Energy Science Director HSBC Director of Low Carbon Innovation

CRedCarbon Reduction

Carbon Footprint Issues

CRed

Keith Tovey MA, PhD, CEng, MICE, CEnv

Recipient of James Watt Medal5th October 2007

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

• 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

• Example with no trading.• Requirement for a 10% cut in emissions

Carbon Trading: How it works -150

0 to

nnes

600

tonn

es

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

• 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 DA50 tonnes 2010 30

E F G30 3060

Cumulative Carbon Savings

Cos

t p

er t

onn

e

30

2019

13121110

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

• Opportunities for Energy or Carbon Reduction• Trends are same, but factors vary depending on carbon intensity

Carbon Trading – Company B: How it works -3

BCA

60 tonnes 20 10

G

200

Cumulative Carbon Savings

Cos

t p

er t

onn

e

30

262420

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

• 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 € 10 €500Project B 10 € 11 €110Project C 20 € 12 €240Project D 30 € 13 €390TOTAL extra

60 €12.33 €740

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

Carbon Trading: How it works -5Company A Company B

Tonnes reduction

Cost per tonne

Total cost

Project A 50 €10 € 500TOTAL extra

60 €12.33 € 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

Carbon Trading: How it works -6Company A Company B

Tonnes reduction

Cost per tonne

Total cost

Project A 50 €10 €500TOTAL extra

60 €12.33 €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

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

Carbon Trading: How it works -7Company A Company B

Tonnes reduction

Cost per tonne

Total cost

TOTAL extra

60 €12.33 €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

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

• 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

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

Measuring Carbon Footprints• Definition of Procedure

Transport of workforce to/from work

* At best Generally impossible to track except in very few isolated cases

Issue Precision 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????

Measuring Carbon Footprints

• Acquire Energy Consumption Data

• Analyse 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

• Assess Awareness/Attitudes of individuals

• Advise on methods to reduce carbon footprint

• Account for performance in move to carbon reduction

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.

summer winter summer

winter

summer

Before conservation strategiesImproved insulation to buildingImproved insulation on hot water tankDegradation of performance

Time

savi

ngCumulative Saving Method

• 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