Monday, 19 October 2009

Beyond Compliance

This article originally appeared in the October 2009 issue (no. 84) of 'the environmentalist', the magazine of the Institute for Environmental Management and Assessement (IEMA).

In the run-up to Copenhagen, governments around the world are proposing carbon reduction targets as part of their negotiating positions. New Zealand has set a preliminary goal to reduce emissions 10 to 20% by 2020; Japan has set a 15% reduction target – albeit from a different baseline. Meanwhile, proposed legislation in the U.S. sets a 17% target by 2020 and the EU has pledged to reduce emissions 20% by that date.

However, many leading global companies have set their own corporate targets for emissions reductions that make these country pledges seem modest and meagre. Wal-Mart’s climate change strategy sets a 20% reduction target by 2012 and Unilever have set a 25% reduction by that same year. British-French rail company Eurostar set a 25% reduction target for 2012, and reached its goal three years ahead of schedule. Meanwhile, supermarket chain Tesco promised a 50% reduction in its footprint by 2020, and Marks and Spencer pledged to go completely carbon neutral by 2012.

In this article, we explore why large companies commit to such ambitious reduction goals, and consider what this means for carbon reduction both at home and abroad.

Why do large companies go beyond compliance?

Companies embark on carbon reduction initiatives in order to exploit opportunities and to manage their risks, including costs, customer retention, regulation and/or exposure to weather and resource variability.

As described in “The end of the low-carbon agenda?” (Issue 72), many companies are attracted to the lower energy and transport bills associated with driving carbon out of the business. Marks & Spencer, for example, originally pledged to spend £200 million on its “Plan A” eco-initiative, but has since found the programme to be cost-neutral and expects the ultimate savings to outweigh its planned investment. In this context, a low-carbon initiative can engage staff in what would otherwise be a traditional cost-reduction exercise.

Multinational companies face more direct risks from climate change. Long supply chains and inefficient suppliers leave firms vulnerable to rising energy prices – especially as governments regulate emissions in transport. Meanwhile, weather-related disruptions – storms, floods, drought, can threaten companies’ “just in time” logistics networks. Climate change risks are increasingly being incorporated into businesses’ planning strategies. As Unilever states, ‘”there will be serious consequences for our business operations, including threats to our agricultural supply chain and the availability of water in some of our markets. The costs of addressing climate change now, while considerable, are likely to be far less than waiting and allowing the problem to get worse.”

With climate change now a popular concern, companies that voluntarily embark on carbon reduction initiatives are earning a reputation as environmental leaders. The Sunday Times “Best Green Companies” list is widely seen as the benchmark for sustainability leadership in the UK, and a company’s commitment to carbon reductions is one of the main criteria that the newspaper uses to evaluate performance. Companies strive to be on this and other “green lists” because environmental leadership can often translate into increased customer loyalty and sales growth, as well as employee satisfaction.

Anticipating regulatory trends is not a new concept for large corporations. For example, chemical companies have long understood that environmental risk management is essential to their continued profitability.

When the chemical industry launched its Responsible Care code of practice in 1988, only 13% of its practices were required by US government regulation. Four years later, the US government had made 80% of these company-initiated practices a regulatory requirement. Companies that had voluntarily adopted the Responsible Care principles were well placed to comply with the eventual increase of government regulation.

Climate change policy has followed a similar course: despite growing pressure, governments have been relatively slow to adopt emissions reduction targets. Meanwhile, leading companies have seen the advantages of a low-carbon economy. These companies have been steadily measuring, reducing, and offsetting their carbon emissions over the past five years – with telecommunications firm BT launching its carbon reduction initiative back in 1992.

The global supply chain

Unlike utilities and manufacturers, large retailers often have relatively low “direct” or “Scope 1” emissions (emissions from sources under a company’s direct control), and their emissions from purchased electricity and steam are not particularly high. However, these companies maintain extensive supply chains, and influence a carbon footprint that may be 20 to 60 times greater than their direct and energy indirect emissions.

Unilever, for example, reports the carbon footprint from their own factories, offices, laboratories and business travel at approximately four million tonnes of CO2 equivalent per year. Their wider (“other indirect” or “Scope 3”) footprint from sourcing agricultural and chemical raw materials is around ten times larger, and when consumer use and product disposal are included, this footprint can expand to 30 to 60 times greater than their direct emissions. As a result, many companies find that they can achieve more ambitious emissions reductions if they involve their suppliers – and even their customers – in their low-carbon initiatives.

These companies often wield tremendous influence over their suppliers due to their immense purchasing power. Wal-Mart, for example, is the largest single customer of many suppliers around the world. Even Proctor & Gamble, the world’s largest consumer goods maker, counts Wal-Mart as its largest customer. When Wal-Mart asks its suppliers to measure their carbon footprint or identify ways to reduce emissions, they are more likely to get a response than would be a smaller customer. As Marks & Spencer’s Mike Barry puts it, “They know that if they want to want to be pursuing business with us in the future, they have got to come on the journey with us.” To this end, Marks & Spencer has helped its suppliers set up four “green” factories that use significantly less energy and contribute to the firm’s lower carbon footprint.

Not only are these changes pushed up the supply chain, but also down to the end user. After launching their “Plan A” sustainability initiative, Marks & Spencer found that up to 75% of the carbon footprint of their clothing came from washing, drying, and ironing. As a result, the company has begun designing and labelling its clothes for washing at lower temperatures and launched a customer communications campaign.

As described in our article “Counting the Cost of Outsourcing” (Issue 55), many of the emissions from developing countries are attributable to outsourced manufacturing on behalf of Western companies. Indeed, adjusted for exports, China’s carbon footprint is significantly lower than the United States’. 70% of the products sold in Wal-Mart stores are made in China, and the company has supply relationships with 5,000 Chinese enterprises.

What happens when massive Western companies demand that their foreign suppliers go beyond compliance and reduce emissions? It may be too early to tell, but we would expect this supply chain pressure to lead to greater demand for green electricity and energy efficiency improvements at factories in China, India and other developing countries.

There is another source of external emissions reductions that major companies are pursuing: carbon offsets. Carbon offsets are purchased emissions reductions that occur outside an organisation’s boundaries. In this regard, generating measurable reductions by investing in a wind or solar project in China is only one step removed from investing to help an apparel factory in China reduce energy.

Indeed, large corporates in the U.S., U.K. and mainland Europe are embracing carbon offsetting to help them go beyond compliance and achieve net emissions reductions far faster than they could through incremental internal measures. By supporting projects in developing countries that do not have national caps on their carbon emissions, these companies are helping to accelerate the transition to a lower-carbon mode of economic development.

Different paths to a lower-carbon future

It is clearly in large companies’ best interest to announce and pursue ambitious carbon reduction goals. These initiatives can drive significant reductions in thousands of supplier companies in developing countries and provide an incentive for a rapid transition towards lower-emissions practices in those countries.

This ongoing trend raises an interesting possibility. The post-Kyoto climate change negotiations are currently bogged down over the issue of developing country reduction commitments. Developed nations like the U.S. and U.K. argue, correctly, that emissions from China, India and other poorer nations are so large that serious action to fight climate change will be stymied without their active involvement. The developing nations argue, also correctly, that current warming is due to richer nations’ historical emissions and rich countries should demonstrate their own commitment to reduce their footprint before lecturing others.

Wal-Mart, M&S and other companies are showing that it is not either-or. The world economy is so intertwined that actions taken in developed nations can lead to significant emissions reductions overseas. Indeed, while a binding emissions cap would provide the force of law, it is likely that supply chain pressure and demand for offsets will also drive significant cuts.

Major structural change to our carbon-based economy is inevitable as we shift to different ways of meeting our needs while tackling the challenges of climate change. Large corporates have led the way in showing how a commitment at home can lead to a reduced footprint overseas. As pressure mounts on carbon caps in developed countries, we can expect to see it spread into faster action around the world.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.

Monday, 21 September 2009

Breathing Room

Most of the news that comes to us from the climate change front lines is alarming. Over the last few years greenhouse gas emissions and temperatures have continued their upward trend. Emissions have risen so much over the past decade that what used to be considered a worst-case scenario is now our most probable future.

But the future is not cast in stone - at least not yet. As reported in the Financial Times, the International Energy Administration (IEA) has found that global CO2 emissions had fallen faster in the past year than any year over the past four decades.

In one sense, the IEA report is a good-news-bad news-story. CO2 can stay in the atmosphere for a hundred years or more, so lower emissions mean a lower overall concentration of greenhouse gases. And that means less warming in the future. The bad news is that much of the reduction we are seeing is due to economic pain.

Emissions fall when factories reduce output, businesses go bankrupt and workers lose their jobs. As we noted in a blog post several months ago, the last thing we want to do is reinforce the perception that lower CO2 emisisons means financial misery. It is this perception that makes it so hard for governments to negotiate a climate change treaty that will help us achieve the ambitious global cuts that are needed to forestall dangerous warming in the future. The recent reductions are not nearly enough to stave off the worst effects of climate change, so a global agreement remains the order of the day.

There has, however, been another effect from the economic recession. Not only have existing factories and power plants reduced their output, but a large amount of new construction has been put on hold. New coal-fired power plants have an operational life of fifty years or more, so a decision to launch a new fossil fueled power station would lock us into decades of carbon-intensive energy production - at a time when we should be moving in the opposite direction.

Postponing construction of these power stations gives us some breathing room. We're not committed yet. There's still time to choose an alternate path, preferably one that doesn't lock us into a worst-case scenario of spiraling emissions and environmental misery.

Many renewable energy and energy efficiency investments have also been hit by the economic crisis, but not everything has ground to a halt. We continue to learn more about how our carbon emissions affect the climate, and about the likely impacts of climate change on planet and people. We continue to learn more about promising technologies and approaches that reduce the tradeoff between helping the environment and securing a decent quality of life. And we learn that governments are taking climate change seriously - regulations will force businesses to factor the cost of carbon into their business decisions. Each new piece of information reinforces the knowledge that we can and must do more - not less - to cut emissons.

So one possible silver lining to the recent economic pain is that it has given us an opportunity to make more informed decisions and hopefully avoid making long term decisions we might eventually come to regret.

The future is not cast in stone. As the economy recovers and the investment climate improves, let's use what we've learned to re-evaluate our options and make faster progress towards a lower-carbon future.

(Back to the Carbon Clear website)

Friday, 14 August 2009

The 230 MPG Car

According to the news reports, General Motors has done the impossible. The NYT and hundreds of other press sites have covered the auto maker's announcement that the forthcoming Chevy Volt hybrid car will run 230 miles per (US) gallon of gasoline. Given our interest in low-carbon solutions, that was enough to make the team at Carbon Clear sit up and take notice.

The announcement was a shot across the bow of Toyota, which sells the best-selling Prius hybrid car, and generate more buzz around the long-anticipated Volt. According to the US Environmental Protection Agency's fuel economy website, the Prius gets 48 mpg in city driving, better than anyone else, but pathetic compared to the Volt's 230 mpg.

General Motors based their claim on the fact that the Volt is a plug-in hybrid that can run for 40 miles in electric-only mode, and the battery can be recharged overnight from a household electrical outlet. The gasoline (petrol) motor only kicks in to recharge the electric batteries when the car is driven more than 40 miles in typical conditions. Since the typical American car only travels 33 miles per day and the battery gets recharged overnight, argues GM, the gasoline engine will rarely get called into service. The car might travel on average for 230 miles before an entire gallon of gasoline is consumed.

Voila, 230 mpg.

I can see how this number might be technically accurate. But does it tell customers what they really need to know?

The Volt is expected to cost between $30,000 and $40,000 - considerably more than a conventional car of the same size. I can think of four reasons why people would spend the extra money:
  1. They have money to burn and are caught up in the hype,
  2. They want to reduce consumption of imported fossil fuels,
  3. They want to reduce CO2 emissions from driving,
  4. They want to spend less on fuel.
Let's set aside the first rationale, as it falls outside the normal scope of this blog. How does the Volt rate on the other three?

Rationale #2: Most of the electricity in the United States comes from coal, natural gas, nuclear, and hydropower. The coal, gas, and water, and (much of) the uranium are sourced domestically. So a car that gets mosts of its power from grid electricity rather than gasoline wins on this count. If the 230 mpg figure is accurate, then the Prius uses nearly five times (okay 4.79 times) as much gasoline compare to the Volt. Winner: Volt.

Rationale #3: How does the Volt compare on greenhouse gas emissions? According to the GM press announcement, the Volt can typically travel 40 miles on electricity alone, and its built-in battery has a useable capacity of 8.8 kilowatt-hours. So its daily energy consumption is 8.8 kWh for 40 miles of travel. That's 0.22 kWh/mile.

Greenhouse gas emissions from electricity vary widely depending on the fuel source, but on average the emissions from electricity consumption in the U.S. average 599.9 grams CO2 per kWh. Multiply that number by the Volt's 8.8 kWh daily electricity consumption and we get 5,279 grams of CO2 emissions per day. That's about 132 grams CO2 per mile, or 82 grams CO2 per kilometre. (These are what the carbon reporting standards call "Scope 2" or "energy indirect" emissions: you're using the energy, but the CO2 is coming out of someone else's pipe.)

According to the UK's Car Fuel Data website, the Prius emits 89 grams CO2 per kilometre. Winner: Volt, but not by nearly as wide a margin.

We can look at the CO2 data another way. Let's see how much petrol would have to be consumed to release the Volt's 82 grams CO2 per mile. The US Energy Information Administration says that a gallon of gasoline emits 19.567 pounds CO2/gallon. Converting to metric makes the math easier and gives us 2,346 grams CO2 per litre of gasoline.

Now we have Chevy Volt grams of CO2 per mile, and gasoline grams of CO2 per litre. Manipulating the numbers gives us an equivalent fuel economy of 67.5 miles per (U.S.) gallon. The US EPA says the Prius gets 48 miles per (US) gallon. The UK says the Prius gets 72 miles per (UK) gallon - equivalent to 60 miles per (US gallon). Winner: Volt.

Rationale #4: How much does it cost to drive the Volt? According to the US Energy Information Administration, the average cost of electricity in the year to April 2009 was 9.09 cents per kWh. From our earlier calculations, we learned that the Volt uses 0.22 kWh per mile. So the Chevy Volt's energy costs 1.9998 (let's call it two) cents per mile.

How efficient would a gasoline powered car need to be to achieve the same per-mile fuel costs? The handy US Energy Information Agency website tells us that the average US gasoline price in the week ending August 10th, 2009 was $2.65 per gallon. With two cents (the Volt's per-mile energy cost), we would be able to buy a whopping 0.0135 gallons of gasoline for our car. And if our car were to travel a mile on that amount of fuel, it would need a fuel economy of 75 miles per (US) gallon. Using the larger UK gallons, we would need a fuel economy of 90 mpg to match the driving cost of the Volt.

By comparison, the Prius gets a US EPA rating of 48 mpg, and a UK VCA rating of 72 mpg. Winner: Volt.

Summary: If GM's driving distance and battery capacity numbers hold up in the real world, the company appears poised to take the green consumer car title away from Toyota (and push Honda from second place down to a lowly third). My calculations show a significant greenhouse gas and fuel cost saving compared to the latest model Toyota Prius. The Volt gets the equivalent of between 67 and 75 mpg, depending on whether you're looking at CO2 emissions or dollars per mile. The advantage over the Prius is nowhere near the five-fold difference being trumpted in GM's press releases, but it is real.

  • CO2 emissions per mile: 40% lower using EPA figures for Prius (8% lower using UK figures)
  • Energy cost per mile: 57% lower using EPA figures for Prius

GM has thrown down the gauntlet. I'm eager to see if Toyota and other car producers will rise to the challenge and produce even more efficient vehicles.

Wednesday, 12 August 2009

U.S. Military: Climate Change a Security Threat

One of the most vexing challenges related to climate change has long been finding a way to get people to pay attention. Climate change is caused by the release of invisible gases and the impacts are felt over relatively long timeframes.

We simply are not evolved to pay attention to such intangible, long-range threats. We respond much better when the danger is immediate, proximate, and something that we've encountered before.

Like war, for example.

This week, the U.S. Defense Department issued a report arguing that U.S. failure to lead the way on greenhouse gas reductions could expose the country to a raft of military security challenges.

Storms, droughts, floods, and disease can lead to riots, wars and conflict, mass population movements, and government instability in strategically important countries around the world. Dealing with these challenges, on a recurring and increasingly basis, is but one of the costs imposed by unchecked climate change.

The timing of this report is helpful. The ambitious plans that were initially drafted in the U.S. House of Representatives are in danger of being watered down or even shelved. Putting the case for taking action into terms that we humans are better evolved to understand and recognise may help shift the terms of debate and lead to rapid action.
(Carbon Clear website)

Monday, 13 July 2009

Two Degrees

During last week's Group of 8 summit in L'Aquilla, Italy, leaders from the largest greenhouse gas emitting nations met to set the stage for December's climate change conference in Copenhagen. Together these 17 countries are responsible for 80% of global CO2 emissions.

Meetings like this are useful because they allow governments to broadcast their negotiating positions and begin edging towards compromise positions.

There's a lot that didn't happen during this meeting. China's president left early, the developing nations refused to commit to a reduction target, and while the industrialised nations agreed to reduce emissions 80% by the year 2050, they failed to state the base year - so we are left asking, "80% of what, precisely?".

And yet, there was a ray of hope. The G8 communique contained the following interesting passage:

"We reaffirm the importance of the work of the Intergovernmental Panel on Climate Change (IPCC) and notably of its Fourth Assessment Report, which constitutes the most comprehensive assessment of the science. We recognise the broad scientific view that the increase in global average temperature above pre-industrial levels ought not to exceed 2°C."

I believe this is the first time that a communique from heads of state has mentioned a temperature target. Most discussions to date have focused on emission levels, but I have always found this to be a bit abstract. Emissions affect the concentration of greenhouse gases in the atmosphere. Greenhouse gas concentrations affect the temperature, and the temperature change leads to the climactic changes about which we are all concerned.

Emissions levels are important, but they are hard to understand - they can't be seen or touched directly.

Temperature is another matter - a warming world can be felt by both people and ecosystems. So these world leaders have jumped two steps up the chain to talk about tangible outcomes - limiting temperature rises to two degrees Centigrade (about 3.6 degrees Fahrenheit).

Two degrees is about the maximum temperature that scientists think we can bear without reaching a "tipping point" into unpredictable and potentially catastrophic climate change impacts. Beyond that point, and we may enter a system where warming triggers feedback effects like methane releases from the sub-arctic tundra, CO2 releases forest die-offs, and less heat reflected back out to space due to melting glaciers.

Focusing on outcomes instead of processes gives us more flexibility to look at a range of options. It sets an ultimate test for any measure or negotiating position that is proposed in the run-up to Copenhagen: how effective

is this measure in keeping warming within two degrees?

So much for the good news. The bad news is that it's almost too late.

Alan Meyer of the Union of Concerned Scientists says that we've already warmed the planet by 0.8 degree, and time lags from the greenhouse gases already released mean that temperatures would rise another 0.6 degree even with no further pollution. So we have set a target to limit increases to 2 degrees, and we're already at 1.4.

We have to do more, and soon.

Tuesday, 23 June 2009

PRESS RELEASE: Total wins 'Environmental Innovation Award 2009'

The following press release features Carbon Clear's fuel card partnership with Total.

TOTAL wins ‘Environmental Innovation Award 2009’
Birmingham 17th June 2009 – Awareness of environmental issues in business and among the general public has reached new heights as a result of a constant barrage of reports and studies into the contribution of human activity to climate change. In the fleet and automotive sectors, companies are facing strong pressure to develop products and systems which reduce emissions at the same time as maintaining high performance and productivity levels. As part of its fleet Awards programme, the Institute of Transport Management (ITM) has been investigating fuel cards as a means of reducing carbon emissions and increasing fleet efficiency. On the basis of information collected by the research team, the Awards Committee is hereby delighted to announce that TOTAL is to be presented with an ITM ‘Environmental Innovation Award 2009’ for its TOTALCARD green product.

The TOTAL Group is a major player in the global petroleum industry and is actively involved in both upstream and downstream operations: oil and gas exploration, development and production, and liquefied natural gas (LNG), plus refining, marketing and the trade and shipping of crude oil and petroleum products. It also produces base chemicals (fertilisers and petrochemicals) and speciality chemicals for both consumer and industrial markets (adhesives, resins, electroplating and rubber processing). The company additionally has interests in coal mining and power generation. On the basis of a clear corporate vision and decisive leadership, the company has grown to become the fourth largest integrated and publicly traded company oil and gas company in the world, able to boast sales of more than £150 billion per year and the second biggest capitalisation in Europe, registering in excess of €130 million.

Its TOTALCARD services help fleet operators to fine tune fleet efficiency through web-based, PIN-protected management systems which operate through a nationwide network. Managers can avail of a thorough yet intelligible analysis of fuel use, including spending, miles per gallon and time of purchase. The system gives managers much greater control over the activities of the fleet, resulting in cost savings as well as a better environmental profile. Indeed, TOTAL is fully committed to exploring the potential for environmentally friendly fuel products, and has recently launched a dedicated green card to assist fleet managers in meeting the latest emissions regulations.

TOTALCARD green enables easy calculation of CO2 emissions, implementation of reduction programmes, access to follow-up reports and carbon offsetting. The emissions calculation is based on fuel expenditure and is available to managers online. Collection of such data forms the background for a three-part CO2 reduction plan: price incentives for advanced fuels which decrease consumption by 3.8 percent; ongoing monitoring of daily expenditure, fuel consumption per vehicle and unusual transactions; comprehensive and practical advice relating to the key principles of investing in advanced fuels and lubricants, vehicle maintenance and driving behaviour. Following implementation of the action plan, managers can access online data on emissions levels, percentages of advanced fuels used and resultant savings. Additional emissions can be offset by the Carbon Clear programme to which TOTAL itself contributes in proportion to the fuel volumes of TOTALCARD green clients.

Announcing the Award to TOTAL, ITM Media and PR Director Mr. Patrick Sheedy said: ‘TOTAL has been successful with the ITM Awards programme in the past, winning fuel card titles since the start of the decade. With its latest product, TOTAL tackles the environmental issue head-on through a dedicated green fuel card. Considering the increase in the burden of emissions regulation on businesses today together with public pressure to improve green credentials, fleet companies really do need a helping hand to reduce CO2 output. Having thoroughly examined the fuel cards currently on the market, the Institute is confident that the strongest environmental offering comes from TOTAL, with its TOTALCARD green. This latest fuel card from TOTAL will be a hugely useful tool for fleet managers who must watch emissions at the same time as keeping an eye on the bottom line. It also underlines TOTAL’s dedication towards ensuring a healthy energy future for the planet.”

Mr. Sheedy concludes: “I congratulate TOTAL on winning this Award and hope that other businesses in the transport industry will pay heed and model their own environmental policies on those of TOTAL. I look forward to witnessing the development of further pioneering products and services from TOTAL in the near future.”

More Hot Summers - More Air Conditioning?

(This article was originally published in issue number 80 (June 2009) of the IEMA journal the environmentalist.)

One of the main challenges in the fight against climate change is dealing with unexpected feedback effects. In many cases, a warming globe creates impacts that lead to even more warming. In this article, we explore the feedbacks between climate change and building heating and cooling systems, and discuss some of the options available to environment managers.

The Met Office has predicted a sweltering summer for 2009. According to the UK’s Chief Meteorologist, “….we can expect times when temperatures will be above 30°C, something we hardly saw at all last year.”

Hot summers are becoming more common as climate change takes hold. While summers in 2007 and 2008 were cooler in many northern latitude countries, the summer of 2003 was the hottest in Europe for at least five centuries and in the UK, six out of the seven warmest years since 1659 have occurred since 1990.

And it’s not just a European phenomenon - eight of the past ten summers in the USA have been warmer than the average for the 20th century.

Climate Change and Building Energy

These hot summers have energy implications: according to Government figures, the USA's residential energy demand was approximately 10 percent higher than what would have occurred under average climate conditions for the season, and it is likely that in the UK, electricity consumption will rise as a result of an increase in air conditioning. Since most of our electricity in both countries comes from fossil fuels, increasing air conditioner use makes it more difficult to meet challenging emissions reduction targets.

In the USA 65% of commercial buildings have air conditioning, compared to 27% in Europe, although a higher percentage of buildings constructed after 1991 rely on air conditioning. One rule of thumb is that a 2°C temperature increase translates into a 25% rise in air conditioning loads. If summers continue to get hotter, will the UK adopt the Continental tradition of afternoon siestas to deal with the heat, or follow the USA’s heavy reliance on round the clock air conditioning?

An indication of what might lie in store for the UK can be gained from looking at air conditioning trends in New England. Historically, electricity demand was greater during the region’s snowy winters due to heating demands and a greater reliance on electric heaters. In summer demand would drop as residents relied on windows and fans to keep cool. But around 2000, peak electric loads shifted to the summer due to the increased use of- and the perceived need for-air conditioning. Now, even in northern New England, peak load has shifted to the summer due to more regular use of air conditioning, and a switch away from electricity for winter heating.

Making matters worse are the unpredictable shoulder seasons of autumn and spring. Lag-times in heating and cooling mean gas-fired heating systems may be competing with air conditioners in those months where cool mornings transition into warm afternoons. Simultaneous heating and cooling is not uncommon, especially in small and mid-size buildings which do not have active management and may not have been properly commissioned. Increasingly variable weather during these seasons due to climate change may mean even greater energy consumption.

Can these trends in increased summer electricity demand be reversed, or will our hotter summers continue to be accompanied by a rise in air conditioning and the related emissions from electricity production? Can we take action to break this positive feedback loop?

Small buildings and air conditioning use

Historically, smaller buildings had a single boiler and thermostat. Now even modest buildings of 4,000 square feet (372 square meters) typically include heating, air conditioning and ventilation systems and automated controls with numerous control devices. These systems are generally design/build – meaning the same firm that designs them, installs them. This approach may result in a lack of independence and transparency in the set up and deployment of the building controls.

Typical problems in small retail and office premises can include:
  • Lack of documentation (i.e., no sequence of operation or controls wiring diagrams)
  • Comfort problems (intermittent overheating in the winter or overcooling in summer)
  • Loss of original intent as subsequent contractors modify the system with limited understanding of existing functionality (e.g., programmable thermostats not set properly for use)

This problem of proper commissioning and air conditioning use can be illustrated in an ongoing project evaluating a 4,200 square foot (380 sq meter) office building in northern New England. A review of the monthly consumption of purchased electricity showed that this building’s electricity usage was 40% higher in August than in January due to air conditioning use even though 2007 was not a particularly hot summer in New England The annual electricity usage amounted to 31,850 KWh causing almost one tonne of CO2e emissions . This indicated an average electricity energy intensity of 8.5 kWh per square foot. Regional best practice indicates an average electricity energy intensity of half this amount, 4.12 kWh per square foot. . Optimization of controls could reduce the building’s electricity usage by at least 15% overall - in this case, cutting annual greenhouse emissions by approximately 150 kg of CO2e.

The Heating Ventilation and Air Conditioning (HVAC) systems of small and mid-size commercial buildings typically do not work as effectively and as efficiently as they might. The deficiencies can result from a lack of expertise in control system diagnostics and operations in the staff and in contractors who typically are on site to perform routine maintenance. In particular, smaller buildings and companies often cannot afford to maintain a facilities manager or employee with facilities management expertise.

These results are not unique to the US. A pilot study in the UK evaluated 20 retail premises for temperature and relative humidity. The results showed that higher summer thermostat settings could improve both thermal comfort and the energy efficiency of air conditioning units. However, despite increased energy costs and the public’s mounting concern over climate change, few UK retail outlets have any plan for managing air conditioning use.

These deficiencies lead to on-going costs, lost personnel time due to comfort problems, increased operating costs as contractors are brought on site to address comfort issues, energy waste, and avoidable carbon emissions.

The building as a system

While proper operational control of energy use is often the starting point for making cost-effective improvements and reducing carbon emissions, it is also helpful to recognize a building as a dynamic system – with energy consumption influenced by its site and orientation, building envelope micro-climate, occupant behaviour and landscaping and the surrounding vegetation.

For example, ground soil and groundwater are both warmer in the winter and cooler in the summer than ambient air temperature. Ground source pumps use these temperature differentials to pre-cool incoming air and reduce the energy requirement of air conditioners in summer, and do the reverse in winter.

Construction materials can play an important role: masonry has a higher thermal mass than glass and steel, and therefore maintains a more even temperature. The lag time between heating and cooling can be used to maintain interior temperatures and reduce air conditioning loads.

Building occupants can be motivated to reduce internal heat gains in the summer by ensuring lights, computers, printers and other electrical equipment is turned off when not in use. Meanwhile staff can be encouraged not to overcool buildings simply because air conditioning is available – many companies are already encouraging casual wear on hotter days to reduce cooling requirements.

Landscaping can provide a shade canopy in the summer, lock up carbon through photosynthesis, and reduce ambient temperatures through evapo-transpiration. Broad-leaf deciduous trees in particular have canopies which reduce passive solar gain in the summer while allowing it when needed in the winter.

This type of holistic view is easier for new-builds, where such considerations can be factored in at the planning stage. Options for cost-effective improvements are more limited with existing buildings. However renovation does present real opportunities to improve the building envelope to manage heat flow. Natural ventilation can be improved by considering the placement of internal partition walls that do not impede cross ventilation, and windows can be retrofitted to make better use of nighttime cooling to lower cooling requirements during the day.
Nearly every human activity has an effect on the climate. Buildings occupy a critical role in modern society, and climate feedbacks threaten to amplify their impact. However, with careful planning, we may be able to break the link between buildings and global warming.

Suzy Hodgson AIEMA is a Principal Consultant and Jamal Gore AIEMA is Managing Director at specialist carbon management company Carbon Clear Limited.

Thursday, 30 April 2009

Conjunction Junction

Time for some definitions:
  • and.  (-conjunction used to connect gramatically coordinate words, phrases, or clauses) along or together with; as well as; in addition to; besides; also; moreover.
  • or. (-conjunction used to connect words, phrases, or clauses representing alternatives) "books or magazines", "to be or not to be".
'And' and 'or' are both conjunctions, but they serve nearly opposite functions.  Compare these two sentences:
  1.  "Given the threat of climate change, should our company reduce internal emissions as much as possible or use carbon offsets?"
  2. "Given the threat of climate change, should our company reduce internal emissions as much as possible and use carbon offsets?"
One little word can result in such a huge change in thinking.  Using "or" when we talk about climate change means we take a suite of viable solutions off the table.  Using "and" enables us to consider a wider range of options.

As I noted in a blog post exactly one year ago, there is no single source of greenhouse gas emissions, and there is no single solution.  We have to seek the most ambitious, fastest emissions reductions possible, wherever they may occur.  When it comes to carbon, we need internal reductions and offsets.

Eurostar celebrates two years of 'Tread Lightly'

High-speed rail operator Eurostar on Monday celebrated the two-year anniversary of its 'Tread Lightly' environmental initiative, and issued a progress report on its five-year carbon reduction target.

In 2007, the company pledged to reduce carbon dioxide emissions per passenger journey 25% by 2012.  At the same time, they embarked on a 10-point plan to reduce their other environmental impacts, and to make passenger journeys carbon neutral by offsetting the remaining CO2 emissions.

In the first two years of 'Tread Lightly', Eurostar has exceeded their carbon reduction target, achieving a 31% reduction through increased passenger numbers and a switch to lower-carbon electricity sources.  While the company expects per passenger emissions to increase slightly due to a recession-linked fall in passenger numbers, they have nevertheless raised their overall emission reduction target, to 35% by 2012.  As CEO Richard Brown notes, "This is challenging and requires significant investment of resources."

Eurostar's initiative is notable for its dual approach - they have pledged to reduce and offset, and are delivering tangible, verifiable results on both fronts.

Carbon Clear is proud to be Eurostar's carbon credit provider for the offset component of 'Tread Lightly'.  As a business, Eurostar has offset more than 70% of the unavoidable emissions attributable to their operations.  Their partnership focused approach has been a good match to our own, where we work together to support carbon projects that deliver robust, additional emissions reductions while helping communities in poorer countries make the transition to a low-carbon future.

Total Launches New Fuel Card

(from the  company press release)
Total is launching a new fuel card which will enable fleets to track their CO2 emissions based on actual performance, rather than claimed figures.

TotalCard Green provides fleet managers with real-world fuel consumption reports based on the petrol or diesel bought, and then calculates the fleet’s actual CO2 emissions.

Total, which has 850 filling stations throughout the England and Wales, then offers advice on implementing a CO2 reduction plan (correct vehicle maintenance, use of advanced fuel and lubricants and advice on driver behaviour) and provides price incentives on advanced fuels such as its Excellium product which is claimed to reduce fuel consumption by nearly 4%.

The fuel company will follow up the plan with reports to show the differences in both litres fuel and carbon emissions made by following the plan.

Samuel Vermeersch, TotalCard development manager, said: “We know that more and more companies are looking at ways to reduce their carbon footprint and we strongly believe our card will help them optimise their fuel spending and make carbon management much easier for them.”

As part of the scheme, Total will contribute to the Carbon Clear carbon offsetting pro-gramme, based on the fuel volumes bought with the new card, and offer customers the chance to offset their emissions through the company.

For more information on the card, go to

Wednesday, 22 April 2009

The Carbon Reduction Commitment – A New Role for Environmental Managers

The original version of this article appeared in the April (No. 76) issue of the IEMA journal 'the environmentalist'.

On 12th March the UK Department for Energy and Climate Change released the draft user guide for the Carbon Reduction Commitment (CRC). In this article, we provide an introduction to the CRC and explain what it means for environmental managers.

In a recent newspaper interview, Energy and Climate Change Minister Joan Ruddock asserted that the government had thoroughly announced this impending legislation and that businesses are well aware of their obligations. Based on feedback from Carbon Clear’s ongoing winter and spring workshop series, we are not so sure.

Approximately 20,000 UK firms will have to submit a CRC information disclosure to the Environment Agency by Summer 2010, while roughly 5,000 will have to pay registration fees and participate in the full scheme.

CRC information notices and registration requests are sent to the billing address on record with each company’s electricity provider. As a result, government information on the CRC is now landing on the desk of the facilities manager or the accounts payable department, not with the energy or environment manager.

Despite its innocuous-sounding name, companies should not take the Carbon Reduction Commitment lightly. As with any new regulatory requirement, failure to prepare poses serious financial and reputational risks. At the same time, environmental managers are well-placed to help their companies use the CRC to achieve real emissions reductions, cut costs, and identify new sources of competitive advantage.

The CRC in A Nutshell
The Carbon Reduction Commitment is designed to help the UK Government meet the 80% greenhouse gas reduction target set out in the Climate Change Act. It is a mandatory, auction-based emissions trading scheme targeted at large, non-energy-intensive companies - supermarkets, office blocks, and the like. Every company, charity, and government body with at least one half-hourly electricity meter needs to be aware of the CRC.

Like the EU Emissions Trading Scheme (EU-ETS), the CRC uses market forces and competition to drive corporate carbon reductions at the lowest overall cost (see our article “Emissions Trading, Going Global?” in issue 60 of the environmentalist). In the introductory phase of the CRC (April 2010-March 2013), participants will buy emissions allowances equal to their carbon footprint at a price of £12 per tonne CO2.

But once the CRC enters the “capped” phase in April 2013, government will limit the number of allowances and auction them to the highest bidder. At the end of the recording year, firms that end up with more allowances than they require to meet their obligations can sell them into the secondary market, while firms with a shortfall will have to purchase more or face a punitive fine.

One of the innovations in the design of the CRC is that revenues raised through the Government’s sale or auction of allowances are recycled back to participants via a publicly viewable league table. Companies with a better-than-average league table score may receive more money back than they put in, while those that score poorly will receive less. In addition, we anticipate that customers will use the league table to help identify lower-carbon suppliers of goods and services.

In the first year of the CRC, a company’s ranking in the league table is determined solely by how much of the organisation’s emissions are covered by voluntarily installed automatic metering (AMR), and how much of the organisation’s emissions are covered by a Carbon Trust Standard or Energy Efficiency Accreditation Scheme certificate. In subsequent years, league table rankings will be based primarily upon the organisation’s absolute emissions reductions compared to all other participants, and the relative improvement in emissions compared to company growth.

Your CRC Carbon Footprint
The carbon footprint that an organisation reports under the CRC is only a subset of the total organisational footprint included in an ISO 14064 or WRI/GHG Protocol emissions inventory (see our articles “Whose footprint is it anyway?” in issue 53 and “Counting the cost of outsourcing” in issue 55 of the environmentalist). In particular, the CRC only focuses on what ISO 14064 calls direct and energy-indirect emissions (Scopes 1 and 2 under the GHG Protocol). These are emissions from on-site energy production and emissions from purchased electricity and gas. Supplier and customer emissions are excluded.

Next, the CRC excludes emissions from transport vehicles and the onward supply of energy to other organisations. The next set of exemptions are for organisations that are fully or part-covered under a Climate Change Agreement (CCA) or the EU ETS. Excluding these emissions from the CRC footprint ensures that organisations are not forced to report emissions that are already regulated.

Carrots and Sticks
The CRC could have major financial implications for companies, especially in a challenging economic climate. DECC expects the CRC to lower annual corporate energy bills by nearly a billion pounds by 2020 as companies find the most cost effective ways to reduce their emissions. These savings translate into improved profitability and a stronger economy. Moreover, lower emissions means a smaller outlay for allowances in subsequent years, and the CRC’s recycling mechanism means that companies that perform above average on the league table may get back from the scheme more money than they put in.

On the other hand, getting it wrong poses risks. Approximately 20,000 companies with at least one half-hourly meter will be required to submit an initial Information Disclosure – failure to do so will result in a one-off fine of £1,000. The 5,000 or so organisations required to participate fully in the CRC will face an immediate fine of £5,000 if they do not register by the deadline, and will face an additional fine of £500 for each subsequent day of delay.

Failure to provide a footprint report by the deadline also results in an immediate fine of £5,000, and a further fine of £0.05 per tonne of CO2 per day, rising to £0.10 per tonne of CO2 per day after 40 days. Once the scheme is up and running, failure to provide an annual report results in the same level of fines, plus a bottom ranking in the league table.

Where emissions are incorrectly reported, a fine of £40 per tonne of CO2 incorrectly reported will be levied. Failure to purchase sufficient allowances will also incur a £40 per tonne CO2 fine. Outright falsification of evidence is considered a criminal offence, punishable by imprisonment of up to three years and a fine of up to £50,000.

Implications for Environment Managers
This is only a summary as the CRC guidance document is 84 pages long, and the background consultation document tops out at over 200 pages of detailed explanation. However this brief overview demonstrates how important it is for environmental managers to understand the requirements and to lead their organisations’ response to the CRC.

Under the CRC, environmental management is elevated to a strategic role that, if executed properly, can deliver measurable competitive advantage to the company. But if the requirements are not properly addressed, significant costs will be incurred.

The financial carrots and sticks in the CRC and the reputational spur of a public league table may make a number of otherwise borderline or low-priority environmental initiatives more attractive. For instance, environmental managers may now be able to fast track boiler retrofit or lighting replacement schemes that might otherwise be starved of investment, or get the go-ahead to install onsite renewables where the cost of carbon under the CRC makes them economical.

The CRC may also spur the formation of cross-functional teams that integrate environmental management into every corner of the organisation. For example an organisation’s CRC team might include:

  • the environment manager: to identify best practice emissions reduction measures, co-ordinate the team, calculate the organisation’s carbon footprint and manage reporting and record-keeping with the facilities manager;
  • facilities: to implement technology-based energy saving measures throughout the company;
  • human resources: to help develop a staff “green team” to mainstream low-carbon thinking into the corporate culture;
  • finance: to evaluate the trade-off between energy efficiency investments and purchasing allowances, and then find the required cash. For example, a company with a 100,000 tonne CRC footprint will need to come up with £240,000 to purchase allowances during the first compliance period;
  • communications: to manage the media response to the company’s public league table ranking relative to its competitors which could be brand enhancing or damaging; and
  • a director-level representative to raise the profile and priority of the initiative and report progress to the Board of Directors.

A Model for the Rest of the World
The UK is the first nation to implement a national beyond-Kyoto cap and trade emissions scheme. It is unlikely to be the last. Just two days before DECC released their guidance document, the U.S. Environmental Protection Agency announced that it is planning its own emissions reporting system.

This reporting scheme, a precursor to national cap-and-trade, targets approximately 13,000 facilities (rather than organisations) across all sectors, responsible for between 85-90% of the country’s greenhouse gas emissions. As proposed, the regulation requires the reporting of only direct GHG emissions (scope 1) but is asking for public comment on including energy indirect emissions (scope 2) among other aspects in its lengthy 1,410 page proposal. The final rule is expected within the year, followed by a cap and trade scheme to be in place by 2012. EPA’s enforcement action could result in a fine of up to $32,500 per day for violators.

Our informal enquiries indicate that other nations are watching the UK and USA closely to determine whether some version of the CRC or the imminent USA programme will work in their own countries and how a global system of reporting and trading of GHG emissions may function in a global marketplace.

Government regulation on corporate carbon emissions is not the only reasons firms may wish to support green initiatives in the midst of an economic downturn. As we described in our article “The end of the low-carbon agenda” in issue 72 of 'the environmentalist', environmental programmes also help to demonstrate the company’s commitment to sustainability, improve staff morale and retention, and attract new customers. Regulations like the Carbon Reduction Commitment provide an added incentive, and help environmental managers quantify the potential risks and benefits in a language that other parts of the company can easily understand.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.

Friday, 17 April 2009

Sainsbury Gets It Exactly Wrong

Like many consumer-facing busineses around the world, Sainbury has embarked on a greening initiative that includes an effort to reduce in the company's carbon footprint.

Earlier this week, Neil Sachdev, commercial director for UK supermarket retailer J. Sainsbury was asked to discuss his view on carbon offsets.

"It just passes the problem to a third party. It makes more sense to focus on energy efficiency, where there are clear economic and environmental savings."

With all due respect, Mr Sachdev has gotten it exactly backwards. Not just a little off target; his view is exactly counter to how offsets work.

Poor brick makers in Nicaragua are not razing their country's forests for fuel because they want to; they're doing it because they can't readily access a cleaner alternative. Similarly, the owners of an Indian textile mill would prefer not to use polluting coal or fuel oil to generate heat for their factory, but cleaner alternatives simply may be unfeasible.

People in poorer countries are not emitting greenhouse gases into the atmosphere because they enjoy it. Their pollution is a symptom of energy poverty - their inability to access cleaner sources of energy. The savings from switching to more cost effective and cleaner alternatives are clear.

Additionality - a key concept in the carbon world - means proving that the project would not have happened without the expectation of carbon credit funding. So purchasing carbon offset credits means providing the funds to create projects that would otherwise not exist, and that displace more polluting activities.

In other words, purchasing carbon offset credits means you're not passing on the problem; just the opposite. Using carbon credits means you're passing on a solution.

To be fair, Sachdev was trying to argue that purchasing offsets was a less efficient use of funds than reducing his company's own emissions. But as I've explained previously, it doesn't have to be either-or. Reducing emissions anywhere helps the climate; a tonne of CO2 reduction at home doesn't have some magical climate benefit that an overseas reduction lacks.

In that same article, a representative from beverage maker Diageo referred to offsets as a "last resort". This language implies that it is acceptable to wait to achieve some emissions reductions. Unfortunately, climate change is such a huge problem that we don't have a moment to spare. We simply cannot afford to reduce, then offset. We have to pursue both at the same time.

The planet doesn't care whether your emission reduction is costly or cheap, so long as it happens swiftly. So the real challenge is to find the activities that will generate the most ambitious, fastest, and most cost-effective reductions.

In many cases, energy saving measures at home will be low-cost or actually save money. In other cases, reducing carbon close to home will be relatively expensive. In those cases, it would be more cost effective to help Nicaraguan brick makers and Indian textile mills reduce their emissions instead.

Climate change is too big a problem to fight with one hand tied behind our back. At Carbon Clear, we encourage our clients to do more to help the environment by embarking on a comprehensive reduce-AND-offset programme. It's time for other companies to come on board.

(Carbon Clear homepage)

Tuesday, 14 April 2009

The End of the Low-Carbon Agenda?

The original version of this article appeared in the February (No. 72) issue of the IEMA journal 'the environmentalist'.

The emergence of corporate greening and corporate carbon reduction coincided with an unprecedented global economic boom. But does companies’ renewed focus on survival and the bottom-line mean they will abandon their low-carbon initiatives?

Recent evidence from both the United Kingdom and United States indicates that cash-strapped consumers are changing their buying behaviour. The growth of the UK organic food sector has fallen by 73% as shoppers cut costs. In the USA, organic producers are also witnessing slower than usual growth. Electric vehicle sales have stalled on both sides of the Atlantic, and Britain’s Nice Car Company has filed for administration. And according to Autodata, US hybrid vehicle sales in November 2008 were 53% lower than in 2007, compared with a 37 per cent drop in overall car sales.

Consumer items such as organic food or hybrid cars can cost at least 15% more than their “less-green” counterparts. For increasingly cost-conscious consumers, it appears this price premium is too much to bear. Gloomy retail sales across Europe and the USA underscore the lack of consumer and business confidence in the economy.

Are corporations taking a similar path? What does the financial crisis mean for the low-carbon agenda?

Making it pay

Companies struggling to get working capital loans or meet payroll may find it hard to justify long-term investments in energy efficiency, renewable energy, and greener manufacturing techniques. Many firms plan to defer new investment until their cash situation becomes clearer. When they do spend, they expect a clear payback.

One form of payback on environmental investment may come in the form of increased sales.

InfoPrint Solutions Company, a joint venture of Ricoh and IBM, has offices in 36 countries around the world. InfoPrint has focused on sustainability as a key component of their “triple bottom line” since hiring Joe Czyszczewski as chief sustainability officer in November 2007. The company has differentiated itself from its competitors in the printer market, by shifting its efforts from selling printers, to offering “work flow solutions”. As Joe, puts it, “we can look beyond the printer at the end-to-end supply chain and full life cycle.”

A recent InfoPrint's pilot study shows that a greener option can help them meet customers’ preferences for less direct mail, while providing clear energy and environmental benefits.

When InfoPrint surveyed over 1,100 consumers, 40% responded that the paper inserts accompanying “must read” documents such as bills are “always impersonal and irrelevant”, and a further 86 percent said they “never purchased a product or service after receiving a separate promotional document.” Infoprint has tackled the problem of “junk” inserts with tailored promotional information printed directly on customers’ bill statements. Paper usage can be reduced by 33% while increasing the mailing’s relevance to their clients’ customers. And since these inserts are pre-printed in bulk, the associated energy and environmental impacts of printing at an offset press, transport and waste can be avoided.

According to InfoPrint’s research, 43% of American households receive between one and three account statements, 39% receive between four and six statements each month, and 13% receive between seven and nine each month by post. We calculate that reducing the weight of each statement sent to American households by 3 grammes would save an estimated 20,233 tonnes of paper and 50,583 tonnes of CO2 – roughly equivalent to 15,000 return flights between New York City and London.

InfoPrint’s venture was launched with great fanfare at the height of the economic boom. Just over one year on, InfoPrint is a telling case study. Rather than scaling back, cutting staff, and allowing sustainability to slip down the list of priorities, the company has set its sights firmly on profit and sustainable growth tied to greener products and services.

Save Carbon – Save Cash

Initiatives which reduce energy and resource consumption and waste can contribute directly to cost savings. These cash-conserving measures are unlikely to be ignored in an economy when companies are squeezing every ounce of efficiency out of limited resources.

Marriot Hotels announced a five point environmental strategy to help address climate change in 2008, with a key goal to green their $10 billion supply chain. On his “CEO Blog” Bill Marriott on 6 January 2009 says, “Because of our size and scale, we can ask our vendors, ‘How can you make your products more environmentally friendly?’ And they've come up with some great solutions that don't cost any more money, which is good news in the current economy.”

As part of their “costless greening” programme, Marriott is introducing pillows stuffed with filling made from recycled bottles, and about 500 of their hotels are trialling “coreless” bathroom tissue, which “should save about 119 trees, 3 million gallons of water and 21 tons of packaging waste every year.” If Marriot rolled out “coreless” bathroom tissues in all of its hotel rooms, we calculate that the carbon savings could be an estimated 221 tonnes. And if recycled plastic instead of a virgin plastic product becomes the filling of choice in all of Marriot’s 2,900,000 pillows, the carbon reductions could amount to 11,300 tonnes annually.

Staying Competitive

Firms that choose to abandon their green initiatives may find themselves in a minority.

Eighty percent of corporate sustainability executives surveyed from across North America plan to maintain or increase levels of sustainability-related spending in 2009, despite the current economic conditions, according to Panel Intelligence's Quarterly Sustainability Tracking Study. Their November 2008 survey found that despite a declining U.S. economy and lower oil prices, corporate investment in energy efficiency remains strong.

The survey found that eighty-two percent of respondents rated energy efficiency as the most important area of current focus and investment, and that corporate spending on sustainable waste management initiatives is expected to grow by 20 percent in 2009, the highest percentage increase of any subcategory. Cost savings, revenue generation and brand strength are the most important drivers of environmental and clean technology initiatives.

Preparing for the future

More companies also recognise that failing to maintain their low-carbon initiatives could prove costly in the long run. Environmental initiatives are a key tool for engaging employees and maintaining morale in challenging circumstances. Customers and stakeholders are unlikely to believe that environmental improvement is “part of the corporate DNA” if green initiatives are cut whenever the economy slows.

Government is even less likely to show understanding. In the UK, the Government has introduced the Carbon Reduction Commitment, with a performance league table and compliance costs equivalent to about 11% of companies’ energy bills. Meanwhile, regional greenhouse gas emissions trading systems have been rolled out in North America, with most analysts expecting the incoming Obama Administration to introduce a national cap-and-trade scheme during the next year. Firms that abandon their carbon reduction programmes in the short term are likely to find their costs increasing down the line.

Challenges and barriers

It is clearly in companies’ long-term interest to continue pursuing a low-carbon agenda. But in a difficult economy, cash is king. The inability to borrow for capital intensive investments may prevent companies from taking measures that provide clear and lasting benefits. As discussed in our previous the environmentalist article (issue no. 68), low-carbon investments also tend to have disproportionately high employment and societal benefits. A case could therefore be made for government incentives to encourage businesses to go green.

Governments have an array of financial and policy tools to stimulate continued investment in lower-carbon business practices. These include tax incentives, direct subsidies, regulatory clarity that levels the playing field for different technologies, and direct government procurement that generates economies of scale and drives down the cost of green technology for businesses.

As Deere & Company CEO Robert Lane notes, “There need not be an inherent contradiction between government and business nor a perpetual dependence. Public policies can provide useful "pump priming" for new, evolving industries, creating the infrastructure needed for markets to develop and businesses to grow.” Deere proved to be ahead of the curve as these remarks are not recent – they were made in October 2006.


Climate change will not wait for the economy to recover. It is up to us to make the most of the opportunities that present themselves and take action now. Lee Scott, Jr., President and CEO of Wal-Mart Stores, captured this spiriti in his remarkes to the National Retail Federation on 12 January 2009, when he said, "If we as a country want to get through this time...and position ourselves to prosper and lead in the years ahead, then we need to tackle the hard issues. We cannot afford to postpone solving these problems."

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA, is the managing director at specialist carbon management company Carbon Clear Limited.

Thursday, 2 April 2009

The CRC: One Year and Counting

The UK's Carbon Reduction Commitment comes into effect on April 1st, 2010. For the 5,000 companies and public bodies covered under this mandatory cap-and-trade scheme, the countdown clock starts now. For the 20,000 organisations with a half-hourly meter required to submit a CRC Information Disclosure, the clock starts now.

Carbon Clear is working to help companies understand the implications of the Carbon Reduction Commitment and position themselves for competitive advantage. We have been running CRC briefing workshops throughout Winter and Spring 2009 to help our clients prepare, and I'll be posting on this blog our upcoming article on the CRC, to be published in a forthcoming edition of "the environmentalist" journal. For those who can't wait, you can find our top-level overview here.

The CRC could have significant financial and reputational implications for your business. And the clock is ticking.

(Carbon Clear homepage)

Wednesday, 18 March 2009

Peak Oil: Will We Freeze or Roast?

When I was in graduate school in the early 1990s, M. King Hubbert was a name known only to fellow energy nerds. Now, he's so popular you can get regular news alerts.

Hubbert developed a mathematical model describing how production from an oil well or entire oil producing region tends to increase at a predictable rate, until it hits a - predictable - peak and then declines. Hubbert used his model to predict the year of peak oil output for the United States, and it has been used more or less successfully for other oil producing regions since then.

In addition to forecasting output growth for particular regions, the Hubbert Curve and peak oil theory can be applied to oil production for the world as a whole. But as recently as 2005, the International Energy Agency (IEA) dismissed the concept. Mainstream energy agencies tended to assume that oil production could increase indefinitely as new investment and technology are brought to bear. If a peak exists, they argued, we are nowhere near it.

This matters because when the world's leading climate scientists prepared their 2007 report on global warming trends and impacts, they turned to the IEA for their best estimates of fossil fuel consumption. The IPCC works by consensus, and its reports tend to refer only to the most authoritative sources. The IEA estimates showed that conventional fossil fuel use would continue to grow without end, and this prediction is reflected in all the pessimistic warnings about global temperature increases and climate change.

Times have changed. The IEA is now predicting that we will reach global peak oil between 2020 and 2030 (more pessimistic scenarios argue that we reached the global peak last year). So oil production will top out much earlier than anticipated.

Less petroleum production means fewer petroleum-related greenhouse gas emissions. In fact, manyindependent models suggest that, once peak oil (and coal) is factored in, we simply can't burn enough traditional fossil fuels to reach the worst-case global warming levels.

Let me repeat that: Most climate models that incorporate peak oil theory predict a temperature rise of less than 2 degrees Centigrade. A major change to be sure, but far less than the IPCC's "business as usual" scenario for global warming.

So, this is good news, isn't it? Climate change is solved because fossil fuel production will decline sooner than predicted, right?

Not so fast. What are we going to use for our vehicles when the oil starts to run out? Shall we simply switch off the lights and freeze?

In 2006, Alex Farrell and Adam Brandt, researchers at the University of California at Berkeley's Energy and Resources Group, published a paper that examined the cost, availability and climate change implications of substitutes for conventional petroleum. These are liquid fuels derived from heavy, difficult to process resources like tar sands, oil shale, and coal.

The Berkeley team found that it would be commercially viable to produce synthetic petroleum from these heavy fuels at oil prices of less than US $50 per barrel. What's more these resources are so abundant that they would keep pump prices relatively low.

In other words, peak oil means less petroleum, but not an end to fossil fuels. For those who worry that peak oil means society will collapse into "Mad Max" - style anarchy, that's good news.

The bad news is that these fuels have a much greater climate change impact than conventional oil. Using tar sands and heavy oil results in about 50% more CO2 per unit of energy than regular petroleum. Synthetic fuels made from coal nearly doubles the greenhouse gas emssions, and using oil shale could result in up to 3X the emissions per unit of energy. To quote the authors:

"Overall...the oil transition is not a shift from abundance to scarcity: fossil fuel resources abound. Rather, the oil transition is a shift from high quality resources to lower quality resources that have increased risks of environmental damage, as well as other risks."

Sadly, peak oil is not the solution to climate change. If anything, a poorly planned response to peak oil could accelerate global greenhouse gas emissions growth.

There is an alternative. We have the technical know-how to produce energy from low- or zero-emission sources. Solar, hydropower, wave and tidal, wind, and geothermal energy are clean sources of hydrogen and electricity, and carefully chosen biofuels can provide high energy-density liquid fuels.

Scaling up these clean energy technologies at the rate required to compensate for peak oil and limite climate change is a challenge. But as discussed in an earlier article, the required investments by governments, corporations and communities are no larger than other causes on which we have spent billions. The need is arguably as great, if not greater, because poorly planned energy investments made today will have a huge impact for decades to come.

Thursday, 19 February 2009

Paying It Forward

I've worked in countries all over the world and speak a few languages. As a result, I like to think I'm a pretty self-reliant traveler.

But during my most recent trip to Central America a complete stranger helped me out. The specific details aren't important, but what's notable is that a person whom I'd never met before walked up, took the time and effort to make my day a little better, and then walked away.

"Thanks!" I called after her, pleasantly surprised at this small kindness. "Isn't there something I can do to repay you?"

"I'm happy to help," she responded. "Pay it forward instead." And then she was gone.

Paying it forward means helping other people when it's not in your own immediate financial interest. It means going out of your way to make the world a slightly better place - even if you may not see the benefit yourself.

Paying it forward is a concept that is immensely relevant to our efforts to combat climate change.

Will we choose a slightly less convenient mode of transportation or pay slightly more for cleaner energy when the benefits go to future generations or to people in far-flung corners of the world? Will we take action now to avert a danger that may not come to pass in our own lifetimes?

The conventional wisdom is that most people will answer "no" to these questions. Most efforts to engage the public in the climate change debate therefore take narrow-minded self interest as their starting point. Environmental groups strive to document the effects of climate change in our own backyards. Pressure groups lobby government to penalise companies that don't reduce emissions. And companies like Carbon Clear find ways for businesses to see a direct benefit from their carbon reduction measures.

People clearly do act in their own self interest. But many observers worry that these attempts will not be enough to avert the worst effects of climate change. They point out that governments will not enforce tight limits and that companies and individuals may put their bottom lines ahead of the environment. The worriers may be right. But something else is happening.

People are paying it forward.

Around the world, more and more companies and individuals are setting voluntary emission reduction targets, and volunteering to pay for livelihoods-enhancing emissions reduction projects in developing countries. These are clean energy initiatives that are often not included in government regulated carbon trading schemes, and that would not have happened without these voluntary carbon payments.

In Nicaragua, Carbon Clear's customers are helping traditional brick and tile producers reduce their energy costs and protect the country's rapidly shrinking forests. With deforestation responsible for about 25% of global greenhouse gas emissions and a major environmental threat in Nicaragua, new technology is making a real difference to both planet and people.

Our project is not covered under the government-backed carbon credit mechanism. If we were limited to those tools this fantastic initiative in Nicaragua would never have happened. It is only alternative carbon certification schemes like the Voluntary Carbon Standard and Gold Standard - backed by companies and individuals willing to take voluntary action - that enable us to make this contribution to the lives of people in rural communities around the world.

Last year the voluntary carbon market doubled in size, while governments struggle to develop a post-Kyoto climate change agreement. And the voluntary market continues to grow this year despite a global economic crisis.

Something special is happening.

More and more people are paying it forward.

More of us are taking action beyond government regulation and narrow self-interest. That's good news in the fight against climate change, and good news for communities around the world.

(Carbon Clear homepage)

Friday, 9 January 2009

From Credit Crisis to Carbon Crisis

The original version of this article appeared in the November 2008 (No. 68) issue of The Environmentalist

As governments across the globe find a new role shoring up troubled financial institutions, those of us who advocate bold moves towards a sustainable energy transition have taken notice. The USA and the UK committed more than $700 billion and £400 billion, respectively, to the financial bailout. Consider the benefits if equivalent amounts were committed to securing a lower-carbon future.

When the Invisible Hand Gets it Wrong
There has been a major upheaval in the relationship between government and the private sector. The worldwide financial crisis has been sudden, systemic, and severe. The deep-seated belief that competition and free markets led by Adam Smith’s “invisible hand” will promote society’s interests has been shaken.

What happened? Economists argue that the invisible hand does not do a good job handling externalities – situations where private actors pay the cost and society benefits, or vice versa. In these situations government needs to step in. This was the case during the lending freeze, with banks afraid to lend to one another and the credit market on the brink of collapse. With no other solution in sight, governments stepped in to try and rescue the world’s financial system.

While the financial meltdown has been sobering (or punitive depending on your personal stake), the policy flip side is that we have witnessed how quickly events can catapult governments into concerted and coordinated action.

Past Precedents
The energy sector is no stranger to support from governments. Nuclear energy currently comprises about 17% of the UK’s electricity mix, and serves as an interesting example.

Put plainly, the economics of nuclear power would be questionable without governments’ financial support. In both the US and the UK, governments have artificially limited private companies’ legal liability for nuclear accidents. Despite concerns in some circles about another Three Mile Island or Chernobyl, in the US a nuclear power plant’s annual insurance bill might only run to $400,000. This is because Government shoulders much of the burden for catastrophic accidents.

Similarly, the cost of disposing of waste from the UK’s existing nuclear reactors is likely to cost £74 billion, discounted over a whopping 130 years (that's easily more than half a trillion pounds if you don't discount the cost to future generations). These environmental costs clearly fall outside of the time horizon for private sector investment. As a result, most nuclear power plants would never have been built without governments’ pivotal role taking on future liabilities.

Climate change is another area where governments have a critical role to play. Climate change - a “negative externality” from fossil fuel use - has been partially addressed through emissions-trading schemes that allow CO2 to be priced in a regulated market [see our article “Emissions Trading – Going Global?” in the environmentalist issue 60, 16 June 2008].

However, global emissions continue to rise, evidence that the market price of CO2 is not yet high enough and stable enough to encourage significant private investment in abatement measures. Similarly, renewable energy remains a small percentage of the UK’s and America’s energy mix, even though there are compelling environmental reasons and a strong economic basis to increase its use.

According to the Stern Review, the cost to limit severe temperature increases is estimated at 1% of global GDP. Inaction has far greater costs –Stern estimates damage costs from climate change exceeding $70 trillion over time. At an estimated $3.5 trillion, the cost of the global financial bailout looks like loose change in comparison. But private firms lack the incentive and ability to make the required investments on their own.

Investing in a low-carbon future
What would it look like if we could invest even a fraction of the global bailout amount into rapidly building a low-carbon economy? Here are just a few hypothetical examples of what could be done.

In the USA, about 40 million households rely on electric water heaters. For a $282 billion investment, the US government could replace all of these inefficient electric heaters with solar water heaters at no additional cost to homeowners. This investment would reduce CO2 emissions by 48.7 million tonnes each year. Moreover, each household would save about $220 per year, pumping an additional $9 billion per annum into the economy. These savings would likely increase as the price of electricity rises over time.

In the UK, the government has made a commitment to expand the use of wind power to generate electricity. Installing 33 GW of offshore wind would meet 20% of the country’s electricity needs. This measure would cost about £30 billion – a fraction of the British financial bailout – and reduce the need for a new generation of coal fired power plants. Government funding would mean firms would not need to raise expensive venture capital, and could pass the savings on to utility customers in the form of lower electricity bills. Moreover, with most renewable energy projects employing more people per GW of installed capacity than coal and nuclear power plants, such an initiative would boost jobs growth and provide broader benefits to the UK economy.

For an investment of just over $740 billion (1/5 the cost of the global bailout) the US government could target all families earning less than $35,000 and replace half their old vehicles with plug-in hybrids – for free . This investment would reap huge environmental, economic, and social benefits. Each family would save about $840 annually in petrol costs. Fuel savings from this initiative would total nearly $24 billion each year, and would be recycled into the economy. In addition, it would reduce annual CO2 emissions by over 65 million tonnes. With this level of increased household income and reduced emissions, such a government investment provides a reasonable pay-off, while achieving other sustainability objectives.

Meanwhile, in the developing world, two billion people – roughly 400 million families – cook over primitive wood stoves. For an investment of less than $10 billion (about £6 billion), we could replace every traditional cook stove in the world with efficient and cleaner burning models. This move would reduce labour burdens, improve health, help protect the world’s forests and reduce global CO2 emissions by over half a billion tonnes each year.

For these examples, we assumed that governments would pay the entire cost and give the product – electricity from wind turbines, household solar water heaters, hybrid cars, and cook stoves – away for free. We chose this assumption to show that even such radical measures cost less than the recent financial bailout. In reality, even partial subsidies could drive a massive shift towards a low-energy future.

In today’s challenging economic climate, the private sector has neither the resources nor the appetite to even contemplate this scale of investment. Nevertheless, the public benefits - cost savings, job creation, combating climate change, and reduced dependence on imported fossil fuels - are huge. Because governments enjoy a longer time horizon, they can realise these benefits by acting creatively on a grand scale.

The financial bailout was justified because the threat to private banks put the entire global economy at risk. But we face other threats as well. The social, environmental and economic risks from climate change are vast. The measures we have proposed here are merely illustrative, but they show that we have the means to make fast and meaningful reductions in global greenhouse gas emissions.

What we need now is the will.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.