28 March 2008
Many large councils will soon be involved in carbon trading schemes as part of efforts to combat climate change. But they will need to raise awareness and improve communications if the initiative is to succeed, argues Andy Johnston
Despite the changeable nature of modern politics, the environment has succeeded in capturing the attention of all the main parties – just witness Alistair Darling's recent Budget, with its range of green measures.
But at the policy level, environmental concerns are sometimes overshadowed because they are not articulated as clearly as others. Health, education and economic growth, for example, have organisations speaking powerfully on their behalf. So how does the environment get a seat at the table on anything like an equal footing with social and economic concerns?
The current solution is to put a financial value on the environment. This is not a new idea, the fuel duty escalator and landfill tax being recent examples. But the urgency and magnitude of climate change have moved it on to a new level.
In December 2007 the government decided that the price of a tonne of carbon was £25.50. This is the figure that decision makers can use in their cost-benefit calculations for projects and policies. It is likely that local authorities will be expected to use it when deciding on projects such as community power schemes, energy from waste options and even trunk roads.
At the time, the government heralded the arrival of a 'new currency'. Some might have thought that a corner had been turned and now any new action that contributed to climate change would be summarily dismissed. The reality has been less inspiring. The first real test of this new number, branded the 'shadow price of carbon', was used to justify the fifth terminal at Heathrow, opened with much fanfare a fortnight ago by the Queen.
The scale of the threat from climate change has provided the impetus to consider adopting radical solutions. The Intergovernmental Panel on Climate Change, which operates under the aegis of the United Nations, agrees that global average temperatures will rise by two degrees, causing a rise in global sea levels, the melting of ice caps and changes in rainfall patterns.
The panel is also clear that these effects are the result of man-made emissions of greenhouse gases. Of these gases, carbon dioxide accounts for almost two-thirds of the warming effect. The government-commissioned review by Sir Nicholas Stern explains that the sooner action is taken, the cheaper that action will be. He argues eloquently that action on climate change will help, rather than hinder, the UK economy.
The main reason that modern societies cause so much harm is that the environment is treated as a free good. Giving it a price means it shows up on the balance sheet and gets attention, but there are bound to be difficulties getting the price right. That is why it is more sensible to try to create a proper market in carbon, where consumers set the price.
That is what the Climate Change Bill will do. It will enable the government to set up carbon trading schemes. The first, the Carbon Reduction Commitment, to be run by the Department for Environment, Food and Rural Affairs, will start in January 2010. It will cover any organisation that produces more than 6,000-megawatt hours of electricity per annum. Therefore, it is likely to capture most upper-tier local authorities and certainly all metropolitan boroughs within its remit.
The basic idea is simple. The amount of carbon emitted by each organisation covered by the scheme is measured, and then the government sets an emissions cap that is lower. Organisations can implement measures to reduce their emissions, or overshoot their targets and buy credits from other organisations to bring them back down to the capped level. Of course, if they have invested in reducing their emissions they can sell the credits they are given.
Action across the public sector is urgently needed, as the report last week from the government's green watchdog, the Sustainable Development Commission, graphically illustrated.
The SDC, which independently audits Whitehall's performance against its carbon reduction targets, concluded that the government 'urgently needs to raise its game' if it is to lead by example. It found that two-thirds of departments are unlikely to meet their 2010 targets to reduce carbon emissions from their offices by 12.5%.
Councils would also be wise to ensure they get off to a flying start. But the CRC scheme will work only if organisations actually buy and sell carbon credits. Defra's big fear is that local authorities will merely engage in compliance trading. This means they will do nothing all year then buy the requisite amount of credits to bring them in line. The trading scheme would then effectively become a system of fines.
Compliance trading is a disappointing end point from all perspectives. It empties local authority coffers and does little to reduce carbon emissions. In addition, the CRC is a public and private sector scheme, so it is quite possible that an enterprising company will be able to make money selling carbon credits to hard-pushed councils.
To avoid this, local authorities need to establish a rapport between the staff responsible for finances, risk and energy management. They must also send clear messages to all staff that carbon trading entails unavoidable costs – either from investment in carbon reduction schemes or paying for credits. But most importantly, councils will need to communicate with the community to prepare them for the risks and rewards of trading.
This is why the Local Government Information Unit is launching Carbon Trading Councils – an opportunity for local authorities to learn how to operate in a carbon trading scheme and rehearse data gathering for it. The scheme has been shaped by a development group of 18 local authorities and will include all the main stages required for effective trading, but no money will change hands. Participants will get help with all the elements of the mandatory scheme: to set a carbon baseline, agree a carbon target, develop carbon reduction plans and trade on a shadow market.
Existing members include the councils that will fall under the CRC but also smaller councils that recognise that they need to understand the dynamics of carbon trading as it will affect them and businesses in their areas. The initiative goes live on April 22 and there is still an opportunity for interested councils to sign up.
Local authorities in the UK are substantial emitters of carbon and significant influencers of the behaviour of others. As such, their active engagement in reducing carbon emissions through trading schemes is vital. Councils will have to lead by example if they wish to avoid the worst effects of climate change, and to do so effectively they have to act now.
Andy Johnston is head of the Local Government Information Unit's Centre for Local Sustainability
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