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Developing and Implementing your Carbon Strategy We provide strategic advice and assistance across Government, manufacturing, finance, waste management, recycling, agriculture, agribusiness and packaging. We bring together expertise and experience across four areas: Compliance and Management Engagement and Communications • Environmental assessments and environmental management systems • Glue internal and external engagement tool • Training and awareness raising • Corporate Social Responsibility, Global Reporting Initiative and sustainability reporting • Environmental accreditation and ecolabelling • Energy Efficiency Opportunities, National Greenhouse and Energy Reporting and State energy, water and waste efficiency programs • Research and market intelligence Climate Change and Sustainability Government Relations • Strategic planning and advice • Advice and assistance on grants • EASE™ carbon accounting and software • Submissions and lobbying • Carbon workshops and training and education • Policy advice and strategy Why measure and understand carbon emissions? • Most Australian businesses will be impacted by the carbon price mechanism: • Increased energy costs - natural gas and non-renewable electricity • Increased costs of some input materials including carbon intensive products • Increased costs of services such as freight and logistics • Changed reporting procedures • Financial liabilities and risks What are carbon emissions Direct carbon emissions Carbon price mechanism and energy We are already experiencing higher transmission and distribution costs increasing electricity prices in the order of $0.04/kWh Under a legislated price of $23/tonne in 2012/13 (increasing 2.5% - fixed price period): • 75% flow-through rate by retailers is expected to increase electricity costs by $0.02/kWh (additional 20%) • Natural gas is expected to increase $1.18/GJ (15-20%) under a carbon price. • Waste to increase between $20 to $30 tonne. Australian Government carbon price modelling $/MWh $/MWh 300 300 250 250 200 200 150 150 100 100 50 50 0 0 2010-11 2012-13 Wholesale prices 2019-20 Network costs 2029-30 RET 2049-50 Other costs Upstream carbon emissions Downstream carbon emissions What other impacts could your business expect? • Domestic aviation, domestic shipping, and rail transport are included • Proposal to consider heavy on-road transportation from 2014 however fuel tax credits will remain at 100 per cent for the agriculture industry. Material procurement costs • The impact on materials will be dependent on whether the: • manufacturer is a liable party or not • goods are majority imported or manufactured locally. • Locally sourced materials (i.e. packaging) where it is subject to a price on carbon will increase in cost. • Materials that are required to be transported large distances in the case that they are manufactured overseas will also increase in price. Upstream agricultural impacts • Fertiliser production (although usually set by world markets not domestic policies) • Pesticide and other agrichemical production • Extraction and processing of lime • Production of other inputs (e.g., farm machinery, greenhouses, etc.) Downstream agricultural impacts • Product storage (e.g., cool rooms) Cost flows under the carbon pricing mechanism • Customers – in-flow depending on what price can be passed through and competition • Suppliers – out-flow - depending on what price can be passed through and timing of purchases/availability • Operating and capital costs – out-flow – depending project timing and sources of funding. In the medium to long term – risks relating to the provision of products and services given the uncertainty around climate change impacts could add other costs. Why measure and understand carbon emissions? • Direct cost savings • Benchmarking for improved operational performance • Operational efficiencies • Identification of less specific, lower quality or lower cost inputs • Increased brand awareness or competitive advantage Why measure and understand carbon emissions? • Identifying resource efficiencies can lead to a number of indirect benefits: • reduced repair and maintenance costs • increased employee motivation and retention • increased productivity • reduced costs resulting from actions undertaken by suppliers • availability of government grants or subsidies in relation to the use of innovative technology or specialist training of staff. • increased research and development allowances. Other market pressures • Do you currently need to report your environmental improvement initiatives? • What questions would you expect from your customers and consumers around your performance in reducing carbon emissions? • What information would you expect from your supply chain in relation to carbon emissions? Questions • Are there any companies represented here that have developed and implemented a carbon strategy? • What were your drivers? • What barriers have you faced? • Have you identified all of the opprtunities? Developing and Implementing your Carbon Strategy Setting your boundary • Decide your operational controls • Obtain energy billing information • Use financial account processes to collect the data. • Consider: • Assets and liabilities • Capital expenses • Operational expenses • Leased assets, outsourcing, and franchises Aligning carbon measurements and management with existing business systems • Quality management • OH&S reporting • Financial reporting • Inventory management systems Aligning carbon with financial accounting Carbon accounting systems Five general principles for measuring and reporting emissions: • relevance; • completeness; • constancy; • transparency; • accuracy Setting the baseline • Determine your baseline year and use this to compare future emissions (trend analysis) • Review your in-sourcing and out-sourcing activities – will these change? • Organic growth or decline • Acquisitions and or mergers Benchmarking your performance • km’s travelled • tonnes product manufactured • No FTE’s Calculate your emission profile • determine your carbon intensity Investigate opportunities for energy efficiencies • look internally as well as your supply chain Engage your employees as well as the supply chain Plastics and chemicals manufacturing example Areas for Improvement Compressed air systems Energy management Pumps and motors Power factor correction Chiller and cooling Systems Exhaust and hot air Insulation and lagging Steam systems and lines (boilers) Lighting Abatement Opportunities Cost/ Payback Energy use breakdown at a grocery/convenience store • Some opportunities might be obvious from an energy perspective • Energy efficiencies can be easily be achieved through technology and behaviour change • There may be some hidden cost associated with your supply chain Waste generation from a typical retail store: • can the material be reused? • can the packaging be avoided? • can the packaging be returned? • can products be packaged differently to reduce transportation? • What are the costs impacts? Direct and indirect emission sources Calculating your liabilities and pass-through costs • Understand the carbon intensity of the whole life cycle of your products or service: • material inputs • resource use • waste outputs • up-stream and down-stream supply chain impacts • What is the percentage of costs that are likely to increase as a portion of your overall operational costs? Carbon cost analysis - Packaging manufacturer • Under a price on carbon, electricity costs will increase between $277,000 and $555,000 by 2015. • Natural gas costs were estimated to increase by $9,800 by 2015. LPG <1% Natural Gas - 2% Petrol - 2% Diesel - 1% Purchased Electricity 95% Current liability – between 3 and 8% cost increase per unit due to a carbon price on electricity Large product supplier and waste management contractor to the health industry • assessed the carbon liability from waste disposal practices • modelled what the change in material composition would mean to landfill carbon emissions. • developed a carbon emission factor and expected price increase amount to use in future contract negotiations. Building your model • determine pricing scenarios including pass through costs. • identify impacts. • develop knowledge and strategies. • prepare engagement models and tools. • negotiate positions and look for efficiencies. • communicate your mitigation outcomes. Workshops (Scenario and Educational) Energy Efficiency Opportunity Assessments Rewards and Recognition Feasibility Assessments Carbon Reduction Strategy Benchmarking and Case Study Development Internal Engagement and Training Best Practice Guidelines ACCC – Passing on carbon costs Review likely impacts: • • • • fuel use transportation energy travel Any claims need to be: • truthful and accurate • not misleading • based on reasonable grounds • substantiated Clean Energy Future funding • Clean Technology Investment Program • $800 million competitive, merit-based grants program to support Australian manufacturers. • Clean Technology Innovation Program • $200 million to support research and development, proof of concept and early stage commercialisation activities that lead to the development of new clean technologies. • Clean Technology Food and Foundries Investment Program • $200 million competitive, merit-based grants program to support Australian food and foundry manufacturers