Tricks of the trade

21 Jun 2007Archived News Energetics in the News

PUBLISHED: BRW Magazine - By Kate Burgess - Dr. Mary Stewart, Principal Consultant - Mining, Energetics Pty Ltd is asked by BRW Magazine what methodologies can be used to quantify carbon emissions when estimating a carbon footprint.

 

THE PROPOSED EMISSIONS TRADING SCHEME WILL HELP COMPANIES SAVE ON ENERGY INPUT COSTS AS WELL AS GENERATE CARBON CREDITS AND ESTABLISH ‘GREEN’ CREDENTIALS.

ARMED WITH THE REPORT of the Prime Ministerial Task Group on Emissions Trading, business has the certainty that an emissions-trading system will be introduced within five years, irrespective of the outcome of this year’s federal election.

The report calls for companies to gain access to a pool of emission permits before trading begins in 2011-12 if they implement emission-reduction strategies. With the tangible benefits of taking early action on climate change, businesses in every sector of the economy stand to gain from being among the first to prepare for emissions trading.

A logical starting point lies in measuring and reducing total carbon emissions. Pinpointing the catalyst for responding to climate change – cost savings, enhanced reputation or a response to regulatory requirements – will help establish sensible targets for emission reductions.

Deloitte partner Ron Loborec says he is receiving a growing number of carbon-related inquiries. “Everyone is very curious about what they can do for energy efficiency. They want to understand what their footprint is. They’re asking: what can we do to lower our cost base, or what would increase in our cost base if we became more efficient.”

Besides saving on energy input costs, companies that reduce their emissions below industry averages – on which caps will be based – will be able to generate carbon credits. If the company is in an “included sector” (one that is deemed to be energy-intensive or trade-exposed), it will be able to trade these permits in a national trading system. Companies in other sectors will be able to create carbon credits and trade these on a voluntary exchange such as the New South Wales Greenhouse Gas Abatement Scheme.

First-mover advantages don’t end with cost savings. Early adopters, including BP, Westpac and Origin Energy, have found that gaining a reputation as a “green” company builds credibility as a sustainable, socially responsible organisation among consumers and employees.

Popular among companies wishing to respond to climate change for marketing and reputation reasons is the desire to become “carbon neutral” – where emissions are reduced as far as possible and the remainder is offset by investing in projects to prevent the release of carbon into the atmosphere.

As fashionable as it sounds, going “carbon neutral” is not a realistic or desirable prospect for all businesses, Loborec explains. “Most people come to us wanting to be carbon neutral, and it’s not until they understand how many zeros are involved that they usually set a target of, say, 20 per cent. It’s a journey, and the more that new technologies emerge, it becomes more affordable.”

Quantifying carbon emissions starts with estimating a “carbon footprint” using input-output or lifecycle analysis. There are no mandatory guidelines at present, but there are at least five different methodologies in use.

Energetics principal consultant Dr Mary Stewart recommends an analysis called economic input-output lifecycle assessment (EIO-LCA), which integrates the two methodologies. Additional guidance can be gleaned from greenhouse gas protocols issued by the World Business Council for Sustainable Development.

The protocols outline three types of emissions that can be included in a carbon-footprint analysis and recommend that companies consider at least scope-one and scope-two emissions, which eliminate the possibility of double counting a given emission by more than one company.

Scope one refers to emissions produced in the course of a company’s operations, such as smelting aluminium or producing plastics. Scope two covers emissions that result from generating the energy used in these processes, such as emissions from coal or gas-fired power stations. Scope three relates to inputs used in production, for example, emissions released in the manufacture of paper that is used to produce an annual report.

PricewaterhouseCoopers partner Rob Hogarth says that when his firm recently analysed its carbon footprint, the most difficult aspect was deciding which emissions to include. “How far do you go with indirect emissions? Where do you draw the boundaries? When I travel for clients, is it my carbon emission or theirs?” he asks. “The best way is to keep an open mind and note down everything you think of, and then refine this list. Is it directly attributable? Direct emissions are fairly easy – but there are issues around subcontracting and outsourcing work to other parties.”

Joint ventures and other partially owned assets present a unique set of problems in measuring a carbon footprint. Loborec says: “When you have a joint-venture entity or a partnership, you can’t account for your footprint based on equity – it’s based on control. There is confusion over who has the right to claim abatement credits associated with that vehicle.”

Having quantified the carbon footprint, analysis is required of how best to avoid, abate or offset emissions. When the cost of carbon is factored into the economy, the relative costs of emitting then offsetting carbon will be balanced in favour of strategies to avoid emitting carbon in the first place. Hopefully, it will eventually be cheaper to avoid and reduce emissions than simply purchase offsets.

Purchasing offset credits but continuing to emit is potentially hazardous, Buckeridge says. “You can achieve carbon neutrality in a number of ways. You can just write a cheque and say, ‘Right, we’re carbon neutral’, which hasn’t reduced emissions. I think people will see through that approach and the expectation on companies will be that they take serious steps to become more energy efficient.”

3 Steps towards a footprint analysis

1. Check direct onsite emissions
2. Check indirect emissions from the purchase of energy
3. Check indirect emissions arising from the supply chain
(Scopes one and two are recommended in a carbon footprint analysis.)
Source: World Business Council for Sustainable Development

Websites

Greenhouse Gas ProtocolAustralian Greenhouse OfficeGreenhouse Friendly Program

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