Wednesday, September 05, 2012

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