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Climate Change Bill [HL]

I am sorry if I am still being particularly stupid. I am in the business of manufacturing some metallic product; in order to do that I require to purchase energy with a carbon cost, but I trade in the market to buy carbon certificates to cover that cost. That is how the new system will work. As I trade in the market, the price of those certificates will go up and down across the year, depending on circumstances and how people judge the market, and so on. Now, I have to include that cost in my product costs, but the truth is that because it is a variable cost I will not really know the cost of my purchased carbon certificates until I am well into the year, if not until the end of it. I would only then be able to assess what they have actually cost me and make a proper price for goods that I supplied at the beginning of the financial year. That is because we do not immediately know the effect of one on the other. The alternative way is to charge the carbon certificates that you use at a particular time directly on to the cost of your output, but that will mean that, if the cost of carbon certificates fluctuates, the cost of your product will have to fluctuate to take account of that. That seems to me a rather peculiar system to operate.