THE Government will need to extend its loan scheme for small businesses and provide more incentives for them to go green if tough carbon emission targets are to be met.

The call for greater support comes from the Federation of Small Businesses (FSB) in a report which looks at ways in which smaller firms can help contribute to reducing carbon emissions by 20 per cent by 2020.

At present small firms can access a zero per cent loan scheme for energy-efficient equipment.

This allows them to "pay as you save" – make cash savings through energy efficiency, without having to pay any costs up front.

The FSB wants this scheme expanded to also give private sector providers such as banks and energy companies incentives to provide money to cover costs.

It says new business owners should be encouraged to upgrade the energy efficiency of their buildings.

And it also wants those firms which increase the rateable value of their premises by going green not to be penalised, by waiving the resulting increased business rates.

Jeremy Frost, chairman of Croydon FSB, 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."

But he warned: "In order to achieve the tough targets set by the Government, it must ensure it makes economic sense for the UK's 4.8 million small firms to go green."

Mr Frost called for the Government to ensure measures to harness small businesses' potential to meet the targets be included in its proposed new energy bill.

He said: "If the correct policies are put in place now, then small businesses will have the potential to significantly reduce carbon emissions."