Asked whether they supported the Government's commitment to reducing emissions in line with the Kyoto protocol,over 80 percent of the organisations surveyed said they were in favour,the figure rising to 93 percent amongst larger industrial companies.

However,the backing was accompanied by significant scepticism over whether targets would be achieved,along with a loud and clear message that environmental policy must not damage UK industry's competitiveness.

The npower Business Energy Index is intended to track attitudes of energy intensive Small and Mediumsized Enterprises(SMEs)and large firms on the issues of costs,energy efficiency,and energy policy and regulation.

It will also canvass respondents on the impact of energy policy and prices on their businesses.

Over 73 percent of respondents said current environmental policy in the UK had led to higher costs and 43 percent said that this had resulted in a loss of competitiveness both in the UK and abroad.

However when asked to prioritise future energy sources,more respondents identified wind power as the top priority than any other generation method, with nuclear power a close second.

Andy Duff,CEO of RWE npower,said:"It is clear from this research that respondents recognise the challenge facing industry and policy- makers in maintaining secure power supplies while reducing CO2 emissions.Not surprisingly they want 'least cost'solutions.

"The best approach must be 'light touch' regulation which allows the energy market to tackle these challenges.The European Emissions Trading Scheme is a good example of this.The 'cap and trade'approach encourages companies to reduce CO2 emissions through lowest cost routes.

“However,it is absolutely imperative that we have clarity on the implementation of regulatory instruments like the ETS which began this year.

Good as it is in theory;we don't yet have the rules for the next phase of the scheme coming into effect in 2008.

Without this information we cannot identify the cost of carbon permits,and the knock-on effect on electricity prices.This means vital investments in our power infrastructure are being delayed,and business customers face unwelcome uncertainty."

The npower Business Energy Index revealed that 60 percent of all businesses surveyed had experienced rising energy costs in the last six months.Asked to identify the factors behind this,businesses pointed chiefly to the rising costs of fuels such as oil,coal,and gas and regulatory factors.58 percent of businesses reported lower profits and 42 percent lower competitiveness as a direct result of rising energy costs.

Looking to the future,32 percent of all respondents predicted further increases in energy prices over the next three years,though the picture was mixed on short-term expectations;over half the respondents in the survey predicted no change or a decrease in prices over the next six months.

The survey also revealed significant activity in the field of energy efficiency improvements over the last six months.Over half the respondents (52 percent) had made changes to their heating and lighting set up,and over half (51 percent) had made changes to equipment and technology.

Director of Sales and Marketing for npower business Gordon Parsons said:"Business energy buyers are starting to do more to tackle energy costs.Gone are the days of arm's-length,oneoff contracts with energy suppliers based on a single price.It's more important now than ever for energy buyers to work with suppliers on managing their changing exposure to prices - this means exploring 'flexible buying' products and services,along with energy efficiency advice and support packages."

The next edition of the npower Business Energy Index will be published in winter '05.

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