Energy Science Director HSBC Director of Low Carbon Innovation

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

2. Measuring Carbon Footprints 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.

3. Carbon Trading • 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

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

5. Carbon Trading – Company A: How it works -2 Tradable Value of Allowances Cost per tonne B C A D F E G Cumulative Carbon Savings • Opportunities for Energy or Carbon Reduction • Trends are same, but factors vary depending on carbon intensity 30 20 19 13 12 11 10 60 30 30 30 20 50 tonnes 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

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

7. Carbon Trading: How it works -4 • Same Example with trading. • Requirement for a 10% cut in emissions Company A Company B Cost is much more expensive than for company A. Would it be cheaper to purchase 60 tonnes of allowances rather than implementing reduction strategies? No Trading: Cost to achieve 10% reduction: 110 tonnes = €1700 or €15.45 per tonne 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 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 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) 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 In absence of brokers, optimum price is (€12.333 + € 20 ) / 2 = €16.167

9. Carbon Trading: How it works -6 Company A Company B 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 @ €16.167gives 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 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. Measuring Carbon Footprints • Scope of Measurement • A complete site/organisation • A particular product or activity • Clear definition of boundaries of system under investigation is needed. Machinery to make machines Customers Machinery Product A Raw Materials and transport Factory/ Office/ Company/ Organisation Product B Process Energy Requirements Product C Energy for space heating/lighting

12. Measuring Carbon Footprints 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

13. Measuring Carbon Footprints • Definition of Procedure

14. 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 • AssessAwareness/Attitudes of individuals • Advise on methods to reduce carbon footprint • Account 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 summer winter summer winter Cumulative Saving Method Time saving Before conservation strategies Improved insulation to building Improved insulation on hot water tank Degradation of performance

17. Processing Raw Energy Data • 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