Author Archives: Anthony Day

About Anthony Day

Speaker, writer and consultant on sustainability issues. Read my new book Sustainability Works available at the Kindle store: http://www.amazon.co.uk/Sustainability-Works-ebook/dp/B008L1DP70/ref=sr_1_1?ie=UTF8&qid=1342526397&sr=8-1

CRC due for a change?

Not much has happened recently on the Carbon Reduction Commitment (CRC). The helpdesk tells me that the Performance League Table for 2011/12 will be out some time this month. No great urgency, then. I doubt if we will see a trace in the press unless Manchester United comes to the top again. The Chancellor did mutter something earlier in the year about replacing CRC. Will he announce this in the Autumn Statement on Wednesday, 5th December? As far as I can see he has three options:

  •       Leave things as they are and let the “tax” keep rolling in
  •       Increase the price of carbon allowances
  •       Announce the replacement of the scheme, (no doubt preceded by another consultation)

My prediction is that he will do nothing beyond reducing the list of 28 fuels to four, as already suggested . He will not increase the carbon price because he doesn’t believe in restricting emissions if this will restrict the short-term performance of the economy. He won’t replace the scheme because it will take time and whatever he ends up with will have to yield as much revenue as CRC does at present, so why bother? In any case, the civil servants will be gearing up to administer the new Greenhouse Gas (GHG) reporting requirements. That looks even more complex than CRC, although it won’t raise any revenues. Yet.

Let’s see what Wednesday brings!

Green Double Whammy for George Osborne

George Osborne has made no secret of his environmental scepticism and claims that emissions targets and environmental measures could damage British industry. He’ll find it more difficult to maintain this position in the face of today’s call from the world’s largest investors for more decisive action by governments on climate change.

The letter from global investor networks representing institutional investors responsible for over $22.5 trillion in assets calls for a new dialogue between investors and governments on climate policy.

They set out seven key tasks, including the need to favour low-carbon investment over high-carbon investment and to stop subsidising fossil fuels. This does not fit well with Osborne’s plan to redevelop Britain’s power stations with a new dash for gas!

The investors conclude that “governments are key in reducing the serious risks, losses and damage that climate change will cause, and the risks to the investments and retirement savings of millions of people. While we commend governments that have implemented supportive policy, much further work is needed to decarbonise economies and portfolios and to stimulate private investment in low-carbon solutions.”

At the same time, the influential Environmental Audit Committee (EAC) is urging the Chancellor to “restore investor confidence” in the government’s energy policy with a clear decarbonisation target.

Joining the growing chorus of calls for a 2030 decarbonisation goal for the power sector in the forthcoming Energy Bill, Committee chair Joan Walley MP says:

“The government needs to reassure investors by setting a clear target in the Energy Bill to clean up the power sector by 2030. A second ‘dash for gas’ could lock the UK into a high-carbon energy system that leaves us vulnerable to rising gas prices.”

The Committee wants the Treasury to explain how new incentives for gas-powered energy generation can be compatible with the UK’s legally binding carbon reduction targets.

Walley also alludes to the much-reported rift between the Treasury and the Department for Energy and Climate Change.

“The Treasury must end the uncertainty on energy policy and give investors and businesses the confidence to seize the enormous opportunities presented by new clean technologies,” she adds.

So what future for the “greenest government ever”?

And what future for us?

Another Dash for Gas!

Gas companies are announcing price increases of up to 9%, but it looks as though gas will actually be providing cheaper electricity – in the short term at least!

Ed Davey, Energy Secretary, has announced a programme of new gas-fired power stations, and at first sight gas is a dream solution to our energy problems.

Unlike wind, wave or solar, a gas-fired power station can run 24/7. Unlike a coal or nuclear station, it can rapidly run up or run down to meet fluctuations in demand. Gas stations are quick and relatively cheap to build. At the end of their lives there’s no dangerous waste to deal with. CO2 emissions are far lower than from coal, there’s much less of other greenhouse gases like sulphur dioxide and hardly any particulates. The gas comes along a pipe. It doesn’t need railways or roads for transport, so is unlikely to be disrupted by industrial disputes. A perfect solution all round?

We will always need some gas-fired capacity because of its flexibility in load-balancing, but there are many questions about the present policy of major expansion. Britain’s energy policy needs to deliver security, keeping the lights on 24/7, and affordability, minimising fuel poverty and keeping our industry competitive. We also have national emissions targets, and although gas stations are far cleaner than coal they still emit CO2.

The Committee on Climate Change, an independent panel of advisors to the Government, said last month that investment in more gas-fired power stations was “incompatible” with the UK’s targets for reducing carbon dioxide emissions, which are legally binding under the Climate Change Act.

At the same time the Aldersgate Group, representing M&S, EDF, Aviva and other major companies, has called upon George Osborne for a clear policy on decarbonising electricity production by 2030. They say “It is essential for Government to provide investors with the long-term confidence they need to transform our electricity market and make investments capable of driving wider economic growth.”

This leaves security and affordability. British North Sea gas has been in decline for a number of years. We now import more gas than we produce. About half of imports comes from Norway and just under half comes from Qatar by ship. Norway is a friendly, stable nation but there are strong suggestions that Norway’s reserves will start to run out and production will decline rapidly after 2020. The next big supplier is Russia. There’s plenty of gas there, but we would be at the very far end of the pipeline. In the past Russia has cut off supplies to whole countries, and other countries further down the line have suffered as a result.

Gas from Qatar comes by tanker. Tankers can go anywhere, and as demand and gas prices rise it would be easy to divert the ships to the highest bidder. And then there’s the Straits of Hormuz problem.  This is the pinch-point at the mouth of the Persian Gulf. If Iran or anyone else decides to blockade the straits, the LNG tankers will be unable to get out. (And the oil tankers will be boxed in as well!)

Is fracking the answer? Fracking, the release of gas from deep rock layers, could give us a new source of UK gas. The Institute of Directors believes fracking could create 35,000 jobs and there’s strong support from the CBI. Fracking still remains controversial. People are mainly concerned that their groundwater will be polluted. More seriously, fracking can destabilise the geology and test drilling in the northwest has already triggered earth tremors. At the end of the day the product is still gas, and burning gas still releases CO2.

Affordability? There is no doubt that energy, along with many other resources, is becoming scarce and expensive. Switching suppliers and setting up buying groups may have some effect on prices, but the underlying commodity prices will always determine what must be paid in the end. In the medium to long term prices will go up dramatically. In the short term a fleet of new gas power stations may seem attractive and cheap, but it’s likely to turn out to be insecure, expensive and polluting.

So what do we do?

CRC or GHG? Welcome back to work!

This week’s cabinet re-shuffle is generally accepted as a move to the right and it also looks like a move away from the green agenda. The coalition’s promise of “the greenest government ever” is long forgotten. Boris Johnson has made no secret of his anger at Justine Greening’s removal from Transport. This is because he’s against the expansion of Heathrow and he thinks her departure will lead to the government changing its mind on a third runway. Last week Tim Yeo urged David Cameron (are you a man or a mouse?) to build the third runway without delay. Tim Yeo is chairman of the Commons Select Committee on Energy and Climate Change. You couldn’t make it up!

Of course Boris isn’t against airport expansion – he just wants a brand new airport in the Thames Estuary. Fine for London and the Southeast, but not so handy for the rest of us! That’s not the issue, though. Such an airport will take at least 20 years to build and probably 50 years to pay for itself. In the short term it will create lots of jobs and the economic growth that all politicians are chasing. In the medium and long term it will make it more and more difficult, if not impossible, to reach our carbon reduction targets. More to the point, within 50 years oil is likely to be so expensive that we’ll think twice about even driving to the airport and air travel will once again be only for the rich. Boris Island or LHR3 will be a white elephant. (Remember, a white elephant was given by Indian rulers to courtiers they didn’t like. It costs so much to maintain a white elephant that it’s expected to bankrupt the owner.) Who will own, or at least underwrite, these new airports? Why, the taxpayer. So that’s all right then!

What’s changed on the CRC front?

For the moment, nothing’s changed. Except that a shift to the right makes it more likely that George Osborne will review the CRC scheme with a view to replacing it.  He threatened to, earlier in the year. We should learn more at the Comprehensive Spending Review (CSR), which is likely to take place shortly after 15th October.

My predictions? CRC will continue for the moment, at least until the end of the first phase. The Chancellor will therefore collect another £750m next July and again in 2014. This assumes that he stays with £12/tonne. He will have to weigh the temptation of extra revenues from a higher carbon price against the pressures from the business lobby. Again, the CSR will reveal all.

And how does GHG reporting fit into the picture?

There’s been a lot of comment over the summer about greenhouse gas reporting. (GHG) We’re told it demonstrates the government’s firm commitment to the green agenda. Am I missing something? From where I’m standing it looks just like greenwash. Why?

▪                GHG reporting will apply to some 1,100 companies and therefore leave out many of the 2,700 CRC participants.

▪                Companies can choose their own reporting formats. They need to be consistent from year to year but do not need to conform with any other organisations.

▪                Companies must report on Scope 1 and Scope 2 emissions and account for the six Kyoto gases, including fugitive emissions. Given the constant attempts to simplify CRC this looks like a highly complex requirement, but if there is no reporting standard how can it be monitored or regulated?

▪                CRC was set up with a financial performance measurement which was turned into a financial levy. GHG reporting has no financial structure or incentive, so it will be impossible for the government to use it to raise revenue. How will they replace the £750m from the CRC if they scrap the scheme – or will they simply retain it and demand GHG reporting as well? Did someone mention cutting red tape?

Have your say!

The original consultation on GHG reporting took place in 2011. DEFRA has published a Summary of Responses here

A succinct summary is available from the Institute of Environmental Management and Assessment (IEMA) here.

Draft regulations have now been published and are open for consultation. Here are some of the key provisions additional to those mentioned above:

▪       An option to delay the introduction of mandatory GHG reporting until October 2013; to tie in with other planned changes to company reporting;

▪       A planned review of the GHG reports published in the first two years and a decision in 2016 whether mandatory reporting should be imposed on all “large” companies;

▪       The regulations will be made under the Companies Act 2006 and enforced by the Conduct Committee of the Financial Reporting Council (FRC). This means your GHG report will have to be audited.

▪       Transparency is a requirement, but not the method of reporting;

▪       Existing data developed for compliance with the current EU ETS, CRC and CCAs can be used;

▪       The report must include an ‘intensity ratio’, using a financial or activity factor;

▪       Emissions must be reported in tonnes of carbon dioxide equivalence;

▪       The emissions data reported in the first year must be reported in subsequent years to allow comparison.

You have until 17th October 2012 to respond.

If yours is not a quoted company then of course you are outside the GHG net. The public sector is completely excluded as well. Apparently the further consultation in 2015/16 could bring another 24,000 organisations into the net. But hey – that’s three years off, and the other side of a general election! Well there’s nothing urgent about carbon reduction is there?

If you’d like to talk about your corporate carbon footprint, about sustainable business strategies or scenario planning for sustainable survival, you can email me or call 07803 616877.

 

Anthony Day

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 17th 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. 

 

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 17th 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 CO2e 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.

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!