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The Business of Climate Change. WHAT A MESS!. Business Leaders. Australian Business. The Carbon Economy is real?. US$ 3.1 trillion by 2020. Two Challenges. International Experience. Indications of things to come. EU ETS began 2005 Now in 2 nd phase, tougher targets & pressures. - PowerPoint PPT Presentation
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The Business of Climate Change
WHAT A MESS!
Australian BusinessBusiness Leaders
US$ 3.1 trillion by 2020
The Carbon Economy is real?
Two Challenges
International Experience
• EU ETS began 2005• Now in 2nd phase, tougher targets & pressures
Indications of things to come
Real outcomes• It is working• Environmental policy is highly valued• Greener supply chains• Consumer sentiment changing• Mitigating future cost increases
Good carbon managementcan reduce costs, help create more
efficient and resilient organisations whilst delivering a
competitive advantage
Today’s focus
• Legislation• Compelling analysis from McKinsey• Reasons for you to act• Case studies• Next steps
Carbon Planet
• Carbon management solutions
• Expert scientific and strategic advice
• 1 million tonnes of GHG “assessed”
LegislationFederal Government and the Carbon Economy
NGER - National Greenhouse and Energy Reporting • Commenced July 2008• First Reports were due by 31 October 2009
CPRS - Carbon Pollution Reduction Scheme
• Draft exposure legislation released• Due to start July 2011
NGER Compliance
Act Ref Act RequirementPenalty Units (PU)
Penalty $PU/Day overdue
$/day penalty
12.1 Requirement to apply to register 2000 $220,000 100 $11,000
19.2 Report to be submitted 2000 $220,000 100 $11,000
20.4Liability of other persons to provide information
Individual 400 $44,000 100 $11,000
Organisation 2000 $220,000 100 $11,000
21.4 Reports content relating to GHG projects 1000 $110,000
22.1Group members activity reports to be kept
1000 $110,000
22.2Reports to be kept of a persons activities
Individual 200 $22,000
Organisation 1000 $110,000
61.3Response to questions of Authorised officer
10 $1,100
69.2 Failure to provide facilities assistance 10 $1,100
71.3Power to request information - compliance
50 $5,500
71.4Power to request information - misleading information
60 $6,600
73.5 External audit - compliance 1000 $110,000
Major Transport Company
Leading carrier servicing Adelaide, Melbourne and Sydney. Completed 2008 GHG Assessment and developed Carbon Management Plan.
Outcomes• Exceeded NGER threshold and avoided $220,000 fine• Opportunity to offset all emissions via embedded carbon pricing (less than 1.8% increase)
Source: Carbon Planet
Case Study: Knowledge
CPRS snapshot
• Action on climate change crucial to economic prosperity• Encourage polluters to a cleaner future• Prices will rise• Covers 75% of Australian emissions• Broader offset strategies allowed• Permits treated as financial products• EITE industry given greater support• Households given support
Key findings
• Significant GHG reductions to 30% below 1990 levels by 2020 and 60% by 2030 are achievable without major lifestyle changes or technology breakthroughs
• Reducing emissions is affordable $A290 per household
• Achieving significant reductions requires prompt action
• Failure to do so will have real consequences in upcoming commitment periods
McKinsey Report
Cost Impact
Source: McKinsey Australia Climate Change Initiative
Cost Impact
Source: McKinsey Australia Climate Change Initiative
Carbon ActionMeet the challenge of the Carbon Economy
Reasons to Act
1 – Compliance
2 - Reduce energy use, emissions and costs
3 - Build credibility and increase market share
4 - Recognise and account for new carbon costs
Carbon Action - ROI2. Reduce energy use, emissions and costs.
Pathways
Behavioural change - minimal cost, immediate return
Minor infrastructure - low cost, quick return
Major infrastructure - higher cost, long-term sustainability
Case Study: Quick Return
Quality assured company that delivers highly effective document and drawing management solutions. Completed a GHG assessment in 2008 and commenced a range of environmental programs.
Outcomes• Reduced emissions by 55%• Reduced energy use by 18%• Implemented new lighting and water saving systems• Substantial staff engagement
Scan Conversion Services
Source: Carbon Planet
Carbon Action - Opportunity3 - Build credibility and increase market share
Action
Identify clients that are greening their supply chains
Build credibility with carbon business planning
Communicate and promote carbon credentials
ASX
Govt
M/L
SME
Supply Chain
Actual tender questions
• What is your environmental policy? • What are you doing to reduce your carbon footprint? • Has your company set targets for reducing emissions? • 20% of tender weighting based on carbon neutrality
“We will only deal with organisations that have their own
green policy in place and are aiming to reduce their own
carbon footprint”
Source: James Scott, CIO, Toyota Motor Corporation Australia
Case Study: Supply ChainMacquarie Telecom
Recently awarded $1 million Information Communication Technology (ICT) contract to Sun Microsystems over long time incumbent Hewlett-Packard due to their;
“solid environmental credentials”
and their ability to
“really deliver on their green promises”
Source: World Environment Centre
Source: Business Review Weekly
…and remember
If you’re involved in a supply chain ensure you have included a “Carbon Variation Clause” in your supply contracts if they extend into 2011.
Carbon Action - Risk4 - Recognise and account for new carbon costs
Focus
Identify increasing prices and measure the impact
Explore alternatives, cleaner and cheaper options
Implement changes
Embedded cost of carbon
* Fuels prices to be offset via reductions in fuel taxes for first 3 years NB - Due to free permits final cost impacts may vary
CPRS early estimates
Source: Carbon Planet
Potential IncreasePermits @ $23 Permits @ $40
Electricity 11% 19%Gas 8% 14%Steel 4% 8%Aluminum 67% 116%Flights 3% 5%Cement 4% 7%Petrol 6%* 10%*Diesel 5%* 8%*
Carbon Impact On Profits Case Study: Innovation
As % of turnover
Electricity4%Gas 3%Steel 30%Aluminum 10%
Net Profit 8%
CPRS
11%8%4%67%
Cost Increase
Runaway costs
Electricity4.4%Gas 3.2%Steel 31.2%Aluminum 16.7%
Net Loss (0.5%)
Manufacturing sector example
Case Study: Early Adopter
Best International
Technical service provider to leading Tier 1 vendors like Dell. Conducted a GHG assessment and designed an embedded carbon strategy.
Outcome• 20 cents was added to the cost of their service calls• This generated enough revenue to offset all emissions• Now recognised as a green service providerSource: Carbon Planet
Carbon ActionThree clear steps
1 - Reduce energy use, emissions and costs- save money
2 - Build credibility and increase market share
- win more customers
3 - Modify business to account for new carbon costs
- make money
The Big Picture
Investor Risk
“Investors will consider a range of factors, such as a credible mitigation strategy, when assessing the impact of an emissions trading scheme on the value of a company.”
Source: Carbon Disclosure Project Report 2008 Australia & New Zealand(On behalf of 385 investor groups with assets of $US57 trillion)
“Your company needs to beat competitors in 2 areas:
Reducing exposure to climate related risks and find business
opportunities within those risks.”
Strategy for business
Source: Harvard Business Review: Fred Wellington, Jonathon Lash
Benefits of Acting
Where to from here?
Measure your carbon footprint
&
Do something about it
Carbon Management Planning
Grant Assistance
Clean Business Australia Initiative• $240 million fund• Four year period• Improve energy and water efficiency• Increase sustainability
Key elements• Australian Carbon Trust• Re-Tooling for Climate Change• Green Car Innovation Fund
Take advantage of Government funding
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