Carbon Lunch Notes
(posted 02-06-05)


Stimulators:
Paul Dickinson - Carbon Disclosure Project
Neil Winfield - BT

Other guests:
John Groom, Karin Ireton - Anglo American
Chris Smith - Standard Chartered
Bill Boyle - BP
Amanda Adey - Friends Provident
David Hone - Shell
Blake Lee-Harwood - Greenpeace
Santiago Gowland - Unilever.

With impeccable timing, we arranged our lunch discussion on carbon (and its implications for climate change) for the day that the group of leading UK businesses told the government to get its act together (Financial Times 28 May) and firm up its climate change policies.

There certainly seems to be more readiness for action on climate change in the financial world than in government circles. Paul Dickinson of the Carbon Disclosure Project kicked off our discussion with a reminder that the CDP is backed by $20 trillion of investors’ money, which demonstrates how far concern about carbon has spread in the investment community. But while FT 500 companies have improved their responses to the CDP request for information on their greenhouse gas emissions, many are still doing very little to reduce emissions from their operations and products.

The contrast between Microsoft and Intel demonstrates how far apart companies can be in their response to climate change, even when they are in the same sector. Microsoft responded to the CDP’s second inquiry (in 2004) saying that it doesn’t quantify emissions and has no plans to do so "due to the categories of products and services we produce". Yet Intel, which makes the chips that Microsoft’s software runs on, pointed to its technology which reduces power use when PCs are in sleep mode – which the US Environmental Protection Agency has estimated could save 75m tonnes of CO2 over 10 years.

This contrast can be blamed partly on the uncertainty that still exists in the corporate world. That uncertainty will continue, although the evidence for human-induced climate change gets stronger every year. But managers might ask themselves: "What if it is all true?". And the answer is that climate change will be the most important issue of their careers. And for those who are convinced of the urgency of action (including everybody round our table, it seems) it is frustrating that people are still using uncertainty or complexity as an excuse for inaction.

Our second stimulator, Neil Winfield, works for BT - a company which decided action was necessary back in the 1990s, and last year became the world’s biggest user of green electricity. That is possible because, surprisingly, the power needs of BT’s 5,500 exchanges make it the UK’s biggest single user of electricity. And because the company began to measure usage half-hourly rather than relying on the traditional quarterly manual readings.

But this raises the question of what exactly is green electricity, and whether there is enough for other companies which want to emulate BT. Green has generally been associated with Renewable Obligation Certificates (ROCs). But these certificates merely provide evidence that the certified amount of renewable power has been generated somewhere. They are not evidence that the power a company is buying actually comes from renewable sources. For that kind of guarantee you need a REGO (Renewable Energy Guarantees of Origin) not a ROC. This is part of an EU-wide scheme to promote renewables. In the UK the electricity regulator (OFGEM) issues REGOs to generators to prove their electricity is being produced from renewable energy sources.

Energy efficiency
Switching to renewables is one course of action. Another is to use less energy. And experience suggests companies can do a lot here. Although many will argue that they are already on top of this and have already done everything they can, it is often the case that a fresh look will reveal many opportunities for further energy savings.

As one of our guests put it, a typical response is: "I’m an engineer. Don’t tell me how to save energy". Yet those engineers often find they can go much further by taking a fresh look at how they do things.

The financial case for making alterations to existing plant doesn’t always work, especially when many companies are still looking for 18-month paybacks on investments. But new ideas can make a big impact in new projects.

And there are plenty ways companies can build energy-saving into products, from standby power use in consumer electronics, to LEDs in traffic lights and other signage. Apparently, if all the traffic lights in the world were converted to LEDs it would provide a sixth of the carbon dioxide reductions we need.

Other options
There was less agreement on other ways of saving carbon. Sequestration (storing CO2 underground) could work – and is already happening in Norway. But it is a long-term solution and should not distract form other, more immediate action.

Offsetting carbon by planting trees may help reduce emissions to atmosphere, but it was generally regarded as unattractive for companies because there is no financial benefit.

The nuclear option also produced little enthusiasm from most people round our table, partly because of the industry’s track record, and partly because the timescales make this another longer-term option.

Trading schemes, on the other hand, can amount to free funding for investment in energy efficiency projects. But companies need certainty – the kind of certainty which would be provided by allocating allowances for 15 years rather than three.

Indeed, we ended by echoing those business leaders, rounding on lily-livered politicians who will not campaign to change people’s behaviour, despite the unprecedented risk the world faces, and the very limited political risk in doing something serious about it.