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UK’s Carbon reduction commitment legislation – the shape of things to come globally!

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Climate change

Screenshot credit Tom Raftery – data from NASA

The world is getting warmer. 2008 was the 9th warmest year on record. 2009, barring a sudden, severe, global cold snap, will end up being the 4th or 5th warmest year on record and with El Niño coming on in the Pacific, 2010 looks likely to set a new temperature record for the hottest year in recorded history.

Climate change is real and it is here, now. So what you say, what does that have to do with me? Or more to the point, what does that have to do with my work?

Well, if you are based in the UK, there is a strong chance that next April, it will have a very direct impact on your job, company, or business. This is because the UK has passed legislation called the Carbon Reduction Committment (CRC).

The CRC is a groundbreaking piece of legislation designed to help the UK meet its carbon reduction targets by 2020. Basically, the CRC scheme will apply to organisations that had a half-hourly metered electricity consumption greater than 6,000 MWh per year in 2008. Organisations qualifying for CRC would have all their energy use covered by the scheme, this includes emissions from direct energy use as well as electricity purchased. Initially, it is estimated, around 5,000 organisations will qualify, including supermarkets, water companies, banks, local authorities and all central Government Departments. Qualifying organisations mostly fall below the threshold for the European Union Emissions Trading Scheme, but account for around 10% of the UK carbon emissions.

The organisations involved will need to register or make an information disclosure by 30 September 2010. A financial penalty (£5,000 plus a per diem charge for each subsequent working day an organisation fails to submit a report) will be imposed on organisations who fail to meet the deadline.

The first year of the scheme (April 2010-2011) is called the footprint year. Companies are required to submit an audited report of their emissions during the footprint year by 29 July 2011. Again financial penalties will be imposed for failing to meet the deadline.

In the second year, (2011-2012) participants will have to purchase emissions allowances to cover their forecast emissions for 2011/12. And in 2013 auctioning of carbon allowances begins, with all the income from the auctions recycled back to participants by the means of an annual payment based on participants’ average annual emissions since the start of the scheme.

There will be a bonus or penalty according to the organisation’s position in a CRC league table. The league table will be made public thereby enhancing the transparency of companies carbon reporting and hopefully shaming any egregious emitters into reducing their carbon footprint.

I have gone in to a bit of detail about the CRC here because it is difficult enough to find out information about the scheme and most UK business appear to be wholly unprepared for its implementation. The UK Department of Climate Change (I think it is interesting that the UK has a government department of climate change in the first place – how many other governments do?) has an easy to follow guide to the CRC [PDF] available for download which will help.

The CRC is going to be closely watched by other countries and you can be sure it will be used as a model by many to reduce their carbon emissions.

As I mentioned at the outset of this piece, climate change is here, it is real. Increasingly we are going to see bills like the CRC enacted so we can try to mitigate its effects.

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What price carbon emissions?

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Excess

Photo credit Pinot & Dita

One of the reasons we are facing a climate crisis is because people have not been paying the full economic price for their carbon consumption. Had they been, we’d be living in a very different world today. A quick comparison of average car fuel efficiency in the US versus the EU (where fuel has typically been priced at 2-3x the US price) bears this out.

When people have to pay a higher price for their emissions, they are less likely to pollute (if only to save themselves money!).

This brings us onto the trickier question though of what is a realistic price for carbon. The recent price of carbon emissions in the EU Emissions Trading System (ETS) has varied from €30 to €10 while today as I write this, it has a spot settlement price of €15.31. That may be current, but is it realistic?

What is a realistic price for carbon emissions?

Well, the reason we are charging for carbon emissions in the first place is to counter the damage being done to the environment by those very emissions – the polluter pays principle. In other words, the price to emit one tonne of CO2 into the atmosphere should be equal to the price of extracting one tonne of CO2 from the upper atmosphere.

And how much is that?

I have no idea to be honest! I have asked several people in this space and no-one has been able to tell me – principally because the technologies to extract CO2 from the upper atmosphere don’t yet exist! You can be sure that it is significantly more than €30 per tonne though.

As global CO2 emissions continue to rise and the effects of climate change become even more pronounced, the price being charged for CO2 emissions globally will need to trend closer to the price of extraction and away from the current €15.

If nothing else, this will encourage us to move to a less carbon intensive lifestyle – manufacturers of carbon intensive products beware!

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Schwarzenegger sends “a strong message” to the federal govt

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Arnold Schwarzenegger
Photo Credit Thomas Hawk

I see Grist reporting that the US’ first Cap and Trade program went live. Power plant owners in 10 Northeastern states had to submit sealed bids in order to emit greenhouse gases yesterday.

Then the New York Times has a story about an alliance of 7 Western States and 4 Canadian provinces who have come together under the name Western Climate Initiative to also put a Cap and Trade system in place.

While the WCI draft plan doesn’t come into effect until 2012, the Northeastern states is now live! It only requires a 10 percent reduction in emissions by 2019 and that only in emissions generated by power plants but it is better than nothing and it sets a precedent.

And, as Gov. Arnold Schwarzenegger said

We’re sending a strong message to our federal governments that states and provinces are moving forward in the absence of federal action, and we’re setting the stage for national programs that are just as aggressive.

More aggressive, I hope – looks like politics has seriously diminished the “Terminator’s” definition of aggressive!

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Carbonetworks and the open carbon platform

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Carbonetworks Carbon Balance Sheet Screenshot credit Carbonetworks

I wrote a quick blog post about Carbonetworks the other day when it was announced they secured $5 million in series A financing.

I made the mistake though of assuming their software was a simple carbon accounting solution. It goes well beyond that.

Yesterday, in a phone call with Carbonetworks co-founder, President and CEO Michael Meehan, I discovered that their offering is a full carbon strategy platform.

The app is an online app and according to Michael, Carbonetworks has about 180 subscribers in 23 countries. The app at its most basic helps companies understand what their carbon footprint is, and then helps the companies translate that into a financial bottom line. The app helps companies see what options they have to reduce their carbon footprint and helps them create a carbon strategy from a managerial perspective on how to proceed in the carbon market.

The app can normalize carbon data across all of a companies facilities, and then monetise it so companies can think of their carbon as either an asset or a liability on the balance sheet! This is a clever approach which will change how companies look to their supply chain, or how they approach investments, for example.

Then when you get to the reduction space, Carbonetworks helps there too. Carbonetworks has what they call their marketplace where they offer fully verified offsets as well as a network of other reduction options so companies can have a diverse spread of carbon reduction investments.

Where this gets even more interesting and the reason I called Carbonetworks a platform is because they are currently working on opening up their API so that other companies can use their backend. if they pull this off, they will be the first to market (that I have heard of) with an open platform like this.

If you had programmable access to an online carbon platform like this, what would you do with it? Think of the mashups you could create!