The CRC Energy Efficiency Scheme (CRC) Challenge Henry Garthwaite, Business Development Manager Carbon Trust Standard October 2009 1

Agenda Introduction CRC Policy Context Business opportunities Practical next steps

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 accreditation By 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 collaboration By identifying market barriers and practical ways to overcome them 3

Agenda Introduction CRC Policy Context Business opportunities Practical next steps

The Policy Challenge 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

Not covered by EU ETS, CCA The Policy Challenge Not covered by EU ETS, CCA UK business and public sector emissions (2002) Total 54 MtC

The CRC policy response 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

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

Agenda Introduction CRC Policy Context Business opportunities Practical next steps

Driving internal change: 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 Focus of CRC Reduce direct emissions Work with the supply chain to reduce theirs Consider offsetting Consistent, accurate measurement (carbon footprinting) Illustrative Project F Project E Key component: Construction of abatement cost curve Project D Project C Project B Project A

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 reductions www.carbontruststandard.com

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

The Carbon Trust Standard is linked to initial CRC recycling payments Achieving the Standard will: Boost league table ranking Increase cash back through recycling Achieving certification now gets 2011 benefit 10,000 tCO2e footprint (~£1m-£1.5m energy bill) £120k allowances p.a. £120k 1st purchase £24k at stake (2011) 10% 20% 30% 40% * Or ‘equivalent’ N.B. Figures are based on draft legislation

Agenda Introduction CRC Policy Context Business opportunities Practical next steps

Mobilise your team – across the organisation 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