ROD ORAM: Energy efficiency

Most people feel hopeless about climate change. Any action they could take seems so utterly inconsequential.

Why bother to do your bit when the Chinese start up a new coal-fired electricity plant each week? And it's just as depressing at home.

Most business lobby groups are gleefully seizing on fishooks in the government's proposed emissions trading scheme as an excuse for delaying action rather than working enthusiastically on solutions.

Yet, if we leave climate change to mandated government actions such as treaties, caps, emissions trading and standards we will never achieve the reduction in greenhouse gas emissions needed to stabilise the global climate, argues Michael Molitor of PricewaterhouseCoopers' Australian practice.

Even if you take all the existing mandatory national and international programmes in place and add in something of similar scope for the US on the assumption that the next president will act, "you do not get a reduction in timing and scale of greenhouse gas emissions by 2020," he told a Victoria University Institute of Policy Studies seminar last week. "So, you have to engage everybody."

And that means developing voluntary carbon markets to incentivise people to change their behaviour and adopt better technology.

Some enlightened companies are starting to explore this business opportunity of helping their customers make a difference. The first part is relatively easy: devising programmes that offer advice, service and products that are easy to understand and use yet deliver clear benefits in terms of money, energy and carbon saved.

The second stage is also easy: adding up all the savings they've made and showing them how large their collective action is.

One example here is Contact Energy's "Energy Saving in a Box" programme. Households receive a pack containing three low-energy CFL bulbs, a voucher for an energy audit, plenty of advice on how to save energy and vouchers for discounts of up to 20% on Mitre 10's energy saving products

For example, a typical shower uses 15 litres of water per minute. But if you spend $50 on a shower head that uses only eight litres a minute you'd save 2373kwh of electricity and 1.5 tonnes of carbon dioxide a year. To achieve the same carbon savings by installing solar power would cost some $7000 in solar panels.

Having successfully trialled the project, Contact is working on a national roll-out. It believes the programme could save one million tonnes of carbon by 2014.

But the third stage of programmes like this is still difficult to do. Ideally, Contact would like to bundle up all the carbon saved and sell it as a credit. The buyer might be, for example, a company that could not easily reduce its emissions. Yet under the government's emissions trading scheme it will have to pay for its emissions.

To meet this obligation, it could buy the credit for the one million tonnes Contact had helped its customers save rather than, for example, buying a credit on an international market. Contact could then recycle the money it received into more incentives for electricity savings among its customers.

But it is still not clear if Contact could offer such credits in the government's proposed emissions trading scheme. And there are many other complexities to resolve too.

Yet, it is vital to make such programmes work because they allow consumers to share in the financial rewards of carbon saving. In contrast, if they acted alone they would only get the cost saving of using less electricity.

A growing number of companies, typically in North America and Europe, are devising all sorts of ways to reward consumers and aggregate their climate change efforts. For example, Barclays, the British Bank, has launched in April a credit card called Breathe. Users are rewarded for making green purchases and Barclays contributes half of its profits from the card to carbon reduction projects around the world such as construction of renewable electricity schemes.

Barclays is one of 10 major UK consumer companies supporting a website, www.together.com, which offers a range of programmes to encourage individual climate action.

So far, voluntary carbon markets around the world are tiny. Ecosystem Marketplace, a US consultant, reckons over-the-counter trade last year totalled only 23.7 million tonnes of carbon dioxide worth $US91m although there was clearly a great deal of informal and unquantified activity on top of that.

Its study, released in July, is one of the first comprehensive reviews of markets around the world. It estimates they could grow to 350 million tonnes of carbon diiodide equivalent by 2012.

But there are plenty of complicated issues to solve before voluntary carbon markets can become features of everyday life, as the Institute of Policy Studies' seminar explored with a large number of domestic and international speakers and delegates. Here are four big ones:

Standards: The voluntary market has attracted some rogue operators and shonky credits such as forests that were never planted or hydro-electric schemes that never deliver the power promised. However, a number of standards have already been developed such as the Gold Standard for Voluntary Emission Reductions produced by a highly reputable Swiss foundation.

The next big step comes on November 19 when the Climate Group, a leading British NGO, the World Economic Forum and the International Emissions Trading Association launch the Voluntary Carbon Standard. They will also establish a global body to run it. Under development for the past two years, it will robustly address all the key issues such verification and accountability.

Additionality: Is the credit for a genuine reduction in carbon that would not have otherwise happened? This is difficult to determine but the methodology is getting better. The new Voluntary Carbon Standard, for example, will be available only to projects that prove additionality and it will have strict rules to enforce it.

Relationship to mandatory programmes: Could, for example, reputable voluntary credits be used to help New Zealand meet its Kyoto commitments? This is a hotly debated issue but Murray Ward, a climate policy analyst, and two co-authors presented a useful paper to the conference arguing they could be as long as clear protocols were followed.

Measurement: This is another highly challenging area. If, for example, you wanted to offset the carbon generated from driving your car, do you measure only the carbon content of the petrol? or do you work right back to the `embodied carbon', that is the energy used in materials, construction and transport of the car to New Zealand and then recycling it at the end of its life?

Such life-cycle analysis is becoming more common and is a powerful tool for change. If, for example, car makers were penalised for high levels of embodied carbon in their vehicles they would rapidly shift to better, cleaner materials and technology.

There are abundant opportunities too for consumers. Energy efficiency standards and higher fuel costs will push them to take up some. But the big gains will go begging unless business finds ways to mobilise and reward them through the voluntary markets.

 

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