The CRC Energy Efficiency Scheme (CRC) Challenge

Henry Garthwaite, Business Development ManagerCarbon Trust StandardOctober 2009

Introduction

CRC Policy Context

Business opportunities

Practical next steps

Agenda

Our mission is to accelerate the move to a low carbon economy

We cut carbon emissions now

By providing business and the public sector with expert advice, finance and accreditationBy stimulating demand for low carbon products and services

We cut future carbon emissions

By developing new low carbon technologies through project funding and management, investment and collaborationBy identifying market barriers and practical ways to overcome them

Introduction

CRC Policy Context

Business opportunities

Practical next steps

Agenda

UK has 80% absolute GHG reduction objective by 2050 (~3% pa)– All sectors of the economy must contribute

Energy intensive industry/utilities already focused and regulated:– CCAs– EU ETS

Large non-energy intensive industry (and public sector) less focused historically:– Energy a small part of the cost base– Distributed, building energy use– Difficult to get senior mgmt buy-in– Lack of awareness, transaction costs

4MtCO2 pa saving by 2020 from 5000 CRC organisations

The Policy Challenge

The Policy Challenge

Total 54 MtC

Not covered by EU ETS,

CCA

UK business and public sector emissions (2002)

Coverage:– Direct emissions (fuel use)– Indirect emissions (electricity use) – key to efficiency in building

stock– 5000 largest organisations – beneath the EU ETS/CCA threshold

Requires senior engagement:– Senior mgmt engagement: organisational structure, strategy,

approach– Financial impact: budgeting + emissions reduction planning– Reputation impact: PR/comms– Legal impact: audit + compliance, evidence pack, spot checks +

penalties

Cost-efficient carbon savings:– Carbon trading means lowest cost savings are achieved– Guaranteed carbon savings outcome in 2nd ‘capped’ phase

The CRC policy response

What is the CRC?

Mandatory emissions trading scheme focusing on large non-energy intensive organisations– Minimum ½hrly metered electricity consumption of 6,000MWh in

calendar year 2008; equivalent to >~£500k spend– ~5,000 organisations, equating to emissions of ~50 MtCO2 not covered

by the EU ETS and CCAs

– Cover emissions starting from April 2010

Organisation based scheme, including direct and indirect emissions– Ultimate/nominated UK parent responsible for all subsidiaries’

emissions; including electricity and other direct fuel use

HMT revenue neutral design– Auction, with proceeds recycled to participants

Introduction

CRC Policy Context

Business opportunities

Practical next steps

Agenda

Key opportunities

Driving internal change:– Senior mgmt engagement + resources– Budget for carbon reduction projects– Focus on ‘cost of carbon’

Financial and reputational rewards, from effective carbon management:

– Absolute and relative emissions reduction – Early action

BUT: the biggest savings are from cutting emissions now – before the CRC: electricity cost ~ £150/tCO2

Good carbon management is key to seizing the CRC opportunity

1. Reduce direct emissions

2. Work with the supply chain to reduce theirs

3. Consider offsetting

Consistent, accurate measurement (carbon footprinting)

-25-20-15-10

-505

10152025

0 50 100

Cumulative CO2 savings (tCO2)

£ /

tC

O2

Project A

Project B

Project C

Project D

Project EProject F

Key component: Construction of abatement

cost curve

Illust

rativ

e

Focus of CRC

The Carbon Trust Standard - Recognition for real carbon reduction

Why– Stakeholder communication

– Employees, Customers, Government

– Motivation for future action– CRC “Early Action Metric” Benefit

Methodology– Independent, Transparent,

Robust, Based on GHG Protocol

Criteria– Actual footprint reduction over 3

years (Absolute or relative)– Management infrastructure to

enable continued reductionswww.carbontruststandard.com

Certify

Measure Manage

Reduce

Example certifications to date- 130+ certifications- 200+ customers

2011 2012 2013 2014£0

£2

£4

£6

£8

£10

Valu

e a

t sta

ke (

£/

tCO 2)

Absolute reduction Relative reduction

AMR (Smart metering) Carbon Trust Standard*

The Carbon Trust Standard is linked to initial CRC recycling payments

10% 20% 30% 40%

* Or ‘equivalent’ N.B. Figures are based on draft legislation

10,000 tCO2e footprint (~£1m-£1.5m energy bill)– £120k allowances p.a.– £120k 1st purchase– £24k at stake (2011)

Achieving the Standard will:– Boost league table ranking– Increase cash back

through recyclingAchieving certification now gets 2011 benefit

Introduction

CRC Policy Context

Business opportunities

Practical next steps

Agenda

Practical next steps

Issue Next step

Timeline and Rules

Read DECC CRC User Guide

CRC footprint Determine org structure, investigate property ownership / leases, determine emissions sources

Reduction + trading strategy

Construct ‘MACC’ graph + prioritise projects

Early action Contact Carbon Trust Standard team, evaluate AMR

Budget Engage finance team

Compliance + evidence pack

Engage legal and finance team

Reputation Engage senior mgmt + PR

Mobilise your team – across the organisation

www.carbontruststandard.com

Henry.Garthwaite@carbontrust.co.uk

0800 019 1443