1. Energy Science Director HSBC Director of Low Carbon Innovation CRed Carbon Reduction Carbon Footprint Issues CRed Keith Tovey MA, PhD, CEng, MICE, CEnv Recipient of James Watt Medal 5 th October 2007

2. Why –To assess overall performance of an organisation –To assess requirements for a particular activity Requirements Needed to set a baseline against which improvements can be measured. Large Organisations are already affected by EU-ETS – smaller one may well be incorporated before long. EU-ETS is a trading system for carbon emissions. Proactive companies can enhance benefit to company both from environmental perceptions and also financially. Boundary Definitions can be difficult Need to have an auditable and trackable system. Measuring Carbon Footprints

3. Carbon Trading has potential to reduce carbon emissions at cheapest cost. Companies are given a free allowance which may be reduction on historic trends, an increase on historic trends, or at a constant level. Carbon Trading takes place between companies. If a company exceeds it allowance it can reduce its carbon emissions, or it can purchase allowances from someone who has a surplus. However, there is an ultimate buy out penalty if there are too few allowances. Currently this penalty 40 a tonne in EU-ETS Carbon Trading

4. Example with no trading. Requirement for a 10% cut in emissions Carbon Trading: How it works -1 500 tonnes 600 tonnes Company A Company B 50 tonnes reduction 60 tonnes reduction Cost for reduction is say 10/tonne Total cost to company 500 Cost for reduction is say 20/tonne Total cost to company 1200 Cost to achieve 10% reduction: 110 tonnes = 1700 or 15.45 per tonne All Examples use Euros ( )as the currency

5. Opportunities for Energy or Carbon Reduction Trends are same, but factors vary depending on carbon intensity Carbon Trading – Company A: How it works -2 B C D A 50 tonnes 20 10 30 E F G 60 Cumulative Carbon Savings Cost per tonne 30 20 19 13 12 11 10 Target Reduction is 50 tonnes – can be achieved with an investment of 500 Tradable value of allowance high: company makes profit by investing in other schemes Tradable Value of Allowances

6. Opportunities for Energy or Carbon Reduction Trends are same, but factors vary depending on carbon intensity Carbon Trading – Company B: How it works -3 B C A 60 tonnes 20 10 G 200 Cumulative Carbon Savings Cost per tonne 30 26 24 20 Target Reduction is 60 tonnes – can be achieved with an investment of 1200 Tradable value of allowance low: company buys allowances Tradable Value of Allowances

7. Same Example with trading. Requirement for a 10% cut in emissions Carbon Trading: How it works -4 Company A Company B No Trading: Cost to achieve 10% reduction: 110 tonnes = 1700 or 15.45 per tonne Tonnes reduction Cost per tonne Total cost Project A 50 10500 Project B 10 11110 Project C 20 12240 Project D 30 13390 TOTAL extra 6012.33740 Tonnes reduction Cost per tonne Total cost Project A 60 20 1200 Cost is much more expensive than for company A. Would it be cheaper to purchase 60 tonnes of allowances rather than implementing reduction strategies? With Trading: Cost to achieve 10% reduction: 110 tonnes = 1240 or 11.27 per tonne If Company B paid more than 12.33 this would be possible

8. Carbon Trading: How it works -5 Company A Company B Tonnes reduction Cost per tonne Total cost Project A 5010 500 TOTAL extra 6012.33 740 Tonnes reduction Cost per tonne Total cost Project A 60 20 1200 No Trading: total cost for 110 tonnes = 1700 or 15.45 per tonne With Trading: total cost for 110 tonnes = 1240 or 11.27 per tonne What would be a realistic trade price? If too low: little incentive for Company A to invest in Projects b, C, and D. If too high Company B might be prepared to pay full cost rather than have the hassle What happens if neither Company does anything? Under EU ETS they will have to pay fine of: 40 per tonne (phase 1) or 100 (phase 2) In absence of brokers, optimum price is (12.333 + 20 ) / 2 = 16.167

9. Carbon Trading: How it works -6 Company A Company B Tonnes reduction Cost per tonne Total cost Project A 5010500 TOTAL extra 6012.33740 Tonnes reduction Cost per tonne Total cost Project A 60 201200 No Trading: total cost for 110 tonnes = 1700 or 15.45 per tonne With Trading: total cost for 110 tonnes = 1240 or 11.27 per tonne In absence of brokers, optimum price is 16.167 Company A are not obliged to do more than Project A Cost for Projects B, C, and D would be 740 However, sell allowances @ 16.167 gives and income of 970 i.e. Total cost of extra projects is paid for and there is also a profit of 230 Company B will also benefit Paying 970 will save them 230 compared to implementing a 10% cut

10. Carbon Trading: How it works -7 Company A Company B Tonnes reduction Cost per tonne Total cost TOTAL extra 6012.33740 Tonnes reduction Cost per tonne Total cost Project A 60 201200 No Trading: total cost for 110 tonnes = 1700 or 15.45 per tonne With Trading: total cost for 110 tonnes = 1240 or 11.27 per tonne In absence of brokers, optimum price is 16.167 Company A has all extra projects paid for and makes a profit of 230 Company B saves 230 compared to making saving Schemes with and without trading result in same reduction, but Trading hopefully ensures cheapest options are implemented. Case with brokers with commission @ 10% of trade value Assume Commission is shared between sellers and buyers. Commission: 1.6167: Buying Price 16.975 (=16.167 + 1.6167/2): Selling Price 15.358 Profit now falls to 181.50 for Company A and saving is 181.50 for Company B

11. Scope of Measurement A complete site/organisation A particular product or activity Clear definition of boundaries of system under investigation is needed. Measuring Carbon Footprints Factory/ Office/ Company/ Organisation Raw Materials and transport Energy for space heating/lighting Process Energy Requirements Machinery Machinery to make machines Product A Product B Product C Customers

12. Scope of Measurement A complete site/organisation A particular product or activity Clear definition of boundaries of system under investigation is needed. How does one apportion energy/carbon emissions in multi- product systems? –e.g. making several different products in a factory –stop production of all items but one and then do detailed measurement of production of that product. –Separately meter each product stream –Allocate inputs of energy/raw materials on basis of Cost Weight Energy Content Some other rational basis Measuring Carbon Footprints

13. Definition of Procedure Transport of workforce to/from work * At bestGenerally impossible to track except in very few isolated cases IssuePrecision of Data and values obtained Auditable for tracking purposes Direct Energy Use*** to ***** depending on how data are collected. Yes potentially with high accuracy if data quality is good Direct Process Emissions including primary materials *** to ****Yes – (some limitations over materials). Indirect Process Emissions (land use changes etc). * to ***To some extent – accuracy low in many cases, better in others. Procurement (other than primary materials) *To some extent but accuracy will be generally very low Direct Transport of primary materials and products including marketing **** for road / rail – depending on records kept ** for air/sea transport - Yes, but precision may vary from year to year with air/sea. Also what counts as business travel????

14. Measuring Carbon Footprints A cquire Energy Consumption Data A nalyse Energy Consumption – and hence estimate carbon emissions. –Need to normalise data to allow for annual Lighting variations sub and super annual Heating variations work scheduling A ssess Awareness/Attitudes of individuals A dvise on methods to reduce carbon footprint A ccount for performance in move to carbon reduction

15. Acquiring Energy Consumption Data Data needed –Raw energy consumption – not financial costs –Estimated readings are problematic –Need Date and Time when readings were taken –Readings do not necessarily have to be taken at precisely same time each period. –Check gas meters – what units are they using? cu ft? cu ft x 100, cu m? –Climate data on daily basis – also daylight hours. Frequency of readings? –Three monthly too long –One monthly generally too long except for initial appraisal – problems if there are estimates or date and time is not known –Weekly? A compromise, but cannot extract difference between weekday and weekend – or variations during week – switch off campaign in UEA. –Daily – good interval – more data intensive – how do you deal with weekend if manual collection is taking place? 09:00 approx each day, but additional reading at 17:00 say on Friday. –Sub daily – generally to intensive of data, but informative for a short intensive period – e.g. up to a week.

16. summer wintersummer winter summer Before conservation strategies Improved insulation to building Improved insulation on hot water tank Degradation of performance Time saving Cumulative Saving Method

17. Cell e6 =IF(C6="","",A6+C6) –Copy to other cells in column E Cell f6 =IF(OR(E5="",E6=""),"",(E6-E5)*24) Copy to other cells in column F Cell J6 =IF($F6="","",(G6-G5)*1000) Cell K6 =IF($F6="","",(H6-H5)*1000) Cell L6 =IF($F6="","",(I6-I5)*1000) copy into all cells in cols j to l Cell M6 =IF($F6="","",J6-K6-L6) Cell N6 =IF($F6="","",M6*24/F6) –Copy cells j5:n5 to all cells in respective columns Processing Raw Energy Data