Memorandum submitted by the Business Council
for Sustainable Development
The Business Council for Sustainable Development—United
Kingdom (BCSD-UK) is the only affiliated branch in the UK of the
Geneva based World Business Council for Sustainable Development
(WBCSD).
We are a not-for-profit, limited liability company
and a multi-sectored group run by a Management Committee with
representatives from Arup; ConocoPhillips; Corus; Eversheds; Lafarge;
Ondeo; Shell; UPM-Kymenne; WSP.
We are a highly active organisation with a focus
on the practical implementation of sustainable development. We
promote and promulgate best practice, identify barriers to progress
and seek to find ways of removing them; and believe society has
to transform the way it functions to become sustainable. To do
that, it needs new innovation; new technology; new products and
services. Those in the main will come from the business community.
The aspiration to transform society into a sustainable society
is, therefore, a major business opportunity for the business community.
Within a busy action programme we have developed
several Action Groups. One, the Energy Action Group, submits this
response to Government on behalf of the BCSD-UK.
Within our programme of activity we stage Sustainable
Development Business Summits. Within these, we focus on six key
focus areas and explore how businesses are tacking sustainable
development implementation within them. One such focus area is
on Energy. Much of the findings and recommendations of this report
originate from the inputs and outputs of those Summits.
EXECUTIVE SUMMARY
In response to the inquiry launched by the Parliamentary
Environmental Audit Committee (EAC) into the adequacy of the Government's
current approach to evaluating the impact of the Climate Change
Programme, the Business Council for Sustainable Development—United
Kingdom (BCSD-UK) welcomes the opportunity to summarise the results
of Sustainable Development Summits held in Scotland and the Midlands
during 2006.
Our response recognises the challenges set by
the Stern Review and more recently by the World Business Council
for Sustainable Development's Energy and Climate policy proposals
published March 2007. The first document is produced by a UK economist
led review group. The second is by an independent body of some
180 major corporations operating globally. The two documents are
entirely of the same opinions and findings and complement each
other.
BCSD-UK proposes that the "Carbon Committee",
referenced in the Stern Review and announced in the Queen's Speech
as an independent body, should be given a target to maintain growth
within a sustainable UK economy, based upon secure energy supplies,
and meeting targets accepted by government in global negotiations.
Using the factual analysis in Stern and in the WBCSD report, BCSD-UK
contends that the goal of sustainability implies control and eventual
elimination of harmful emissions into the atmosphere. Current
perception of energy values ignores supply failure risks and climate
impact costs. Future awareness of these things depends upon the
UK population accepting the assertions of the Carbon Committee,
because they will be consistent, professionally focussed, and
because the public would benefit from the results of its work.
As emphasised in the letter from the Prime Minster
to the Lahti conference last year, we are faced with a dilemma—"To
ensure well being for a growing world population with unfulfilled
needs and rising expectations, we must grow our economies. Should
we fail, conflict and insecurity will be the result. To grow our
economies we will continue to need energy. Much of that energy
will be in the form of fossil fuels. The logic of this dilemma
is that we must treat energy security and climate security as
two sides of the same coin."
In the same way as we now dismiss the suggestion
that party politics can determine the science of monetary policy,
we must recognise that it is not the profession of government
to analyse technologies for their intrinsic quality, to measure
their effectiveness in reaching our carbon reduction targets,
to assess business solutions, or to judge the risks of our dependency
on any one fuel. Equally, Stern illustrates that economists are
very well equipped to find sound bases on which cost-effectiveness
evaluations can be carried out.
Many UK companies, already seeking to establish
sustainable business practices, have joined BCSD-UK. Some are
also members of the WBCSD. Much of the logic associated with daily
decision-making on sustainability has been thought through. Our
conclusions associated with energy diversity, climate control,
social responsibility, efficiency and materials optimisation are
provided here. BCSD-UK proposes that this expertise is installed
in the Carbon Committee. The pathway to a constructive and prosperous
future is created from the long-term vision of individuals who
are able to judge the directions of science, technology and business
from the inside of those professions.
1. CHAPTER 1—INQUIRY
ISSUES
1.1 Forecasting
1.1.1 Fit for purpose
In the light of the issues raised by
the NAO briefing on emissions projections, is the Government's
current approach to forecasting "fit for purpose"? If
not, what steps should it take to ensure that future forecasts
are robust?
(a) First, it is imperative that the "forecasts"
are defined in universally recognised expressions, and progress
is measured using a consistent sample over the years of existence
of the Carbon Committee. Like the method of measuring inflation,
this implies robustness through definition of terms and uniformity
of metering.
(b) Only some of the activities promoted
by the Carbon Committee will actively take carbon equivalents
from the atmosphere. All activities will have a calculable impact
on UK emissions. Forecasts will be associated with the relationship
between the calculated results of activities and the measured
impact on targets.
(c) BCSD-UK believes that a single emission
reduction target would not lead to activities which would sustain
the economy.
1.1.2 Forecasting issues
In developing its approach, how should
the Government deal with the following issues:
— whether there can be a greater
role for independent assurance;
— how the Government should respond
to the unavoidable uncertainties in forecasting; and
— whether or not future domestic
targets and forecasts should include international aviation and
shipping.
(a) Not only must "independent assurance"
have a greater role, future acceptance by the UK population of
the unpalatable measures needed will depend upon the integrity
and sincerity of the Carbon Committee. Consistency and professional
focus must be easily recognised, and public support will follow
as they benefit from the results of Carbon Committee work.
(b) It should be the responsibility of the
Carbon Committee to refine the sustainability model as experience
adds simplicity, complexity, order or chaos to the challenge—not
government.
(c) The Carbon Committee model should consider
all consumer and fuel provider variations.
1.1.3 The medium term targets
As projections against the 2020 and
2050 targets are less well developed than those for 2010 but are
becoming increasingly important, what improvements are needed
in their production and use?
(a) In terms of atmospheric impact, it must
be recognised that the medium term is the shortest period over
which the results of the work of the Carbon Committee can be measured.
(b) The projections of carbon saving activities
will be made from scientific analyses of the technologies available
and their deployment, and regularly improved by extrapolation
of their measured performance. The 2020 and 2050 emission targets
will be achieved through modification of the sustainable development
model, or "pathway".
(c) The most dangerous situation faced by
the Carbon Committee is one where European and Global agreement
regarding the climate change control activities is not forthcoming.
Paradoxically, in this situation, the sustainability of our economy
will depend upon the acceleration of our requirement for energy—to
power a greater coverage air conditioning in the workplace.
1.2 Cost-effectiveness analysis
1.2.1 Social cost
Given the uncertainties associated with
the social cost of carbon, is it an appropriate basis for future
policy appraisal? What should the Government's policy on its use
now be, particularly in the significant increase in its value
which Stern recommends?
(a) Stern has shown that carbon emissions
have been growing a national carbon debt for a considerable time.
The credit limit is about to be exceeded. Recent measures by the
fuel producing nations have illustrated that energy security has
also been waning for many years, without adequate measures to
re-instate it. BCSD-UK members include business sustainability
and corporate social responsibility as central business aims.
(b) Repayment of the national carbon debt
requires urgent, unpalatable measures. But the opportunity to
provide business and society with perpetual, secure energy will
offer both the medium to long term business planning situation,
and the daily living environment which society needs.
(c) To avoid energy poverty, it would be
possible for the Carbon Committee to administer a mechanism through
which carbon currency would be provided for, and "sold",
by those in society meeting a government criterion, in exchange
for energy. However, credits provided at the consumer end of emissions
control do not provide the right signals. BCSD-UK would recommend
that measures in this arena are kept outside the Carbon Committee
remit.
1.2.2 The short-term targets
Has the government's approach to evaluating
cost-effectiveness in the context of the Climate Change Programme
Review been too short-term in focusing on the 2010 target? Has
this adversely affected the assessment of new policy ideas which
might only be more cost-effective in the long-term?
Cost-effectiveness can be evaluated properly,
only when the true cost of inaction, often termed "Business
As Usual" (BAU), is included in the assessment. BCSD-UK accepts
and supports government expressions of the urgency of the problem,
which has brought about a 2010 target and measures to achieve
it. However, BCSD-UK asserts that the existing approach under-values
renewable energy, because energy prices to reflect the true value
are unpalatable. Further data are emerging all the time to support
government actions—although the balance of measures would
probably have been different, and expenditure would have been
more immediate and an order greater, if assessed by a Carbon Committee.
For example, the security of supply of the wind,
wave and tidal energy around the UK is 100%. The security of fossil
or mineral fuel supplies varies from day to day, and will reduce
as the impacts of climate change move North. In pure economic
terms, we deploy the machines to benefit from this source of fuel
as an insurance policy, or we risk the loss of Gross Domestic
Productivity.
Stern has set the size of the investment to
be made. It is many times that currently underway.
1.2.3 The short-term targets
The NAO briefing has also raised a number
of other issues, including:
— the failure to explore sufficiently
different scales of policy intervention;
— the balance between expanding
existing measures and introducing new ones;
— the range of policy options considered
and the criteria for appraising them; and
— the timing and scope of future
cost-effectiveness evaluations.
In the light of such concerns, how should
the Government improve its approach to the use of cost-effectiveness
evaluation?
(a) To BCSD-UK members, academic study of
the scale of policy intervention to date is not productive. In
the UK, it is only in the light of the clarity, provided by Stern
and the WBCSD report, that the message of sustainable business
through new, clean energy security is visible to a majority.
(b) A number of studies have agreed that
the "feed-in" energy tariffs of Denmark and Germany
have accelerated the introduction of wind power in a way that
Renewable Obligation Certificates have not. As ever, this can
be refuted on the grounds that each country has other historical
or cultural reasons for the success of their wind industries.
Independently of these arguments, BCSD-UK would point out that
feed-in tariffs defeat the market. If we accept that the evidence
of the last century is that the market will ultimately prevail,
then feed-in tariffs cannot be sustainable.
(c) BCSD-UK asserts that the true cost,
including carbon debt, of most product purchased, service delivered,
or fuel expended, is not known to the UK consumer, either because
its calculation is contentious or is impossible. If there is one
exercise by government, which has been globally neglected, and
which would support Carbon Committee activities over the next
50 years in the fields of efficiency, renewable energy, carbon
sequestration, spent fuel storage, energy storage, alternative
fuel production and economic sustainability, it is carbon equivalent,
emission debt evaluation.
(d) In the short-term, referred to in this
question, actions by the Carbon Committee, to secure the solutions
to climate change and sustainable energy supplies, must be borne
by charges on products, services and fuels sold in the UK, according
to a much coarser measure of the carbon debt they incur. This
is discussed later. Transportation incurs cost, but also incurs
a carbon debt, which must be repaid. Ideally, this is in the country
it is produced. If not, it must be repaid in the UK.
1.3 Accountability, targets, and reporting
1.3.1 Monitoring and reporting
What additional reporting and monitoring
arrangements are required to support the aim of a transparent
framework for emissions reduction?
(a) These are totally dependent on the parameters
to be set for the Carbon Committee to control, the authority it
is given to interpret these in terms of a cost, and the other
political measures taken outside its remit.
(b) A control mechanism is proposed by BCSD-UK
in Chapter 2.
1.3.2 Roles, responsibilities, powers and remit
What should be the roles and responsibilities
of the Interdepartmental Analysts Group, the newly created Office
of Climate Change, and the proposed Carbon Committee? In particular,
how should the Carbon Committee be constituted, and what should
be its powers and remit?
(a) A control mechanism is proposed by BCSD-UK
in Chapter 2 (Midlands Summit).
1.3.3 Short-term targets with a long-term goal
What approach should the Government
take towards setting short-term targets as a means of ensuring
progress towards its long-term goal of a 60% reduction in carbon
emissions?
(a) BCSD-UK is very aware that the Carbon
Committee model is the first of its kind, and will be starting
from an inadequate experience base. However, as described in the
response in Chapter 2, the debates concluded that adequate knowledge
has been developed over the past 20 years to allow the mechanism
to be set up. As experience is added to the "pathway",
a clearer picture of the long-term goal is possible. External
influences will impact significantly in the short-term, but the
model will eventually become immune, even to these.
CHAPTER 2—RECOMMENDATIONS
2.1 A view within the Energy Group of BCSD-UK
aligns with Stern that, if government targets for the Carbon Committee
were monthly set-points, they would be constantly at the whim
of political expedience. In the same way as this government recognised
that political control of The Bank of England base rate had become
counter-productive, due to speculation, a moveable target for
the Carbon Committee would defeat the point of independence.
2.2 The UK public appears to be accepting
the concept of carbon offsetting. It is not an inconceivable leap
to the concept of a carbon currency.
2.3 The following must be accompanied by
a reward to the UK for taking the measures, or a penalty to importers,
if their goods are not subject to the same controls.
2.4 As a result of further negotiations,
similar to Kyoto, the UK government will accept a longer-term
emissions target. Consider the Carbon Committee being charged
with meeting it. In the same way that the Monetary Policy Committee
is a vehicle of the Bank of England, it would be necessary for
the Carbon Committee to be controlling a measure in the hands
of a "UK Bank of Carbon", perhaps an interest rate on
the carbon currency.
2.5 Dirty energy or waste producers (to
be defined), not also producing an offset of clean energy, would
borrow. Clean energy producers would save. Interest would be paid
and received in real money. Instead of the interest rate being
the "cost of capital" it would be the "cost of
carbon emitted".
2.6 Clean energy producers would earn carbon
currency, while the dirty energy producers would pay interest,
according to the Carbon Committee model.
2.7 While there are few clean producers,
the interest rate they earn is high. As dirty producers become
fewer, the interest available to clean producers would decline.
2.8 Lender and borrower interest rates would
be controlled by the Carbon Committee on a monthly basis, with
the intention of breaking even. If the underlying carbon reduction
rate were insufficient to reach the annual target, the rates would
be increased. The model would need to take account of the UK's
annualised performance.
CHAPTER 2—BASIS
OF RESPONSE
This BCSD-UK response is based on the focus
on energy at two BCSD-UK Business Summits so far held, one in
Scotland, one in the Midlands. BCSD-UK is working towards a series
of such Summits at which six key subject areas are explored in
a business to business format.
Involved in presentations and debates on Energy
at the Scottish and Midlands Business Summits were representatives
from Converteam Limited; Wardell Armstrong; Eversheds; Scottish
& Newcastle; Scottish Power; Shell, and Summit delegates.
Accounts of the two Summits can be seen at:
Scotland—where the concept of a "Bank
of England" independent type body to take responsibility
over carbon values was first muted. http://www.bcsd-uk.co.uk/Portals/0/PDF/Scot%20Summit%20Report.pdf
Midlands—where the concept was developed.
http://www.bcsd-uk.co.uk/Default.aspx?tabid=124
In addition, the BCSD-UK Energy Action Group
has met to consider the Stern Review and outputs from the Summit
including the idea of an independent, Bank of England like body.
A BCSD-UK General Meeting in February 2007 was
given a preview of the WBCSD's 2050 Energy and Climate policy
document. The issue of an independent body was again explored
at that meeting.
The WBCSD 2050 Energy and Climate document,
approved 9 March 2007, will be available via www.wbcsd.org
March 2007
|
