Newsletter #1

British Gas has launched a consumer gas and electricity tariff that will cost 10% more than its standard rates but which offers better green credentials than any other consumer utility tariff in the UK market.

The product has the following important features:

• The electricity is derived from renewable sources. The company says that this is not the key ingredient of the tariff. Later in this note I try to explain why.
• British Gas will buy and retire Renewable Energy Certificates for 12% of the electricity it supplies. This is probably the most important aspect of the proposition.
• British Gas will ‘offset’ all of the carbon dioxide produced as a result of each household’s purchases. This is the most expensive part of the deal for British Gas.
• There will be a small donation to a green education fund for schools.

BG says that it makes no extra money from the sale of its Zero Carbon product. This looks a justifiable statement to us. The important other questions to ask are:

• Why did BG decide that 10% was the appropriate premium to its main tariff? It could have designed a less costly offering with reasonably strong green features. Do mainstream ‘concerned consumers’ regard 10% as an acceptable price increment? Did BG need to ‘gold plate’ the new product to avoid any criticism that it was a proper green tariff?
• How will the company manage to ensure that it buys high quality offsets, and not the dubious offerings sold by consumer offsetting companies?
• The product is slightly complex and difficult to explain. Can BG cut through the competing claims of other green suppliers to build a large customer base for this high quality offering?

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In early September, researchers from the Tyndall Centre in the UK put out a report that said that incorporation of the airline industry into the Emissions Trading Scheme (ETS) will not provide significant incentive to cut emissions. The big polluters today are paying about €20 per tonne for their emissions. When aviation joins the scheme in 2012, this price would add about €5 for a flight to Barcelona. Tyndall argues that the EU and national governments cannot escape the conclusion that the ETS is not enough and that aviation must be constrained by other fiscal or legislative measures as well as by inclusion in the carbon tax net.

Tyndall has acquired an excellent reputation for its informed and passionate stance on aviation. Broadly speaking, its view has been that continued expansion of aviation is incompatible with the tight emissions targets that the EU and other bodies have set for the years to mid-century. It has consistently said that by 2050 unconstrained air travel will be using up most of the total carbon emissions that the world can allow itself. Aviation expansion will drown out emissions reductions in other areas.

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The evidence is not quite clear enough that organic food is better for the atmosphere.

The debate on whether organic agriculture reduces greenhouse gas emissions is a lively and sometimes acrimonious affair. The calculations are complex, the results depend on myriad factors that are difficult to quantify, and much research remains to be done. Those who give unequivocal answers to the question ‘is organic better?’ may not be recognising the extraordinary uncertainty that still surrounds many aspects of agriculture. Rather than produce a simple answer, this note offers a statement of the competing cases.

This topic has been widely researched but has produced very varying answers. There is certainly no consensus. In general, organic farming seems to be slightly better for the atmosphere than conventional cultivation, but for every ten studies that say this, five say something different. Almost all the conclusions are the subject of passionate debate.

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Do dedicated biomass electricity generating plants make financial sense?

E.ON UK has recently announced a plan to build a second power station using 100% energy crops as fuel. The first investment – a £90m power plant at Lockerbie in Scotland – will open within the next few months. The second plant, still only in the planning stage, will be in Sheffield on the site of a previous generating station. Both power plants will use wood from forestry and specially planted willow but Sheffield will also burn waste wood from other sources, such as industrial pallets. These are the first two large-scale plants in the UK if we exclude the ill-fated Arbre plant of several years ago. (Arbre was an extremely advanced wood chip gasification plant built in Yorkshire. It was never fully commissioned.)

By the standards of the electricity industry, the E.ON investments are tiny. The proposed Sheffield plant has a price tag of £44m compared to £1bn for E.ON’s intended investment in the new super-critical low(ish) emissions coal power plant at Kingsnorth in Kent. Nevertheless, Lockerbie and Sheffield do appear to make good financial sense, at least in part because of the revisions to the renewable energy subsidy scheme announced in the government’s June 2007 Energy White Paper.

This article looks at the prospective financial return from operating a power plant burning wood and other energy crops.

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The key conclusions from a good piece of market research

HSBC’s July 2007 survey entitled the Climate Confidence Index contained many surprising results. Carried out in nine major countries around the world, it showed that concern about climate change is far higher in developing countries than in the UK or the USA. As importantly, the inhabitants in these countries also think that the world is more likely to find ways to avert climate change problems.

Almost 60% of people in Brazil, Mexico and India see global warming as one of the most pressing problems the world faces, compared to little more than 20% in the UK. Broadly speaking, the richer countries tend to see terrorism as a bigger threat to the world than climate change. In all nine nations bar the US, the level of concern tends to rise quite sharply with age. (This result is also seen in most other surveys of UK opinion.)

Confidence that climate change will be successfully addressed by existing institutions is low in most places around the world. It falls to its lowest level (5%) in the UK. The UK also has the lowest level of people saying that they personally are making a significant effort to reduce climate change at 19%, compared to levels above 40% in developing countries. Fatalistic Britons are also almost the most pessimistic about whether global warming will be stopped, with only 6% of people saying ‘I believe we will stop climate change,’ compared to 45% in India and 39% in China.

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Photo: the glacier at Ilulassit in Western Greenland

In early September, leaders from the major faiths came together in Greenland to pray for the future of the planet. They may well have chosen Greenland because of the visible and deeply worrying changes in the glaciers and ice fields that cover almost all its vast area. The melting of the ice sheet has speeded up dramatically since 2000.

The state of Greenland’s glaciers is critical to the rate of global sea level rise. A complete melting of the island’s ice would raise water levels by about 7 metres, enough to flood much of the world’s inhabited land. To give one example, 15% of Bangladesh’s population would be displaced by a rise of just 1.5 metres. Almost all the country’s habitable land would disappear if the water level rises by 7m.

The religious leaders went to the town of Ilulissat on Greenland’s western coast. Here a rapidly retreating glacier calves icebergs into a fjord at a rate of 35bn tonnes of water a year. The daily water loss would provide all the water London or New York needs for a year. Estimates suggest that between 6.5% and 10% of all the ice flowing off the interior icefields of Greenland melts into this fjord. This means that the increase in the rate of melt of this one glacier is adding about 0.06mm a year to the global sea level, 4% of the rate of rise during the 20th century.

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Drawing: the Indian treadle pump backed by Climate Care

Climate Care, the leading UK carbon offset company, has had an eventful few weeks. A few days after receiving an unexpected visit from climate activists who presented management with a basket of red herrings, the company put out a press release claiming that it would offset 1% of the UK’s total carbon emissions next year. In sixty projects around the third world, Climate Care claims that it will reduce emissions in 2008 by 6m tonnes, or ten times as much as it has done this year. It is claiming spectacular growth rates. Continuous critical attention from newspapers and sceptical greens does not appear to have dented Climate Care’s prospects one iota.

The core problems with offsetting are two-fold:

• guaranteeing additionality (ensuring that the investments in carbon reduction wouldn’t have happened anyway)
• verifying the reductions.

Climate Care fails on both of these two important issues. Though Climate Care is getting increasingly tetchy with its critics, the blunt truth is that the company simply doesn’t deliver genuine and quantifiable cuts in emissions. Increasingly, it works as an international development agency rather than as a business balancing one person’s emissions with a reduction in another’s. Climate Care may do a lot of good around the world, but it doesn’t cut carbon dioxide emissions in a reliable or auditable way.

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