There is nothing like a good argument, except when you are directly involved in it. Such must have been the thoughts of one of the speakers at last night’s Pro Manchester / Federation of Small Businesses joint event on Carbon: Efficiency, Reduction and Investment.
Hosts Cobbetts, apparently have ISO14001, one of the environmental standards. We could therefore charitably assume that the formidable build up of heat in the seminar room was due to outstandingly good insulation rather than over-heating, or maybe it was just the large number of people in a relativel confined space. Anyway, it was hot.
To start with the less controversial topics, Richard Hipkiss of digitalenergy talked about sustainable energy reduction, and in particular a cause close to my heart, how to make the business case for investment in energy reduction. He unveiled some extremely useful and practical tools for both monitoring and demonstrating energy efficiency, and outlined a strategy for obtaining the necessary ‘buy in’ from all interested parties.
Gary Cleary of CSR Sustain then outlined the government’s flagship Green Deal for householders and businesses. This is an ambitious scheme to revolutionise the energy efficiency of the UK’s housing and commercial property stock, and works as follows:
1. A full property assessment is carried out by an independent, accredited advisor.
2. The current energy performance of the property is identified in a report by the advisor, along with specific measures accessible under the Green Deal to improve that performance.
3. If the savings from particular measures are expected to exceed the installation cost, the measures can be paid for, without upfront cost, from future energy efficiency savings. This is achieved by way of payment in instalments attached to future electricity bills and spread over a number of years.
4. A comprehensive quote is provided, detailing the total cost of the energy efficiency installations, the sizec of the repayment instalments and the estimated length of the repayment period.
5. Installation work is supervised by the advisor and carried out by approved installers.
6. If work is carried out on let property, the written consent of both llandlord and tenant is required.
7. There is Consumer Credit Act protection for the fixed term credit arrangements under the Green Deal. There are currently 22 financiers offering Green Deal finance, ranging from utilities to DIY stores.
A fairly wide variety of measures are accessible under the Green Deal, including:
Ground source heat pumps
The plan is to concentrate primarily on traditional approaches such as insulation and boiler upgrades in the early stages, and to intensify the concentration on newer technologies as the Deal beds in.
It appears to me that the risks of not embracing the Green Deal are rapidly increasing energy bills in future, and potential difficulty in ultimately selling property which has not benefitted from a Green Deal survey and installations. We will certainly be enquiring into Green Deal opportunities for our house as a matter of urgency.
Matters then got much more feisty, as Steve Graham from Advanced Global Trading talked about carbon investment. By way of background, there is a two-tier market in carbon at present. The first, much larger, tier is the Compliance Market, which stems from the Kyoto Protocol. Governments are allocated carbon caps, which they sell to businesses that are covered by compulsory CO2 emission limits, typically those in heavy polluting industries.
Businesses cannot emit more CO2 than their capped amount; if they do so they have to buy credits to cover the excess. Credits can be saved or sold by businesses that do not fully use their cap. Interestingly, prices of carbon credits in this market have recently been falling, a phenomenom to which I will return below.
The second, smaller tier, is the voluntary market. In this case credits arise from environmentally-friendly projects that are officially certified as reducing carbon emissions. These credits can then be bought and sold, and businesses not covered by the cap and trade compliance market can ‘retire’ carbon credits as a way of offsetting their carbon emissions. At this point the funds arising from the latest sale of those credits are paid to the project that initially generated them.
The price of carbon credits on the voluntary market has recently increased dramatically, for a vareity of reasons:
Businesses concerned about being brought within the compliance market and keen to demonstrate concern about their environmental performance.
Businesses under pressure from large customers to improve environmental performance.
Businesses seeking competitive advantage and/or PR opportunities from appearing concerned about green issues.
It is fair to say that there was a large amount of cynicism in the room about carbon trading, particularly on the voluntary market. I can summarise this by saying that the prevailing feeling was that businesses with more money than genuine concern about their environmental performance were buying their way to apparent environmental respectability by purchasing and retiring carbon credits. And I have to say that this appears to be exactly what is going on.
The problem with all this is of course that on this basis, no actual reduction in carbon emissions necessarily takes place. And given that the UK is committed to an 80% reduction in carbon emissions by 2050, that is a major source of concern. The phrase used to describe the activities of the businesses concerned was the evocative “greenwash”.
This demonstrates again the enormous risks present in leaving decisions on vital world issues to professional politicians. The carbon trading arena is a classic example of the professional politician’s solution to a problem, in that it looks really good in PR terms, it generates lots of nice tax revenue, and it actually does precisely nothing to solve the problem it is supposed to be addressing. It is all presentation and no substance (discuss in the context of UK politicians of the past 15 years).
What is needed, it seems to me, is something akin to the EU concept of ‘matched funding’, whereby the funding they provide for a project must be matched by private investment of a similar amount. I will here put forward for the first time my concept of ‘matched carbon trading’, whereby in order to be entitled to buy carbon credits, a business would have to demonstrate an equivalent real reduction in its carbon footprint. Not only would this give businesses a much greater incentive to actually improve their carbon efficiency rather than buying their way out of the problem, it would also make them properly measure and evaluate their environmental performance.
Of course the other change which is urgently needed is an end to the bizarre system of two parallel carbon credit markets, in one of which the price is rising steeply and in the other falling. There appears to be no particular justification for the existence of the voluntary market, which appears to exist primarily to allow big business to salve what passes for its conscience without actually doing anything useful, and to allow fortunate investors to make a fortune out of doing nothing remotely useful.
So all in all a very interesting and thought-provoking evening which was a credit to the organisers and the participants, even if one of them did retire from the scene a little bruised and battered by his experience!