Carbon Management – A Practical Approach for Business

Jack Holden, Head Of Carbon Management, Ecos Corporation

Casey-Cardinia Business Breakfast

Pakenham 12th June 2008

Outline

• Global warming and carbon emissions overview

• Carbon trading and how it affects business

• Short term energy & carbon trends

• Actions for business

• The carbon neutral trap!

Digging out of a Carbon Neutral Trap

Climate ChangeWhat are we observing so far?

2007Hottest year ever in Victoria

Driest ever for Murray Darling rivers

2005Strongest hurricane ever recorded (Wilma)

Highest daily rainfall event in Indiaever recorded

The most Hurricanes ever

Hurricane Wilma, courtesy of United States National Oceanic and Atmospheric Administration

Mumbai Deluge 26/7/2005

• 1000mm rain in one day

Global mean temperature

Global averagesea level

Northern hemispheresnow cover

IPCC Forth Assessment Report WGI

Direct Observations of Recent Climate Change

1850 - 2005

Hotter days

Less rainfall

Carbon Cycle

Carbon Cycle

Carbon Cycle

The history of CO2 and temperature change shows great variations. A dynamic system.

We’ve built this civilisation in an unusually stable, temperate period. It wasn’t always thus.

Sea level 125 m lower

Sea level: Fairbanks, R.G., 1989, A 17,000-year glacio-eustatic sea level record; influence of glacial melting rates on the Younger Dryas event and deep-ocean circulation: Nature, v. 342, no. 6250, p. 637-642.

Sea level: Fairbanks, R.G., 1989, A 17,000-year glacio-eustatic sea level record; influence of glacial melting rates on the Younger Dryas event and deep-ocean circulation: Nature, v. 342, no. 6250, p. 637-642.

Sea level 4 – 6 m higher

We’ve built this civilisation in an unusually stable, temperate period. It wasn’t always thus.

Conclusion: The earth’s climate is a naturally unstable system. We’ve thrown a large CO2 bomb into it. It has now gone off.

?

-50

0

50

100

150

200

250

300

350Australia’s Carbon Emissions

Million tonnes/year

Adapted from Department of Climate Change, 2008

Greenhouse emissions per person -2003

~26t CO2-e/person

~4 t CO2-e/person

Business Case For Managing Carbon

Commercial Drivers

Regulatory Drivers

MEGA COMPANIES ARE ACTING

Commercial Drivers.

• Investors, employees and customers

• GM to sell Hummer brand, Mitsubishi closes in Adelaide

• SUV sales down 60% in US since 2002

• ANZ had a divorce from Gunns (costs $1M/day)

• Tesco & Walmart environmental disclosure requirements

• Health & beauty industry destocking harsh chemicals

Consumer AwarenessReduce your carbon emissions - Walk to the pub

Regulatory DriversNational Greenhouse Energy Reporting Act

(NGERS)

• Mandatory reporting of carbon emissions

• Begins 1st July 2008.

• Only 700 to 900 companies, 300 first time

reporters

• Corporate penalty is $220K, CEO’s penalty is

$44K

• “operational control”?

• The fuel you burn (petrol, gas, diesel) creates scope 1 emissions

• The electricity you buy creates Scope 2 emissions

• The carbon emissions embedded in the goods and services you buy are Scope 3 emissions

Emissions Trading (1)

• Make bad things more expensive than good things

• Carbon markets are created by governments – they

are not real

• Government mandates a cap (tonnes of CO2/year)

• “Liable parties” are polluters (defined by size and

emissions source)

Emissions Trading (2)

• All direct emissions from facilities above 25K tonnes/year in the following sectors

– Power stations yes – Manufacturing yes– Mining yes– Construction & property yes– Transport probably– Waste not sure– Agriculture & forestry too hard for now

How does emissions trading work?

1. Polluters buy permits (or credits) from the government to cover emissions

2. May be some free permits3. Polluters then surrender permits to governments to

cover emissions & 4. Can sell any surplus to other polluters who are short

5. Some activities like forestry may create extra permits

6. Reducing emissions saves $$ but no credits created

What it means for business

• If you are not a “liable party” (one of the top 500 -1000 emitters) then you won’t need permits

• Increase costs of:energy use - reduce or switch to cleaner fuelscarbon intensive goods and services

Where will it hit hardest?• Large impact from carbon price

– Coal, aluminium, steel, cement

• Moderate impact from carbon price– Oil, Gas, transport, paper

• No carbon price – Solar Water Heating (much cheaper soon)– Wind & Solar electricity (needs to get cheaper)– Geothermal (big potential – but not yet)– Nuclear, hydro (other impacts)– Timber– Recycled products

Carbon Price in Energy Costs

• Caps may start in 2010 on biggest polluters

• $20/tonne of carbon

5c per litre of fuel and

20% increase in Victorian electricity retail price

• $40/tonne of carbon

+10c litre

+ 40% Victorian electricity

Carbon Management for Business

1. Reduce energy use Improves profitability everyday

2. Cleaner fuels Increases costs. Depends on energy intensity of your business

3. Carbon Offsets Increases costs. Only if clients want it.

Carbon Accounting for Business• Use existing data systems for collecting energy data

(finance or inventory)

• Convert (kwh, Mj, litres) from the invoice data to carbon units (www.greenhouse.gov.au)

• Build into existing reporting and performance management process

• Build an emissions reporting system that suits you before your clients build one that doesn’t

Energy Efficiency Pays

• Compact fluro globes ~$6 each

• Each saves $15 each year

• Household saving in first year = $135

• Then saves $225/year for 5 years

Reduces about 1.4 tonnes CO2

15 lights in an average house

Also business opportunities in cutting carbon

Easy Being Green cut over 4 million tonnes in 18 months

But you have to understand the risks

But you have to understand the risks

2006/2007: Weekly Installation Sales (no. of globes)

0

20,000

40,000

60,000

80,000

100,000

8-Oct

22-Oct

5-Nov

19-Nov

3-Dec

17-Dec

31-Dec

14-Jan

28-Jan

11-Feb

25-Feb

11-Mar

25-Mar

8-Apr

22-Apr

6-May

20-May

3-Jun

17-Jun

1-Jul

15-Jul

29-Jul

12-Aug

26-Aug

9-Sep

23-Sep

7-Oct

21-Oct

4-Nov

18-Nov

2-Dec

16-Dec

30-Dec

Week Ending

Glo

bes

per

wee

k

Easy Being Green Weekly Globe Installations

Annex 3

140 redundancies as carbon price dropped 50%

The Carbon Neutral TrapKnow what you are digging into

Take Home Messages• Saving energy will make even more money now

• Action matters – not targets• Carbon accounting will matter soon but it isn’t hard. • Businesses can be very influential as consumers/

clients and advocates

• Develop your sustainability strategy before someone else does.

Innovation Pays

Most of the time