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The carbon fighters

To meet its ambitious emissions targets, the UK's government and its companies need innovation and guidance. The Carbon Trust says it offers both. Derek Brower reports

WILL THE UK hit its climate-change targets? The government's most recent legislation to combat the country's greenhouse-gas (GHG) emissions calls for a 60% reduction by 2050 against a baseline of 1990 levels. By 2020, it wants to have reduced emissions by 26-32% through "domestic and international action".

By any measure, especially international ones, those are ambitious targets. But they aren't impossible, says Michael Rea. He is the chief operating officer of the Carbon Trust, a commercial body that the UK government set up in 2001 to help persuade businesses to start minimising their carbon footprint.

Its mission is to convince companies big and small that "decarbonisation" needn't hurt the bottom line, says Rea. That means the Trust can't just hand out subsidies willy nilly. Rea says one of the Trust's tasks is to ensure the steps a company takes to go carbon neutral are profitable. The best way to start cutting emissions, he says, is to make it good for business to do so.

Nonetheless, subsidies are part of the programme – and despite being registered as a company, with a board of directors and annual planning meetings, the Carbon Trust's only shareholder is the UK government, which provided the seed capital to launch the business and keeps an eye on its finances. Rea says the Carbon Trust charges some of its bigger blue-chip clients for its consultancy services. Others receive them free, leaving the government responsible for around 90% of the £100m ($200m) annual budget.

Making a difference

Is it making a difference? Rea says that since its inception the Carbon Trust has prevented 11m tonnes of CO2 reaching the atmosphere. Last year, the UK emitted 0.658bn tonnes of CO2 – an increase on 2005, but 15% lower than 1990's benchmark 0.775bn tonnes. Those figures might suggest that the Carbon Trust's contribution is marginal. But it is a programme that needs momentum behind it. Persuade one company that going green is good for business and others will follow.

The same logic applies internationally, suggests Rea. Those who doubt the value of campaigns to change consumer patterns in the West say that as long as China keeps building one coal-fired power station a week, all the combi-boilers in the world won't stop global warming. Last year, China added 106 GW of new generating capacity – equivalent to the entire capacity of Germany. China is choosing coal to generate this electricity because it is cheap and available. Won't the UK's endorsement of more expensive green technologies put it at a competitive disadvantage?

Not necessarily, says Rea, because as businesses develop scale in renewable energy it will give the country its own advantage in that new sector. And, he points out, the idea that China and the US are not interested in developing green alternatives to coal is wrong. Beneath the headlines about the country's rapid economic development, Beijing is looking at alternative energy and steps to reduce its carbon footprint. And while the US federal government has resisted Kyoto and its implications, at state level real changes are happening. If the UK can blaze a path to a low-carbon economy, suggests Rea, it will become a beacon for these countries and others. And its companies should reap the rewards from that.

It's a fine idea. And for anyone who accepts the arguments about man's contribution to climate change, the alternative – to do nothing – is unthinkable. As Rea says, however, the steps to combat climate change have to be the right ones. Not all of them have worked so far. The European Union's (EU) emissions-trading scheme (ETS) and various carbon-offsetting campaigns have "come in for quite a bit of stick lately", he acknowledges. And it has been justified. The launch of the first phase of the ETS in 2005 was managed badly. By mid-2006, the price of carbon allowances had collapsed and it became clear that many countries among the EU-25 had been far too generous in the allowances they handed out to their companies. From €30 a tonne at the launch, the price was down to around €0.10/t last month.

Phase two, which will start in 2008, should be different, says Rea. Only the UK and Slovakia measured the caps for their allowances correctly in phase one, leaving them as the only two countries whose allowances will not be cut for the second phase. "Lessons have been learned," says Rea. And, despite its problematic start, the Carbon Trust says the EU ETS "has emerged as the primary instrument for reducing CO2 emissions across power generation and heavy industry in Europe". The forward curve stretching into phase two suggests that, after the teething problems, carbon will soon have a price worth making a market for.

Offsetting the carbon voluntarily is another matter. The notion that individuals' or companies' GHG emissions can be compensated for by planting trees or backing eco-schemes somewhere else in the world looks questionable, at best. Recent investigations into some carbon-offsetting schemes have exposed the practice as one that salves the conscience of the rich, but often makes the poor of the world pay for it. And who measures the carbon emitted or offset?

Rea says consumers must choose offsetting regimes carefully. Acknowledging that the offset industry is largely unregulated, the Carbon Trust offers guidelines to avoid the sharks. Advice is certainly needed, given the rapid growth of the market: the Chicago Climate Exchange, the world's first voluntary credit exchange, has grown by 140% annually.

But ensuring green-minded businesses and individuals know which offset scheme to avoid is only a small part of the Carbon Trust's remit. It also advises businesses on how to reduce emissions throughout the supply chain. And it offers grants to smaller firms developing green technology that would otherwise struggle to raise financing, helping, for example, to develop wave and tidal power schemes. That kind of investment is critical to small R&D firms that can't yet access the venture capital markets. The Trust also has money for those that are in the venture capital stage.

Among the projects it has backed is Connective Energy, which helps capture wasted heat and pipe it to nearby companies for re-use. The trust says that 45% of the primary energy consumed by UK industry is wasted as heat is released into the atmosphere. The market in capturing it could be worth up to £1bn a year, reducing the UK's carbon footprint by 1% in the process.

These kinds of developments might be a drop in the bucket compared with the rampant increase of GHG emissions elsewhere in the world. But that underlines the Carbon Trust's philosophy. Finding ways to meet the UK's climate-change commitments won't be easy, acknowledges Rea. But the process must start somewhere – and fast. Technology and research need guidance and help from the government and its specialists. And if the Carbon Trust can provide that, while showing that the fight against climate change needn't damage the economy, then the modest funding it receives from the UK government will look like public money well spent.

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