The term “carbon footprint” refers to the amount of pollution an activity generates. It can be ascribed to a manufacturing, a service or a transport activity – or to an individual. It is typically measured by totalling up the quantity of greenhouse gas pollutants emitted by the activity over a year or the life of a product.
Six greenhouse gases are normally counted, with carbon dioxide the most common. For simplicity, the six gases are converted into a carbon dioxide equivalent metric – denoted in the following manner: CO2e. Some organisations carry out a more comprehensive approach and choose to incorporate the full life cycle of a product or service and may include the performance of their supply chain.
In total, Australians are responsible for approximately 550 Million Tonnes CO2e per year. This equates to a carbon footprint of 25T CO2e/year on a per capita basis. This means that the activity of every man, woman and child in Australia results in 25 tons of carbon dioxide (equivalent) being emitted to the atmosphere. The per capita emission in Sweden is less than 6T CO2e/year and in China it is about 3 Tonnes CO2e/year.
In order to manage an activity, it must first be measured. In 2007 the former Government passed legislation that mandates that Australia’s largest emitters measure and report their carbon footprint - covering areas such as energy use in buildings, fuel used, transport etc. The legislation is called “National Greenhouse Emissions Reporting Scheme” and initially applies to about 1,000 of Australia’s largest emitters. Over time, the threshold will be reduced to include organisations that have lower emissions.
By measuring the pollution emitted, businesses will be able to implement programs to reduce their carbon footprint and be well informed to participate in a carbon trading scheme. Bottom-line savings can be achieved through the introduction of energy efficiency improvements. Improving energy efficiency has the added benefit of reducing the companies’ carbon footprint.
A 'carbon footprint' serves to measure the environmental impact of human activity in regard to climate change. It is the total amount of greenhouse gas emissions, calculated in terms of tons of carbon dioxide equivalent gases per unit of measure. It can be applied to a country, a company, an individual or a product.
Climate change is an unprecedented challenge and arguably the most pressing issue currently facing the global community. Swift and decisive action is necessary. Without action, dramatic and widespread changes have the potential to further affect economic, environmental and social conditions worldwide. Accordingly, everyone has a role to play in ensuring the systems that sustain our planet and way of life are protected. Business has the opportunity to contribute to this effort.
Opportunities exist for innovation and leadership as carbon markets evolve; as industries adapt to new policies and as we transition to a low-carbon economy. While challenging, many avenues exist for profitability. Increasingly, legislative requirements and corporate social responsibility goals drive businesses to develop effective greenhouse gas (GHG) emissions management strategies. As consumers and investors seek to ensure that outcomes are profitable, sustainable and ethical, this goal becomes even more important.
A carbon footprint can be measured for any given individual, organisation, product or event. This typically involves identifying both direct (primary footprint) and indirect (secondary footprint) emissions. The primary footprint relates to emissions resulting from the burning of fossil fuels for electricity production and consumption, transportation and deforestation. Secondary footprints are mainly influenced by production, consumption and spending patterns and include emissions resulting from the manufacture, use and eventual disposal of products.
Australia's heavy reliance on coal-generated electricity means that per capita, Australian carbon footprints are the highest of the OECD countries and among the highest on Earth. Coal burning generates around 77% of Australia's electricity and the energy sector produces about 86% of carbon dioxide emissions. By 2100 a four-fold increase in emissions is expected in the absence of any mitigation, with the energy sector the main contributor. Australia’s per capita agricultural emissions (another significant GHG source) are also among the highest in the world, generating some 59% of Australian methane emissions, due mainly to large numbers of cattle and sheep. Transport emissions are also in keeping with those of other developed countries.
The large quantities of carbon emitted to produce power in many parts of Australia puts a disproportionate burden on Australian businesses that use large quantities of power.
The old adage that “you can’t manage it unless you measure it” applies equally to carbon.
The GHG Protocol (see: http://www.ghgprotocol.org/) is the most prevalent and widely supported mechanism for GHG reporting and accountability. After initial establishment at Kyoto in 1997, a full protocol was published in 2001. It is designed to provide a standardised method of keeping track of emissions across full product life cycles and corporate value chains. This includes accounting for impacts both upstream and downstream of company operations. Such a comprehensive approach to GHG measurement and management allows organisations and policymakers to focus attention on the greatest emissions reduction opportunities across the full value chain. This is intended to create more sustainable decision-making about the products we buy, sell and produce. The GHG protocol also helps determine what constitutes a company in relation to GHG emissions and informs other environmental measurement regimes and standards organisations.
The former Government introduced legislation that mandates large emitters and energy consumers measure their emissions. The National Greenhouse and Energy Reporting Act (NGER Act 2007) sets requirements of all Australian corporations that control facilities, make or use energy, or emit greenhouse gases above certain limits. They must also identify what type of facilities they operate, whether they have 'operational control' and how to report if required. Monitoring and reporting the greenhouse gases must be done on a carbon dioxide equivalent total. The NGER Act requires the purchase of a 'pollution permit' for each tonne of carbon emitted for each year. About 1,000 companies that produce more than 25,000 tonnes annually are targeted, with the scheme intended to act as a strong incentive to reduce emissions. Over time, this limit will be reduced – impacting a greater number of companies.
In order to account for greenhouse gases at a company level, firms that fall under the NGER Act must implement systems to measure emissions. There are a number of consulting firms that perform 'carbon audits' by entering information about manufacturing, buildings, electricity usage, travel, lifestyle and consumption patterns into 'carbon calculators'. These provide standardised monthly or annual carbon footprints.
After identifying the main contributing factors, carbon management and reduction strategies can be devised. The least cost methods are adopted first.
McKinsey has developed a very useful method of analysing the relative cost of abatement. These are called the “Cost Curve for Greenhouse Gas Reduction” - see: http://www.mckinsey.com/clientservice/ccsi/pdf/Australian_Cost_Curve_for_GHG_Reduction.pdf
Carbon footprints can be managed in a number of ways, many of which focus on directly reducing GHG emissions. Establishing a climate charter, similar to a company mission statement, is one way of placing emphasis on the importance of being energy efficient and 'climate friendly.' Organisations can appoint climate or energy ambassadors, responsible for ensuring meaningful action is taken toward reducing the organisational carbon footprint. These ambassadors embody the climate charter and help bring the principles and policies to life.
The Australian Government recently attempted to introduce legislation designed to create a market for carbon. The Carbon Pollution Reduction Scheme (CPRS) legislation was blocked in the Senate, but it is likely that it will be passed in some form in 2010. The final form of the CPRS is unclear at present, but firms will be able to buy and sell carbon permits.
This will enable firms to reduce emissions either through purchasing permits or investing to change manufacturing processes. Firms with the most efficient operations will be advantaged, as they will have the lowest total emission costs. With lower pollution costs competitive advantage can be achieved over more emissions intensive operators. Companies that position themselves to comply with the rapidly changing regulatory landscape, become energy efficient and are able to take advantage of carbon trading opportunities, have much to gain.
By changing manufacturing processes and the profile of vehicle fleets to favour emissions efficient models, emissions can also be greatly reduced. Avoiding fossil fuel based transport and driving and flying less is also a significant step. Although commercial jets produce less carbon dioxide per passenger per kilometre travelled than cars, it is produced at altitudes where it is more harmful than at the Earth's surface. Encouraging staff to walk or cycle on short journeys, use public transportation, carpool and facilitate flexible work arrangements can further minimise the costs and emissions of travel. Likewise, video conferencing can have similar results. Simply avoiding one long haul flight saves about one tonne of carbon dioxide.
Purchasing 'green' energy from accredited renewable sources also reduces reliance on Australia's typically emissions intensive sources, at little extra cost. Retrofitting and insulating buildings, recycling grey water and replacing old, inefficient technologies and appliances are other useful steps. Generally, improvements in energy efficiency have a “double dividend” effect – they reduce costs on the bottom line and they reduce a firm’s carbon footprint.
Carbon offsets also provide a means for organisations and individuals to reduce the GHG load elsewhere when their emissions cannot be realistically eliminated. In Australia offsetting generally involves financially supporting alternative energy projects such as solar, wind, hydroelectric, geothermal and biomass. Also, financing reforestation (bio-sequestration) projects to increase carbon capture and updating buildings and infrastructure for energy efficiency are other carbon offset options. These offset programs need to be carefully audited to ensure offsets achieve their objectives.
In summary, carbon should be viewed as just another commodity for a firm to manage. A global and national price will be attached to carbon and this will present firms with opportunities and risks. The global carbon market is forecasted to grow to $2Trillion/yr by 2020 – making it one of the largest. Firms will have a number of alternatives to reduce their carbon footprints - through trading, offsets or improving efficiency.