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Johns Environmental © 2009
Carbon footprints – issues and opportunities
FPRF – Issues & Opportunities Seminar
Dr Stewart McGlashan
Senior ConsultantJohns Environmentalstewart@johnsenv.com.au
Johns Environmental © 2009 Slide 2
C-footprint is not a trivial exercise
C-footprints differ to Emission Trading
Corp. sustainability will drive the issue
Strategic & creative footprint reduction
Stakeholder communication is critical
Carbon footprints - Summary
Johns Environmental © 2009 Slide 3
What are they?Life cycle assessment processSub-set of Ecological FootprintsSystem-wide view of emissions profile
Definition (UK Carbon Trust)
“the total set of greenhouse gas (GHG) emissions caused directly and indirectly by an individual, organization, event
or product”
Carbon Footprints
Johns Environmental © 2009 Slide 4
Current applications – Carbon Footprints
Manage footprint & reduce over timeBenchmark current operations/businessScope 1 & 2 focusInternal focusSome external/marketing implications
3rd party (Customer & Government) reportingExternal demand for emissions profileSustainable business practicesScope 1, 2 & (sometimes) 3 focusSignificant stakeholder implications
– E.g. WalMart
Johns Environmental © 2009 Slide 5
Examples of Scope 1, 2 & 3
Johns Environmental © 2009 Slide 6
Manage the footprint & reduce emissionsUnderstand & quantify emissionsRelatively quick and straightforwardEmissions reductions program
Accurate 3rd party reportingFor CSR or marketing purposesTo fulfil requests from business or retail customers, or from investorsTo ascertain what level of emissions they need to offset in order to become ‘carbon neutral’.
US EPA Mandatory Reporting of GHGsNon-tariff, technical barrier to trade
Carbon Footprints – Motivation
Johns Environmental © 2009 Slide 7
Food miles is refers to the distance food is transported from the time of its production until it reaches the consumer
BackgroundUK origin (1990s)One dimensional assessment of environmental impact of food.
ImplicationsSignificant issue for trading nations (Australia & NZ)Does not account for production efficiencyUp to 80% of emissions produced prior to farm gate
OutcomeEncouraged potential ‘carbon’ inefficienciesNon-tariff technical barriers to trade
Case Study: Food Miles
Johns Environmental © 2009 Slide 8
Carbon Footprints & Sustainable Business
Walmart and Global Sustainability
Advocating for one set of social and environmental standards, and one third-party auditing system, to be used by all global retailers and brands.
Strengthening compliance requirements, supplier standards and developing a more comprehensive audit and supplier development program.
Partnering with suppliers on reducing their environmental impact and on improving efficiency and product quality.
Johns Environmental © 2009 Slide 9•Queensland Government Department of Environment and Resource Management Business Sustainability Roadmap. Accessed from http://www.epa.qld.gov.au/register/p00771aa.pdf on 24/09/2009
Johns Environmental © 2009 Slide 10
Direct emissions & electricityOnsite fuel usageOnsite electricity usageUse of own transport
Government standard reportingEmissions Trading Schemes approachAB 32
Scope 1 & 2 emissions only
Internal carbon efficiency and offsets
Managing Carbon Footprints – Basic approach
Johns Environmental © 2009 Slide 11
Basic approachDirect emissions & electricity
Onsite fuel usageOnsite electricity usageUse of own transport
Emissions Trading Schemes approach
Carbon Footprints – calculation
State kg CO2-e/kWhNew South Wales and Australian Capital Territory 0.89Victoria 1.22Queensland 0.91South Australia 0.84Western Australia 0.87Tasmania 0.12
National Greenhouse and Energy Reporting (Measurement) Technical Guidelines v1.1 Table 7.2 pp307 v1.1 2008
Johns Environmental © 2009 Slide 12
California ‘signed’ Kyoto Protocol2020 emissions reduced to 1990 levelsScoping Plan (options)May have Cap and Trade scheme
AB 32 - Global Warming Solutions Act of 2006“many businesses in California will need to make investment decisions with regard to expansion, modernization, relocation, etc. This creates a great deal of regulatory uncertainty for these businesses because the requirements are not yet known.That uncertainty could lead to delays in projects that create jobs, increase economic activity and in some cases reduce greenhouse gas emissions.”
http://www.ab32ig.com/documents/CertifiedEarlyAction.pdf
Johns Environmental © 2009 Slide 13
MethodologyEmissions Trading Schemes use this approach
Full carbon footprint (Life-cycle assessment)1. Define the methodology2. Specify the boundary and scope of coverage3. Collect emissions data and calculate the footprint4. Verify results (optional)5. Disclose the footprint (optional).
Full Carbon Footprints – LCA
Johns Environmental © 2009 Slide 14
First of two critical elements
GHG Protocolwww.ghgprotocol.org
ISO 14064 (Parts 1-3)1. design, develop, manage and report GHG
inventories.2. GHG projects specifically designed to
reduce GHG emissions or increase GHG removals
3. describes the actual validation or verification process
Full Carbon Footprints - methodology
Johns Environmental © 2009 Slide 15
Second of two critical elements
UNFCCCUNFCC.itFramework Convention on Climate Change
Underpins technical guidelines1. Scope 1-3 emissions2. Collect emissions data and calculate the
footprint3. Verify results (optional)4. Disclose the footprint (optional).
Full Carbon Footprints – boundary & scope
Johns Environmental © 2009 Slide 16
Current applications – Emissions trading
Example schemesWaxman-Markey (Cap & trade)EU ETSAustralian CPRS
Implications for renderersScope 1 & 2 focusEnergy intensive industryFinancial penaltyLittle chance to pass on costs
Major stakeholder/customer consequencesSource ‘non-taxed’ products
Johns Environmental © 2009 Slide 17
The Cap and Trade Scheme
Govt. sets limit on permitted emissions (cap)
Govt. allocates rights (allowances) to emit below expected emissions levels
Allowances are given for free or auctioned
Emitter can thenCut productionInvest in clean technology
Domestic or internationalBuy allowance to cover the short fall
Johns Environmental © 2009 Slide 18
Waxman-Markey EU ETS AU CPRS
Emissionstargets
3% below 2005 levelsby 2012.
20% below 2005levels by 2020.
83% below 2005levels by 2050.
21% below 2005levels by 2020 inabsence of globalagreement.
30% below 2000levels by 2020 in eventof global agreement.
80% below 2000levels by 2050.
108% of 2000 levelsby 2012.
5% below 2000 levels by 2020 in absence of global agreement.
15% below 2000levels by 2020 in event of global agreement.
60% below 2000levels by 2050.
Coverage 86% of US emission 52% of EU emissions 75% of Australian emissions
Price controls Minimum auction price of US$10, rising at 5% plus CPI each year.No price cap.
No price cap. Price cap of A$40 for first 5 years, rising at twice CPI.
Johns Environmental © 2009 Slide 19
Business implications of Carbon Footprints
Carbon is not an environmental issuea market issue
Regulations will alter the price of carbon
New rules will affect energy pricing
Strategy1. Know your carbon exposure2. Take action to reduce your carbon footprint & assess
business opportunities3. Influence the Policy-Development Process
Johns Environmental © 2009 Slide 20
Know your carbon exposure
Analyse carbon emission profile through the value chainAnticipate company’s vulnerability to regulation
Knowing how your business model will be impactsIdentify source, types & magnitudeAssess vulnerability of business lines to constraints on those emissionsKnow whether you will be a buyer or seller in carbon marketsCompare your vulnerability to your industry peers
What gets measured gets managedTools and techniquesData management systems
Look at financial risk/exposure
Johns Environmental © 2009 Slide 21
Reduce Carbon Footprint & Seek Opportunity
Assess reporting obligationsAre you required to report?
Capital Expenditure & Depreciation issuesProduct life
Business caseFuture value of carbon
Involve leadershipEmployee buy-in
OpportunitiesBiogas generationBiofuelsCapture within corporate boundaries
Johns Environmental © 2009 Slide 22
Influence the Policy Development Process
Seek to influence the debate of the rules of schemeGain a seat at the policy development tableNeed to have taken credible action
“if you are not at the table you are on the menu”(source unknown)
Five issues to resolve:1. What to count2. Credit for early action3. Allowance allocation in a cap & trade system4. Cost-control mechanism5. Whom to regulate
There will be Government funding programs
Johns Environmental © 2009 Slide 23
Finally
Full C-footprint is not a trivial exercise
C-footprints differ to Emission Trading
Corp. sustainability will drive the issueLook at financial risk/exposure
Strategic & creative footprint reduction
Stakeholder communication is critical
Johns Environmental © 2009 Slide 24
Contact details
Stewart McGlashan Ph.D., GAICDSenior Consultant
Johns Environmental Pty LtdP.O. Box 534Aspley QLD 4034
M: 0450 901 213P: 07 3863 0051F: 07 3863 0057E: stewart@johnsenv.com.au
Johns Environmental © 2009
Case study – Australian CPRS impact on renderers
Assumptions 1No transport fuel estimationsTypical data supplied by ARA
Slide 25
Medium LargeProduction(tonnes raw material)
250 tonnes per day90000 tpa
500 tpd180000 tpa
Wastewater Treatment Yes (NGERS method 1)Gas (GJ/tonne water removed)
4.5
Electricity (kWhr/tonne water removed)
100
Yield(tonnes/tonne raw material)
0.45
Johns Environmental © 2009
Case study
Assumptions 2Carbon Permit Price $10 (2011-12)
# CPRS White Paper page (xxxi)* Department of Treasury, Australia’s Low Pollution
Future, The Economics of Climate Change Mitigation, 2008, Table 6.15
Slide 26
Low Base High $10Carbon permit price (AEU)# $15 $25 $35 $10Scope 1 pass through(Coal, Natural gas, LPG etc)
80% 100% 120% 100
Scope 2 pass through(Electricity price increase)*
15% 20% 25% 15%
Johns Environmental © 2009
Case study - Energy and Emissions results
Slide 27
(Units per annum) Medium Large
Raw Material (tonnes per day)(tonnes per annum)
25090000
500180000
Product (tonnes per annum) 40500 81000
Wastewater (tonne CO2-e) 7175 14351
Gas (TJ)Gas (tonne CO2-e)
22511543
45023085
Electricity (kWhr)Electricity (tonne CO2-e)
4,950,0004505
9,900,0009009
Johns Environmental © 2009
Case study result – Medium (250 tonnes per day)
NGERS -> YES (Energy = 240TJ)
CPRS -> No direct liability (Scope 1 = 18,700 tCO2e)
Slide 28
Cost Impacts Low Base High $10
Direct Scope 1 (WW) $0 $0 $0 $0
Indirect Scope 1 (Gas) $138k $289k $485k $115k
Scope 2 (Electricity) $37k $50k $62k $37k
Scope 3 - - - -
Total CPRS cost impacts $176k $338k $547k $152k
Total per tonne RM $1.95 $3.76 $6.07 $1.70
Total per tonne Product $4.34 $8.35 $13.50 $3.77
Johns Environmental © 2009
Case study result – Large (500 tonnes per day)
NGERS -> YES (Energy = 480TJ + 46,400 tCO2-e)
CPRS -> Yes (Scope 1 = 37,400 tCO2e)
Slide 29
Cost impacts Low Base High $10
Direct Scope 1 (WW) $215k $358k $502k $144k
Indirect Scope 1 (Gas) $277k $577k $969k $231k
Scope 2 (Electricity) $74k $99k $124 $74k
Scope 3 - - - -
Total CPRS cost impacts $567k $1,035k $1,596k $449k
Total per tonne RM $3.15 $5.75 $8.86 $2.49
Total per tonne Product $6.99 $12.78 $19.70 $5.54
Johns Environmental © 2009 Slide 30
Minimising exposure/risk
Purchase carbon permits (AEUs)EfficiencyChange fuel sourceAbate
e.g. Cover pond then:1. Flare2.Use onsite3.Transmit offsite
Gas flare
Johns Environmental © 2009 Slide 31
Australian Emission Units
600 million tCO2-e generated annually (Garnaut)
$12 Billion p.a. @ $20/tCO2-e
Large plant = 37,400 tCO2-eThus
Purchase of permits will be at a premium
Key issue – avoid the liability
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