year of the CRC's operation a firm spending £500,000 on electricity and performing poorly in the CRC league table would, by the government's own calculations, face a maximum penalty payment of just £3,756.

And yet, despite these issues the direction of travel is clear.

The initial sums involved may be pretty modest, but under the government's long-term plan both the penalty and bonus payments will increase incrementally for the first five years of the scheme's operation until 50 per cent of firms initial carbon credit outlay is at jeopardy if they fail to perform. Assuming a carbon price of £13 a tonne that means that by 2015 the best performing firm will receive a minimum bonus payment of £18,780 based on an electricity bill of £500,000, while the worst performing will lose the same amount in penalties. And of course those organisations with higher electricity bills will see far larger sums involved.

Moreover, from 2013 the set £13 price for carbon credits will be replaced by an auction, potentially pushing to cost of credits up further still, while the government has also not ruled out eventually delivering bonus and penalty payments to the tune of a 100 per cent of organisations inital outlay. At that point the costs and bonuses from the CRC would suddenly become a significant component of any firm's balance sheet providing a huge financial incentive for organisations to cut their energy use. 

It might take five or even ten years before it fully comes of age, but in this light it really is no exaggeration to describe the CRC as potentially one of the most important pieces of environmental legislation ever introduced.

So what should firms be doing to prepare for it, how can they keep their compliance headaches to a minimum and what can be done to ensure that when it is introduced they end up as one of the winners raking in bonus payments and not one of the humiliated losers having to effectively fork out money to reward their more energy efficient rivals.

That is what we'll be trying to find out next week.