First CRC Penalties

£99,000 of civil penalties have been levied on four participants of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) for failing to provide reports on time.

The four companies, Saur (UK) Ltd, Henkel Ltd, BI Group plc and Tomkins Ltd were fined £41,000, £38,000, £10,000 and £10,000 respectively and although the fines seem steep they are set as described in the CRC Energy Efficiency Scheme Order 2010. In fact in two of the cases (BI Group plc and Tomkins Ltd) discretion was exercised resulting in a reduction of the penalty imposed. These companies, the administrator judged, had taken all reasonable steps to comply or rectified the failure as soon as possible.

The reports that these companies had failed to provide were those for the first year (2010/11) of phase one, where CRC participants were obliged to provide a footprint report and an annual report by the end of July.

These penalties show that the enforcement agencies are taking non-compliance seriously, in spite of doubts about the future of the CRC.

They also serve as a reminder to participants that annual reports for the reporting year 2011/12 should have been submitted by 31st July 2012, allowances  paid for by 31st July and that the allowances should be surrendered by the 28th September 2012 deadline.

August – and it’s all gone quiet

The Olympics are over, and everyone seems to have gone on holiday.

What have we got to look forward to when we get back? CRC is still with us for the foreseeable future. There were suggestions that it would be abolished in the Autumn, or replaced with something simpler, but will the Chancellor give up the £750m it yielded this year?

Mandatory Greenhouse Gas Reporting (GHG) has had wide press coverage. It’s been hailed as an example of the UK being a world leader in carbon management. How can this be?

• It will apply to UK-registered companies quoted on the Main Market of the London Stock Exchange, European exchanges, NYSE or NASDAQ. That’s about 1,800 companies, whereas CRC covers 2,700.


• The proposals are to monitor the six Kyoto gases. There are constant calls for CRC to be simplified, and that scheme only monitors the one gas – CO₂. They are even talking about including Scope 3 emissions (created by your product in the hands of your customer.)


•  There are no plans to impose penalties or charges for emissions.


• There is no standard methodology required for reporting.


• The whole consultation is very vague (only 6 pages.)

Greenwash, anyone? Oh, I forgot, it’s the silly season.

Hopefully there’ll be some sense by the time the consultation closes on 17^th October, but aren’t we leaving things a bit late? If the government is truly going to reduce the nation’s emissions by 80% by 2050 or even 30% by 2020, is a vague scheme which will allow people to report in any way they like really going to make a difference?

This certainly looks less and less like the greenest government ever. Was I really naïve enough to believe the hype?

In September, our new Sustainability Works website launches, based on my new keynote speech and my book of the same title.

You can keep ahead of the game because the book is AVAILABLE NOW on Kindle. 

 

LEDs lighten the lighting load

Pay CRC PDQ. Is GHG your new USP?

CRC payments are due tomorrow – 31st July – which means the money must be cleared and in the government’s bank account by then.

Although it’s likely that the Chancellor will announce a consultation in September on replacing the CRC, it’s not over yet. The scheme could survive until the end of the first phase, which means that we’ll be reporting – and paying – right through to July 2014.

If the CRC is replaced, something will have to be done to replace the government’s £750m revenue from the sale of allowances.

There’s another consultation out since last week. DEFRA wants your opinion on the Greenhouse Gas Reporting draft regulations. Answers, please, by 17^th October.  At the moment the suggestion is that they will review reports by quoted companies in 2015 and consider widening the net in 2016 to include other large organisations. There is no suggestion of financial levies or penalties, but then, CRC was supposed to be financially neutral.

There is already controversy over the GHG Reporting proposals, particularly that no consistent method is required for measuring emissions. This and other concerns are raised in a recent Guardian blog. The idea of reporting is that shareholders and stakeholders will be made aware of the risks that the reporting companies face and presumably will encourage them to act responsibly. Doesn’t all this sound incredibly laid-back? Doesn’t it sound as though we’ve got all the time in the world?

So how is the government going to maintain or replace its CRC revenues? In the short term, while the scheme still exists, it could get the goose to lay as many golden eggs as possible by raising the price of carbon allowances. Watch out for the Chancellor’s Autumn Statement in October! Or maybe they’ll follow the example of the Australians, who are now taxing major CO_2e emissions from landfill at AU$23/tonne (£15.35). Or perhaps they’ll do both. But will it really make a difference?

Managing emissions is only one part of sustainability. I’ve just published a review of the issues called Sustainability Works. You can buy it for your Kindle here for only £1. Or if you’d like a free copy send me an email and I’ll let you have a link to the pdf version.

Something to read on holiday – and if you’re going on holiday have a good one!

 

 

Major investment in energy infrastructure - but is it enough?

OFGEM has announced a £22 billion upgrade to the nation's gas and electricity networks, but National Grid says it's not enough. There's no doubt that if we increase our use of electricity, in particular by using electric cars, we're going to need much more distribution capacity. Equally, as long as we remain committed to fossil fuels, gas is the cleanest. Hence the need to upgrade the gas pipelines as well. National Grid says that the amount authorised by OFGEM is not enough. OFGEM have done their sums differently and say that some work should be done more efficiently and that National Grid has over-estimated the cost of capital. Either way, the cost will find its way on to electricity bills - the consumer will pay in the end. Here's a comment from the Telegraph.

I see in the papers that shadowy City types have not just been manipulating LIBOR but have been playing with the oil price as well. We've been paying too much for petrol. Compensation? Fat chance! One thing we can be sure of: energy will go up. It's a finite resource and we still waste far too much of it.

GVis2012 – Sustainability in Construction

If you missed last week’s GVis2012 half-day conference in Leeds, here’s my take on it.

The event was challenging from two points of view. First of all, the programme packed a considerable amount of sustainability information into 3½ hours. Secondly it pushed the technical envelope with Twitterfeed, simultaneous webcast and speakers from across the world presenting via Skype. The session closed with four 20x20 presentations – 20 slides with a maximum of 20 seconds each, so there was no loss of pace there!

Plenary sessions were followed by four parallel breakout sessions. Delegates had to choose two of four, so these are my comments on the parts of the conference that I was able to take part in – as a non-expert in property issues.

The session was ably led by Paula Widdowson of CSR-i. She was able to start by bringing us up to date on the latest news for local sustainability – the government’s CITY DEAL announcement promising £1bn for improving east-west transport links, Leeds as a centre for pioneering the green economy and £50m of new money for environmental projects.

Our first speaker was Mel Starrs from PRP Environmental. She said that CSR is sometimes seen as a criticism whereas it should be a communication process. A means by which visions, ethics and beliefs are made explicit; making people accountable to specific commitments. In an ideal world sustainability consultants will make themselves redundant, although she admitted that that was some way off. Although the theme of the event was construction, there was a great deal of solid information for sustainability specialists in all fields in Mel’s presentation and throughout the programme. She quoted cases studies: Patagonia Outdoor Clothes and InterfaceFlor. She spoke about BREEAM (Building Research Establishment Environmental Assessment Method but you knew that), and how productivity is better in green buildings with natural ventilation and natural light. Despite this only 6% of new buildings are BREEAM certified. There are leaders, however. Apparently the greenest tenants are the oil companies and banks. Well, nobody’s all bad. You can find Mel’s detailed summary of her presentation here: http://ow.ly/c541I

For the first breakout session I chose the Living Building Challenge, presented via Skype by Eden Bruckman in California. This was a challenge, not least because all the sessions took place in the same room and the sound from California was weak. Martin Brown controlled the presentation at the Leeds end. The Living Building Challenge goes a whole lot further than BREEAM or equivalent US standards and if the BREEAM uptake is relatively low what hope for something far more demanding? However if we don’t set high targets we’ll never achieve excellence. The objectives include net zero water use and net zero energy use – nothing more than current solar income. All materials must come from proven sustainable sources. It’s a whole philosophy. The aim is to establish “collaboratives” throughout the world. So far there are some 140 projects; the nearest to the UK is a project in Ireland.

My next roundtable session was on CSR and Competitive Advantage, led by Pedro Pablo Cardoso-Castro from Leeds Business School. We started by viewing Michael Porter’s keynote address to the 2012 Corporate Philanthropy Summit. Business is under pressure and facing greater challenges than ever, but in many cases CSR is a bolt-on with a finite budget and is not achieving solutions  to these problems. It is time for a totally integrated strategy (cf Bob Willard’s Stage 4). Business can deliver solutions, but business is business and not charity.

Some organisations have dropped the S from CSR, but Pedro gave examples of organisations where the social aspect has been fundamental to their strategy. ALFA Ceramica in Colombia needed to maintain employment in the face of falling domestic demand. As a company owned by Opus Dei, the commercial arm of the Catholic Church, they saw a duty to protect their employees. They created upmarket tiles and mosaics and exploited markets in Europe. They developed a system of traceability so that purchasers of unique designs could link them back to the family that made them. Corona, their major competitor, followed a similar policy but diversified into kitchens and bathrooms and concentrated on the US market. Corona provides its employees with training in social development and joins ALFA in the belief that strong business depends on strong society. (Come back Titus Salt!) This approach has been vindicated by the fact that both these organisations remained profitable during recession.

Mention was also made of Marshalls, a sustainability success story from here in Yorkshire, and of how they invest in their people in India, a country which provides much of their raw material.

Tamara Bergkamp of the Global Reporting Initiative gave a keynote speech from the Netherlands via Skype. She repeated the well-known wisdom: what you don’t measure you can’t manage and added that what you can’t manage you can’t change. She championed the business case for reporting and at that point my pen ran out, but you’ll find much more on the website.

I thought Pecha Kucha was an abandoned temple in South America but apparently it’s another name for 20x20 presentations.

First up was Faye Jenkins of Laing O’Rourke who explained the benefits of apprenticeships in the construction industry and the problems caused because school leavers have very little idea of the range of trades and opportunities available. Only eight slides, but a strong message.

I think Rick Hamilton, co2sense, has done this before. Twenty slides, not one up for more than 20 seconds. The trouble is that everything now went so fast that his presentation blurred into the ones by Martin Brown of Fairsnape and Eddie Murphy of Mott Macdonald. They mentioned the ecology of commerce, HIUT Denim, Agenda 21, Skanska, #GVisChat, #EndFossilFuelSubsidy, and told us that “CSR needs to shift from doing less bad”. I couldn’t absorb any more!

Thanks to all for a most stimulating afternoon.

We’re promised that the slides will be up on the website. In the meantime have a look at this.

Booklist

Several books were mentioned during the event. You might want to look them up if you haven’t already heard of them.

• Let My People Go Surfing -  Yvon Chouinard


• 2052: A Global Forecast for the Next Forty Years


• The Ecology of Commerce, a declaration of sustainability


• Confessions of a Radical Industrialist


• Common Wealth: Economics for a Crowded Planet

The next Tweetchat at #GVisChat will be at 20.00 on 26^th July.

The Other Side of Peak Oil

Electricity could be the transport fuel of the future – but will we develop the infrastructure in time?

In the 1950s, much to everyone’s disbelief, M King Hubbert came up with his theory of Peak Oil, and claimed that all the world’s oil was going to run out. Production would reach a maximum and then start to decline. In fact US oil production reached a peak in 1971, but nobody has determined exactly when we will reach the global limit, although it’s generally expected in the next couple of decades. Now an article in New Scientist (19th May) suggests that we’ll reach the peak not because of a failure in supply, but because of a failure of demand.

Some 50% of the 85m barrels of oil that the world consumes each day is used for transport. It’s a fossil fuel and a major contributor to global CO2. The author’s belief is that technology will dramatically cut transport fuel consumption, largely because the electric car will capture a major – even dominant – share of the market within only one or two decades.

The efficiency of the petrol car has improved dramatically over the last 20 years or so. New technology with turbochargers and direct fuel injection will improve it even more. In terms of emissions, however, the pure electric car is far cleaner; the emissions at the power station per mile are far lower than those of the traditional internal combustion vehicle. The cost of electricity is dramatically lower at around one fifth of the cost of petrol per kilometre, at European prices. The problem with the electric car is its notoriously limited range and its very high initial cost. Batteries, a major element of cost, are expected to fall in price as demand increases, but that still leaves the problem of range. Rapid recharge still takes at least 30 minutes, and recharging two or three times on a long journey is not acceptable. Battery exchange looks a more viable option. The vehicle arrives at the exchange station and robots remove the battery and replace it with a fully-charged unit in about the same time as it takes to fill a petrol tank. The technology exists, but so far there are few exchange stations.

The hybrid car is a halfway-house. Economy is improved by using the energy from regenerative braking – otherwise wasted – to charge a battery to drive an electric motor to support the petrol engine. In July Toyota launches its plug-in hybrid. In addition to the hybrid technology the car may be charged from a domestic socket to run on battery power for 15 miles. If your journey is longer than that then the petrol engine cuts in seamlessly for the rest of the trip. The savings will only be worthwhile for high mileage users, as the car will cost around £27,000, even after the UK government’s £5,000 subsidy. Other hybrids like the Vauxhall Ampera come in at £38,000.

If electricity is the future, the key question is where is it all going to come from? In the UK we are facing problems with meeting the existing demand for electricity. The government has finally announced its commitment to a new generation of nuclear power stations, but because it will take at least 10 years to get new stations in commission, existing stations are being authorised to run beyond their originally expected lifetimes. There are technical issues with the proposed design of new stations – similar stations are years behind their construction targets. There are political issues. EDF, 85% owned by the French government, is the only serious bidder for the UK nuclear construction programme. The new French president is not a supporter of nuclear power. And then there’s the infrastructure – new pylon routes and a network of exchange or recharging stations.

Electricity is attractive, but how soon it can be practical is open to doubt. Peak Oil, with rocketing prices and unpredictable supply, may not have gone away quite yet!

IIGCC urges EU ministers to revise the Emissions Trading Scheme

 Ahead of a meeting of EU ministers on April 19th, to discuss the future of the European Union’s Emissions Trading Scheme (ETS), the Institutional Investors Group on Climate Change (IIGCC), whose members represent EUR7.5trillion in assets under management, urged ministers to consider changes which would ensure the continued viability of the ETS. The IIGCC makes three recommendations EU ministers should consider to support an improved Emissions Trading Scheme:

• A change in the overall level of ambition of the EU’s 2020 emissions target, with a commensurate change in the EU ETS allocations


• An immediate action to define and implement, as soon as possible, a one off set- aside of carbon credits in order to remove oversupply from the system


• Pre-agreed review processes to cope with unforeseen economic circumstances in future
  
  Stephanie Pfeifer, Executive Director of the IIGCC, said:
  
  “The European Union’s Emissions Trading Scheme is not producing the outcomes originally envisaged and needs fixing.
  
  “The EU ETS was expected to support emission reductions by catalysing innovation and driving investment in low carbon solutions. This is not happening. Carbon credit prices have fallen dramatically as a result of oversupply in the system. At under seven euros per tonne, the carbon price is not even high enough to support a switch from coal to gas.
  
  “As long-term investors, IIGCC members are concerned that current exceptionally low carbon prices fail to create strong enough conditions for private investors to allocate capital to low- carbon energy sources. With the potential for climate change to have major negative impacts on the economic systems in which they operate and on the assets in which they invest, investors are calling for decisive action
  
  “When EU Ministers sit down to discuss the future of the carbon market at a meeting tomorrow, 19 April, we urge them to show leadership and implement measures which boost the carbon price and help stimulate private investment in low carbon solutions.”

Carbon Capture and Storage - New research from UKERC shows tough road ahead to realise potential.

Following the government’s announcement of £1bn to support the development of Carbon Capture and Storage (CCS) the UK Energy Research Centre today publishes a report which is cautiously optimistic about the technology. It identifies four key issues which the government must address:

1. Choice of technologies. There are several different options but so far no clear indication of which will be best. For the moment the government should not attempt to save money by backing a single solution.


2. There must be financial support, not financial regulation. Penalties for emissions cannot be effective until abatement technologies exist.


3. Developing the technology will take a long time and will essentially be unpredictable. There may be a tipping point where it becomes clear that public money would be better spent on other methods of reducing carbon emissions.


4. There will be a long-term storage liability. Government must take lessons from the nuclear industry and protect the interests of future generations.

Clearly CCS is no quick fix. We hope that the government will also look at short-term cost-saving projects to cut carbon and improve energy efficiency without waiting for CCS to prove itself. (Or not)

 

The full text of the report can be found at
http://www.ukerc.ac.uk/support/tiki-read_article.php?articleId=1881

CRC – Consultation on Simplification

Introduction

Opening the Consultation

The Department for Energy and Climate Change (DECC) published its latest consultation on the Carbon Reduction Commitment Energy Efficiency Scheme on 27^th March 2012. The proposal document is accompanied by an impact assessment and a report from KPMG on the costs incurred by participants in setting up and managing compliance with the scheme.

There are 46 proposals, many of which have already been put forward. Some will simplify the process by reducing the scope of the scheme. Others attempt to simplify it by changing parts of the scheme which have proved difficult to interpret and have led to confusion.

We thought that the proposals would relate only to Phase II, but tucked away at the end of the document is the question (paraphrased) “Do you agree with bringing in the simplifications at the beginning of Phase II, or would you like to see them in place for the final years of Phase I?” As you will remember, Phase II starts in 2013/14 for new participants, but 2013/14 is the last year of Phase I for existing participants. (Simples!)

Closing the Scheme?

In his budget statement George Osborne said that the CRC scheme might be closed “should very significant administrative savings not be deliverable”.  The KPMG report on costs concluded that the principal costs were incurred in setting the scheme up and that they would be significantly reduced in subsequent years. They calculated that for every tonne of CO₂ reported, the administration cost in the first year averaged £1.36 but only £0.11 per tonne for each of the remaining years of Phase 1. On this basis it could be argued that significant administrative savings are on the way, so there’s no need to close the scheme. On the other hand, many people are already arguing that it should be closed and replaced by changes to CCL and CCA, but that’s another debate. (See question 37)

Here is a summary of the proposals. The proposal number is indicated at the end of each paragraph. Some are quite complex, especially the ones about simplification. Some will lead to debate and need further clarification. If in doubt, refer to the full text at http://www.decc.gov.uk/en/content/cms/consultations/crc_simp_cons/crc_simp_cons.aspx

The Details

Things we expected

• The list of fuels to be reported on is cut from 29 to 4: electricity and gas, and gas oil and kerosene used for heating.
  
  
  
  • Bottled gas and gas used directly for electricity generation will be excluded.
  
  
  • Self-supplied gas will be included only when it is natural gas.
  
  
  • Bio-methane and other gases will be excluded.
  
  
  • The 90% rule is abolished
  
  
  • There will be no residual measurement list and no distinction between core and residual energy
  
  
  • No footprint reports in future
  
  
  
  

Things to make life simpler

• 
  
  
  
  • Qualification will be based on supplies through settled half-hourly meters only. (1)
  
  
  • Automatic registration. Most participants in Phase I will also participate in Phase II and will have to register in 2013. If there is no change, details will not need to be re-entered but will be carried across automatically from the original registration. (3)
  
  
  • Class 01 and class 02 electricity meters to be excluded, since these are almost always for domestic supplies. For the same reason gas meters registering less than 73,200kWh per annum will also be excluded. (7)
  
  
  • Gas, gas oil or kerosene used to power CHP will be excluded. However, the Electricity Generation Credit (EGC) will be removed from such plants.
  
  
  • CRC emission factors to be aligned with DEFRA’s Greenhouse Gas Reporting Guidelines. As we move towards mandatory GHG reporting it make sense to have universal values.
  
  
  • CCA facilities and EU ETS installations to be removed from the scope of CRC. The intention has always been to avoid double taxation of emissions but participants have found the existing rules very complex. This proposal appears to be for the blanket exclusion of CCA facilities and EU ETS installations from the scheme, but those units will be tightly defined. Exemption will only apply to those parts of an SGU or site which are directly affected by CCA or EU ETS. The rest of the activity will be covered as before.
  
  
  • Increased flexibility to disaggregate. SGUs will be able to disaggregate regardless of size, allowing groups to participate more in line with their financial reporting structures and corporate GHG reporting requirements. If a parent’s consumption falls below the qualifying level following the disaggregation of a subsidiary, that parent still has to participate. Disaggregation will require the mutual consent of the units involved. Disaggregation will be permitted on an annual basis. (19/20/21/22)
  
  
  • Allowance Sales will be carried out after the end of each compliance year for the rest of Phase I. The government has confirmed the price of £12/tCO₂ for 2011/12 and the same price was confirmed in the Budget for 2012/13. For Phase II there will no longer be a cap on allowances and there will be no safety valve. Instead there will be two fixed price sales; one before the end of the compliance year and one after the year-end at a higher price. Participants who have surplus allowances will be able to trade them on a secondary market. (It’s difficult to see how this would arise, unless they bought too many at the first sale before the year-end.) It will be possible to bank allowances and to sell them to other participants or to keep them for a later year. It will still not be permissible to bank allowances from one phase to another. At the end of Phase I any surplus allowances held will simply expire. (34/35/36/37/38)
  
  
  • Surrender Deadline. This will be deferred to the end of September from  2013. Allowances for 2011/12 still have to be surrendered by the last working day of July 2012. (39)
  
  
  • 2013/14 – only one Annual Report. As noted above, 2013/14 is both the last year of Phase I and the first year of Phase II.  The government will accept a single annual report for both purposes. (40)
  
  
  • Retaining Records. This is generally reduced to 6 years. Previously some records had to be held for as much as 12 years. (41)
  
  
  • Timing of Changes. Do you want to wait for Phase II, or would you like to see some changes introduced earlier?  An example which DECC suggests is bringing in the reduced fuel list.
  
  
  
  

Things we’ll need to think about

The rest of the document deals with particularly complex issues and special situations. In several cases the proposals are not specific; rather a request for participants to submit their own ideas. Here is a summary of the main points. Again, the proposal number is given after each paragraph. (Note that proposal numbers are not the same as question numbers.)

• Supply at the direction of another party. This covers the situation where a third party is involved in procuring the energy. That company would be liable under CRC, but might claim relief in respect of ‘unconsumed supply’. Is this an attempt to clarify the PFI situation? In some circumstances a PFI operator purchases the energy and provides it to the building user as part of the package without separate itemisation. (4)


• Payment requirement. At present payment must pass to confirm a supply relationship, but this will not be required in future. Again, this may be intended to clarify the PFI situation if building users are not specifically charged for energy. (5)


• Unmetered supplies. The proposed changes will mainly affect local authorities and their use of energy for street lighting. Certain types of unmetered supply currently fall outside the scope of CRC. The proposal is intended to close this loophole. (6)


• Unconsumed supply. Proposal 8 does not apply in a landlord/tenant situation. Where an organisation procures energy and supplies all or part of it to a third party it can only claim that that energy is unconsumed if it has a supplier relationship, including metering, with that third party. There are scenarios and diagrams in the consultation document to explain what is intended. Going back to the PFI situation: if a PFI operator is supplying energy to a building there will be a meter which shows how much energy is being supplied to that building. The operator can claim that there is a supplier relationship even if there is no specific charge for energy because proposal 5 removes the payment requirement for defining supply. The PFI operator will claim unconsumed supply and the energy will be the responsibility of the operator of the building for CRC. (8)


• Ground lease – landlord/tenant. The government does not propose any radical change to the landlord/tenant rules which have given rise to much disagreement and confusion, but the consultation does ask for suggestions. They claim that no clear consensus has so far come from stakeholders. The one change they do propose is that where the lease is for the land only, and the building and all related services are solely the responsibility of the tenant, then the landlord will not be responsible under CRC. The ground lease must be for a minimum of 40 years. (9)


• Modification to self-supply exclusions and cross-licensed activities. Broadens the exclusion of energy used for the transmission of energy. (10)


• Revised emissions factor for self-supplied electricity. Corrects for the fact that there are no transmission losses for electricity consumed at the point of generation. (11)


• Energy Suppliers’ Statements. The government will work with energy suppliers to ensure that their statements are more in line with CRC requirements. In some cases the information has been incomplete so that participants have suffered the 10% penalty for estimating. From Phase II the requirements for the timing of readings will be more flexible. Suppliers of gas oil and kerosene will also be required to provide statements. (15/16)


• Electricity Generating Credits (EGCs). These credits are awarded to very small generators and offset the emissions from the fuel to the generating process. Under proposal 10 this fuel will be excluded, so the EGCs will be withdrawn. The net effect should be negligible. (18)

 

The remaining proposals are quite specific, relating to Academies, to designated changes and post-qualification organisational changes. Organisations which are directly affected by these issues should review proposals 23, 24, 25 and 26 and take professional advice as appropriate.

 

There are general questions on whether the parameters of the Performance League Table should be moved from law into guidance, whether independent third parties should be appointed to hear appeals and whether Scottish ministers should continue to hear Scottish appeals.

 

Finally, participants are asked if they could report emissions by geographic region, and are invited to provide details of their administrative costs broken down by one-off, registration, annual report and external costs.

 

Wouldn’t it just be simpler to load it all on to the Climate Change Levy?

 

 

 

 

CRC - Latest Consultation Published

DECC has today published its latest consultation on simplifying the CRC. Maybe that means it won't be abolished despite George Osborne's hints!

We have until 18th June to respond and there will be information sessions in London and Manchester - dates to be announced. I'm off to read the documents now. I'll let you know what I think.

Full details of the consultation are here.

CRC - not much in the Budget!

There was so little in the budget about the Carbon Reduction Commitment that the Chancellor decided to repeat most of it in three different places.

Here’s what he actually said:

“…the Government will consult on simplifying the Carbon Reduction Commitment (CRC) energy
 efficiency scheme to reduce administrative burdens on business. Should very significant administrative savings not be deliverable, the Government will bring forward proposals in autumn 2012 to replace CRC revenues with an alternative environmental tax, and will engage with business before then to identify potential options.”

So there’s going to be a consultation (again). We’re already expecting a consultation on phase 2 to be published next Tuesday 27^th March, but there will also be proposals brought forward in autumn 2012. At least they will be brought forward if very significant administrative savings are not deliverable. Surely administrative costs will be relatively low going forward; the major investment was in setting up all the systems in the first place. If the eventual decision is to dump CRC and replace the revenues with an alternative environmental tax this will not satisfy demands from Vince Cable, the CBI and the EEF to reduce the tax burden on business. In this centenary year of the Titanic it will merely be a re-arrangement of deckchairs.

The other important thing the Chancellor said relates to the carbon price:

“Allowances sold with respect to 2012–13 emissions will be £12 per tonne of carbon dioxide.”

We knew this was the price for 2011-12; now we have some certainty for next year as well and it’s not at the £16/tonne that some predicted.

Pity he couldn’t give us a 5-year fix!

 

 

Hello, I'm Anthony Day

I've been writing about the Carbon Reduction Commitment, Sustainable Business and Energy Security for a while now. You can find my articles at www.cyber-associates.com/news . I've had a number of comments, but there's no way of publishing them on that site.

In future I'll set out my views here and I look forward to your agreements, disagreements, comments and chat!

Sustainability - the Balanced Scenario

Oh no, not another article on green issues! We’ve got a recession to dig ourselves out of, we’ve got the dreaded cuts just round the corner...

But...

We need to stimulate growth, we need to get our businesses going again...

But...

Yes, we’re very sorry about the polar bears and the Gulf of Mexico is a bit of a mess, but the economy needs energy and we all need jobs...

But...

And anyway the scientists can’t agree, can they? And what about that lot down at the University of East Anglia?

But...

You still here?

It’s not easy being an environmentalist. One of the major problems I find is other environmentalists, whose ideas are often impractical, naive and extreme. Of course if you believe that we are on the threshold of a total global catastrophe and no-one is doing anything about it, it’s tempting to climb up a power station chimney, ram a whaling ship or devastate a field of GM crops. It’s easy to write people like that off as vandals (and some of them are!) and go back to business as usual.

Business is what it’s about. Sustainable business. Staying in business and staying in profit, in spite of what’s happening in the environment at large. Business has always faced threats - from competitors, from technology, from politicians, from the bank! Successful businesses - sustainable businesses - have recognised these threats, made plans, taken action and survived and prospered. They have recognised that business as usual is an illusion, and all too often a primrose path to ruin.

So what’s changed? All the traditional risks are here, with the added excitement of government cuts and a global recession. I could add a whole litany of environmental threats, with the added assertion that it’s all the fault of business as so many activists like to believe. Passing round the blame will not get us anywhere, but nor will ignoring realities and failing to plan. And let’s not forget there’s good news - opportunities - as well as bad.

If we look at the whole field of sustainability, it’s about a whole lot more than just climate change. Yes, climate change is a significant threat. Regardless of whether it’s our fault or not, increased-intensity weather events can devastate markets and cut supply chains. Since most governments believe that it is our fault, businesses are increasingly faced with taxes for emitting CO₂.

From a physical point of view there are increasing constraints. Rare earth metals, key components of wind turbines and electric cars, are becoming rarer. Helium will run out well before the end of the century at the current rate, and that won’t just mean no more party balloons but no more MRI scanners, LCDs or fibre optics! Agriculture is struggling to keep pace with ever-increasing population and natural disasters. Floods in Pakistan this year and wild-fires in Russia have sent up the price of grain. The loss of habitat and bio-diversity means the loss off potential new medicines and new crops. Peak Oil and the increasing reliance on oil from hostile nations and hostile locations threaten the price and security of our energy supply.

All right - that’s the bad news, and I accept that the natural reaction of most people is that it’s very sad and very serious but they don’t have the time or the clout to do anything about it. True. But whatever happens you can take action to protect yourself.

Planning, and in particular scenario planning, is becoming increasingly vital. Let’s just distinguish this from contingency planning.

Contingency planning is being ready to keep the business going in an emergency; so you’ll have a plan for a public transport strike that keeps half your staff from getting to work, for a power cut that could threaten your freezers, for a suspicious parcel in the post room and other things like that. It’s essentially about preserving the current business model.

Scenario planning is taking a point in the future - five, ten, twenty-five years ahead - the period will be governed by your capital investment cycle - and predicting what the world will then be like from a social, economic, competitive and technological point of view. It is usual to produce one or two scenarios, changing the major assumptions each time. The key question is then “In the projected scenario, is my business going to be viable?” For example, in the face of increased health propaganda, will a tobacconist be a viable business in 2020? If the government achieves its 35% CO2 reduction by 2020 should we still be selling petrol cars or electric ones? Remember what happened to the radio valve when transistors were invented? What happened to saddlers and harness-makers when Henry Ford brought out the Model T? And who makes a living out of developing photographs these days?

So sustainability is all about staying in business, as well as saving the planet and doing what we can to preserve a future for our kids. We need to reduce, re-use, recycle - and re-engineer if our businesses are going to survive. But first, forget about the alligators and draining the swamp for a minute. Take a moment to look at some future scenarios and ask yourself whether where you’re heading is where you want to go - or even if you’re likely to get there!

Anthony Day is director of Cyber Associates, the environmental management consultancy He worked on the Management Accounting Guideline on Sustainability published by the international accountancy bodies and joined the DEFRA consultation on the greenhouse gas reporting standard.

He delivers workshops to senior management on scenario planning for sustainability, has made conference speeches throughout UK and Europe and now facilitates regular webinars. http://cyber-associates.com/scenario-planning

More on CRC

944 down, 9 weeks to go - Registration: use an agent - how safe is saved? - online guide - Last call for disaggregation - EAM: Kitemark Energy Reduction Verification scheme; don’t forget gas meters - Help the helpdesk - Is your guidance up to date? - Chris Huhne has seen our energy future, but you can make up your own mind on the DECC website - You too can have an energy monitor like DECC - Next CRC Webinar

944 organisations had registered as full participants for CRC by 27th July. Original estimates were a total of 5,000; some people have calculated as many as 12,000, so on the face of it with only 9 weeks to go the situation looks pretty dire. The reality is somewhat different. Many organisations are gathering their data in stages and have already started the registration process. Beware, however, if you are one of those who has started and saved, that the system only stores incomplete registrations for 30 days and after that they are irrevocably deleted.

If you are still not sure about how to approach registration there are two detailed guidance documents showing showing shots of each screen at each stage of the process. This one is for private sector organisations http://tinyurl.com/2v9eagx and this one is for the public sector: http://tinyurl.com/35r4jg8 . Of course these only show you how to enter the data. If you have issues with getting the data together Cyber Associates can help and can handle registration as your agent.

Of the remaining 15,000 or so organisations that must make an information disclosure but are not full participants, some 3,900 have registered. If your organisation comes into the disclosure category don’t miss the deadline. There are penalties for you, too!

The deadline for disaggregation is 31st July, which in practical terms means tomorrow. If you don’t know about disaggregation, don’t worry. You’re too late. (Special rules apply for the public sector.)

Early Action Metric. The Environment Agency has now approved the Kitemark Energy Reduction Verification scheme to count towards the Early Action Metric. This is based on the new BS EN 16001 Energy Management Standard. You now have a choice of this, CEMARS or the Carbon Trust Standard. Get any of these in place by 31st March 2011 to qualify.

Voluntary AMRs complete the other part of the Early Action Metric. As noted before, it’s the percentage of total annual energy that goes through the meter in 2010/11 that is taken into account, so the sooner you instal the AMRs the greater the benefit. And gas meters also qualify.

There are signs that the CRC Helpdesk, not surprisingly, is coming under increasing pressure. Of course there are extensive guidance documents on the website, but some people have raised concerns that they don’t carry version numbers. From time to time they are updated, so how do you know that you are referring to the latest edition? Document properties should give you the creation and modification dates, though that won’t tell you what’s changed. (I suppose you could open two versions in Word and get it to do a document comparison, but you really shouldn’t have to do that!)

This week Chris Huhne, Energy and Climate Change Secretary, presented his first Annual Energy Statement to Parliament. His objectives are to keep the lights burning and to meet the 80% carbon footprint reduction by 2050. The model which his department has used, balancing supply against demand, is available for anyone to work with at http://2050-calculator-tool.decc.gov.uk/. What is most revealing is the sort of changes we will need to make to achieve these targets - including heating homes to no more than 17°C, reducing our use of gas, installing micro wind generation on 450,000 properties and extensive use of electric and fuel-cell cars and vans. Fascinating! Realistic? You decide.

Incidentally, if you go to the DECC website www.decc.gov.uk you will see that they are displaying the energy consumption and carbon footprint of their HQ building in real time. I wish I could say that it’s an example of the work of our strategic partner, NoWatt, but it’s not. In fact NoWatt does better than that: it can report not just to the nearest building, but to the nearest floor, department, circuit or appliance. It’s a key tool for managing energy efficiency and for feeding back to all groups of staff to show how they are doing and to reinforce their engagement with energy saving.

I’ll be presenting the next CRC webinars for the Low Carbon Best Practice Exchange on 7th and 14th September. You can find full details at www.carbon-innovation.com

This content is available as a podcast at www.susbiz.biz And if you want to talk to me live about any of this, I’m available at on 07803 616877

CRC Update

More than 4,000 organisations still to register - less than 12 weeks to the 30th September cut-off - more time for disaggregation - PFI: who’s responsible? - landlord and tenant - Early Action Metric - monitoring carbon footprint - buying allowances - evidence pack and audit - super-smart metering to save energy and save cost.

The total number of CRC full participants was estimated at 5,000 and according to the Environment Agency only 651 have so far registered. That leaves less than 12 weeks for the remaining 4,349 to complete the process by 30th September. Of course you may already have started, but if you’re waiting to clear up some minor query or you have some doubts about your particular case the Environment Agency urges you to register now and sort out queries and errors later. No doubt there will be increasing pressure on the system as we get closer to the cut-off.

Good news if you were planning for disaggregation. The Environment Agency has extended the initial deadline until 31st July, although all your SGUs still have to be registered on their own account by 30th September.

Some organisations operate facilities provided under PFI and the PFI company has claimed that the organisation which uses the facilities is responsible. The Environment Agency has now made it clear that the “counterparty to the supply contract” principle applies, so if the PFI company is paying the bill then the PFI company is the participant.

CRC remains an issue for landlords. Remember, if you bought more than 6,000MWh of half-hourly electricity in 2008 you are a full participant even if you sold that electricity on to your tenants. When we get to the reporting phase, the landlord is responsible for reporting the total carbon footprint from all energy sources, including energy used by tenants. Can you negotiate an amendment to the lease? The CRC legislation gives you obligations, but no additional rights vis-à-vis the tenant.

If you are a tenant and taking steps to improve your energy efficiency, will the landlord pass on the benefit of lower CRC costs to you? Again, can you re-negotiate the lease?

Your Performance League Table position and your total CRC cost are both affected by the Early Action Metric and it’s not too late to get the benefit. The earlier you put in voluntary AMRs (automatic meter reading) the better, because the benefit is calculated on the proportion of your total energy that flows through them in 2010/11. Don’t forget gas meters. You have until 31st March 2011 to achieve the Carbon Trust Standard. As long as you have it in place by that date you qualify in full. The Environment Agency has just approved CEMARS as an alternative to the Carbon Trust Standard. Other standards are under review.

Quite apart from the Early Action Metric and your league table position, the surest way to reduce your CRC costs is to improve your energy efficiency and cut your energy bills. Have I told you about the super-smart metering that gives you instant feedback and detailed analysis for close cost control? Give me a call on 07803 616877 and I’ll tell you more!

Once registration is complete the next task is to prepare for the annual report and for the purchase of carbon allowances in April 2011. You need to have an evidence pack, and 20% of all participants will be audited. Have you been monitoring your carbon footprint since April? Have you got detailed records and an audit trail?

If you would like to discuss any of these points in more detail please give me a call on my direct line: 07803 616877. Together with strategic partners, Cyber Associates can help and advise on CRC registration, obtaining benefit from the Early Action Metric, monitoring your carbon footprint and establishing an employee engagement programme to maximise your energy efficiency.

I look forward to talking to you!

Best wishes,

Anthony Day

PS NoWatt, our super-smart metering partners, have a window in August due to customer holidays. If you want a rapid assessment and installation we can help you to start saving money on energy in a matter of weeks. Call me on 07803 616877!

CRC - do you need to buy allowances next April?

The CRC Energy Efficiency Scheme which came into effect on 1st April 2010 is a sort of carbon-trading system for larger organisations. I say “sort of” because the government sells carbon allowances in April and gives all the money back in October. Those organisations which do really well in controlling their emissions, and hence find themselves at the top of the league table (more of that later!), will get their money back with a bonus of up to 10%. In order to pay these bonuses those who do less well will be penalised to the same extent. Over 5 years this bonus/penalty will rise to 50%.

Let’s look at the first year. In April 2011 you have to buy allowances to cover your EXPECTED emissions in 2011/12. In October 2011 the cost of those allowances will be returned to you with a bonus or penalty depending on your ACTUAL performance in 2010/11. Your cost is therefore the cost of having your money tied up from April to October, offset or increased by the bonus/penalty. This bonus/penalty, by the way, at 10% of your allowances will be less than 0.7% of your energy bill.

What if you don’t buy any allowances next April? You don’t have to surrender them until July 2012 and there will be another sale of allowances in April 2012. By then you will know exactly how much you need and allowances can be transferred from year to year within each phase. If you adopt this procedure you will defer the cash flow effect (not increase it, because you will not buy anything for the following year either. When you get to the end of Phase 1 you can buy exactly the allowances you need, which is important because if you have any extras they cannot be carried into Phase 2 and so will be worthless.

Of course, if you do this you’ll miss out on a possible bonus in Year 1, but is 0.7% of your bill such a big deal?

Disaggregation could save you money, if you move fast!

Carbon Reduction Commitment

The key issue here is that if part of a group of companies uses enough electricity to make it liable to participate in CRC, the whole group must register and report. Every part of the group must measure and report its carbon foot print and purchase carbon allowances under the scheme. Disaggregation is a concession which means that groups can apply to exclude those parts of the organisation which would not be liable under CRC on their own, but only on certain conditions:

• You must register the whole group by 30th June 2010 if you want to take advantage of this. This gives you the time to re-register the parent company before the 30th September deadline.

• You cannot split up the group so that no element is big enough to be liable. The parent company must register with enough subsidiaries to bring usage up to participant level.

If you don’t disaggregate you must report on the whole group and buy allowances for the whole group for the three years of the first phase before you will get a chance to apply for disaggregation again.

So, to save both time and money you must make a decision on disaggregation as soon as you possibly can. Call us now on 01904 654986

The Low Carbon Innovations Network has invited Anthony Day to present a series of webinars on the Carbon Reduction Commitment. He will also be presenting a conference session - How to Win at the CRC Game - at the Best Practice Exchange at London Olympia in June 2010. More...

CRC - is the league table a red herring?

For most people, the Performance League Table is a red herring.

Depending on how scheme participants manage their carbon footprints, they will be assigned a ranking on the Performance League Table. This will be publicly available, so the theory is that organisations will not wish to be named and shamed for appearing low down in the league. Secondly, there are financial penalties associated with your league table position.

Since the Environment Agency took over much of the information on CRC seems to have become both more complicated and more vague. For example, the fixed price for carbon allowances was originally announced at £12/tonne. This does not appear to be confirmed on the current CRC website. When participants get their money back through recycling payments, the original plan was that they would get a bonus or a penalty depending on their position on the league table. This could be between 5% and 50%. Again, these figures do not appear on the new CRC website.

Cyber Associates has requested clarification of these points from the CRC helpdesk, but in the meantime let’s use the original figures. On that basis a 5% bonus or penalty on your recycling payment is about 0.3% of your bill. That’s why we believe that the League Table is a red herring.

You will gain far more by reducing your energy usage than by trying to improve your league table position.

After all - as will be revealed at the 10th June conference - many participants will be prevented from taking advantage of the early Action Metrics and will have no way to improve their position at all.

This is all part of the obligation under the Climate Change Act to cut CO2 by 34% by 2020 and 80% by 2050. With UK emissions still growing, even standing still will be difficult. The oil price has been on the rise for most of this year, so energy is going to be expensive to buy and if you use it inefficiently the government is making it even more expensive to use!

Cutting Fuel Costs

Petrol duty rises today by 1p/litre.

Have you had that email forwarded and re-forwarded from a friend of a friend of a friend? The one that urges you to boycott Esso and BP when buying petrol, to force the wicked oil companies to bring prices down to £0.90/litre?

I class it as a "quasi-virus". It urges you to send it to all your contacts and if everyone does that it truly means millions of messages. Why a virus? Because it's just setting out to clog up and slow down the internet with all these messages.

What about the boycott of Esso and BP?

First, it's not true when they claim that the oil price is "as low as it has been for a while." It hit $147/barrel in July 2008 and then fell back, but it's been climbing since the beginning of last year and today is at $83. In sterling that's £73 in July 08 and £55 now - the gap is closing because sterling has fallen against the dollar. The long term average for oil is around $30, but as it runs out and we have to get it from increasingly remote and unstable regions the cost of production goes up and up. Industry experts predict the $200 barrel within 5 years!

So what happens if we stop buying from Esso and BP? The truth is that Morrisons, Sainsbury's, Tesco and all the rest don't own oil wells or refineries. They buy petrol from the oil companies - like BP and Esso. Even if we managed a 100% boycott there would be no change to the price - though there might be queues at the supermarket forecourts! As with electricity and gas, we cannot do anything to drive down the price of what is becoming a scarce resource in the face of growing world demand and population increase. The only solution is to get the very maximum out of every gallon: drive carefully, drive only when you have to, choose an economical car. Very boring, but I'm afraid it's the truth.