One year ago, we interviewed Joe Kwasnik, Head of Climate Change for international energy company National Grid, about his organisation's carbon reduction efforts. In the first of an occasional series which aims to take account of financial and political, as well as actual climate changes, we revisit Joe to ask 'what's new?'

What results have the introduction of a 'carbon budgets' to the business produced?

"Since we announced our new climate change strategy and the introduction of carbon budgets, our first year has really been focused on information gathering and working with our colleagues in the business. The real thing that has changed is an awareness of the company's commitment to playing our role in reducing our emissions, and using carbon budgets as a tool to achieve that. The budgets will come into effect on April 1st 2009 and we are seeing a real enthusiasm across the company."

How has the changing financial climate impacted on your carbon reduction plans?

"Around 95 per cent of our business is regulated with guaranteed returns, so to a certain extent, we aren't as exposed as some companies.

"But we're fully aware of what's happening around the world, and we are being as prudent and responsible as we can. In terms of our emissions reduction plans, this is something we continue to work towards and is still a priority for us."

The UK Government has upped the 2050 carbon reduction target. How has National Grid responded?

"We introduced a new 80 per cent by 2050 emission reduction target when we launched our new strategy last year. It's a tough and challenging target, but we believe that's what targets are for - they have to be aspirational to a certain degree."

Are these new targets actually achievable?

"They are definitely challenging, but are achievable if everyone plays their role.

"From our perspective, there has to be policy changes. The current planning process has to be reformed so renewable generation can be connected to the networks.

"We will also need to work on innovative ways to reduce our greenhouse gas emissions from our US power plants."

Do you anticipate new climate change initiatives from the incoming US administration?

"Clearly, the biggest challenge facing the new administration is the current economic situation, but we still expect integrated energy/climate change measures to be part of any new policies.

"For example: a clean energy economy and the creation of 'green jobs' are just two elements that have already been highlighted as priorities. We expect to play our role, as areas where we have expertise - such as energy efficiency and operating energy networks to get the renewable power to where it's needed - should play vital roles in any new federal energy policies."

Have any new technologies emerged that might help carbon reduction professionals?

"There are a range of technologies being developed, and as a company, we are always looking to evaluate those as they come along - from residential CHP home generators to new 'smart grid' technologies.

"It's difficult to pick out one or two, but they key thing for all of them is that incentives, public funding and market mechanisms exist to support their development where appropriate. We can't continue using energy the way we have in the past, and the development of smart grid technologies will help us look at using what we have a lot more efficiently."

What tips can you give to smaller companies facing carbon trading in 2010?

"Smaller companies that will be facing requirements to acquire carbon allowances to cover their emissions should be thinking about ways to reduce those emissions in advance of the requirement to secure the allowances.

"Investing in energy efficiency improvements, more sustainable ways of doing business and investigating low carbon design are just a few ways of minimizing the impacts of purchasing carbon allowances."

What are you working on right now?

"Right now, we are working on imbedding low carbon design principles in our asset design and construction processes. In addition, we are embarking on major new energy efficiency measures within our business. All of this will help us achieve the low carbon future that we are aiming for."

What have the past 12 months taught you?

"We are completing a major re-evaluation of our greenhouse gas emissions and have learned many things about the challenge of counting carbon within a large organization.

"Although we have a better understanding of our emissions than ever before, we are definitely challenged in establishing our 1990 emissions baseline year. This is due to the fact that few companies in 1990 were focused on developing data on greenhouse gas emissions unlike today. Nevertheless, we continue to work with our businesses to gather data from many sources to define our 1990 emissions."

Stepping Up To The Carbon Reduction Commitment

Energy intensive sectors – those companies involved in the production of aluminium, cement, ceramics, chemicals, food and drink, foundries, glass, non-ferrous metals, paper, and steel – have been covered by the Climate Change Levy since 2001.

Until now, this left a significant proportion of British industry – and its carbon footprint – untouched by government policy. Unveiled in the Energy White Paper of 2007, the Carbon Reduction Commitment (CRC) lays the foundations for an emissions trading scheme that is mandatory for all large organisations in both the public and private sectors.

The CRC will apply to roughly 5,000 organisations, aiming to cut a total of 4 million tonnes of CO2 emissions by 2020, according to government estimates. It is divided into two parts – an introductory phase of fixed-price allowances running from 2010 to 2013, and a capped phase in which the price of allowances will be determined by auction.

These dates may seem some way off, but companies likely to be covered by CRC need to take action now. The most obvious reason is that electricity consumption in 2008 is the main criterion for inclusion in the scheme. An organisation will be included if it has at least one meter settled on the half-hourly market and its total consumption is greater than 6,000 megawatt-hours (MWh) between January 2008 and December 2008. This roughly corresponds to annual electricity bills of approximately £500,000 for that period.

A three year timeframe

Importantly, this defines the criteria for entry into the scheme. Once an organisation falls within its scope all energy use must be accounted for, unless it is already subject to the Climate Change Levy, or is attributed to transport or household consumption. According to EEF, an industry body with 6,000 members in manufacturing, engineering and technology, this will include electricity use through half hourly and profile class 5-8 meters, gas through daily-read meters and all non-daily metered gas consuming more than 73,200 kWh per annum.

Many organisations covered by CRC will have complex structures, either because they operate from numerous sites, or have ownership of subsidiary companies. They may themselves be partly or fully owned by organisations based outside the UK. The CRC criteria stipulate that groups of companies will be treated as a single entity for the purposes of CRC, with the highest UK parent organisation responsible for reporting energy use.

Energy suppliers are now obliged to provide customers with half hourly metered electricity with an information pack which includes their annual consumption for 2008, and pass on the names, addresses and annual consumption figures to government.

Although the three-year introductory phase of the scheme formally begins in 2010, the first sale of allowances will take place in April 2011. Available initially at a fixed price of £12 per tonne of CO2, sufficient allowances will need to be purchased to cover actual energy use in 2010-11 and the forecast use in 2011-12. All revenues derived from CRC are to be recycled back to scheme participants, although the amount in each case will depend on the achievements in reducing emissions.

The first recycling payment is expected to take place at the end of October 2011, six months after the first round of allowance purchases in April 2011, and repeat every October for the duration of the scheme.

Each year a Performance League Table will be published, based on carbon reductions achieved since the start of the scheme. Participants achieving greater energy reductions will be placed higher up the league table than those that have done little. There will also be a system of bonuses and penalties, rising successively from 10% to 50% of the total value of allowances for each participant in any particular year.

A learning process

So overall, there is a significant amount at stake for companies, both financially and in terms of reputation. But the government’s intention is that CRC requirements will allow companies to learn as they go along. Industry bodies such as EEF are an obvious source of learning, but so too are companies that have already made significant headway with reducing their emissions.

Abbey Corrugated is one the UK’s major manufacturers of corrugated board of the kind used in cardboard boxes, producing 160 million square metres of the material a year at its site in Blunham, Bedfordshire. Around five years ago, the company decided to tackle its rising fuel bills by appointing an energy reduction team with a brief to look across the business. The team were helped by an initial Carbon Trust survey and a process improvement manager was appointed to act as a leader on good practice across the company.

Measuring energy consumption accurately was a key factor in early progress, says operations manager Adrian Swindells. “It’s very important to have the right measurement tools, and in the right place. We put meters in specific areas and that led us to focus on the shut-down and start-up of our machines. For example, we found that keeping our boilers and pumps on tickover over the weekend used a lot of energy,” he said. The new meters are also smarter, automatically populating its central databases. This means that complying with CRC will be simpler, says Swindells.

Other energy-saving opportunities included recycling the steam needed to heat plates and rollers back into the boilers, and reducing the energy consumed by lighting and leaks in compressors, for example.

Maintaining momentum

The company has made a significant effort to involve staff, including an energy competition with a first prize of £300 that yielded 36 responses. “They included some really good ideas,” says Swindells. The company has maintained contact with the Carbon Trust to ensure it is on the right track. “We had an audit that was quite intensive; it wasn’t just about sitting around the office for a couple of days talking. We had to prove that we had made reductions,” he said.

Other companies can learn from Abbey’s experience, says Swindells. Forming a team that can reach across the business, putting measurement devices in place, and drawing on external advice where appropriate are all part of a sound approach. Budgeting properly is essential, he says. “Budget for specific projects and concentrate on payback periods of up to two years. A project with a payback period of about 20 years is probably not worth thinking about.”

To date Abbey Corrugated has saved several hundred thousand pounds, but there is no mystery about achieving cost savings and reduced carbon emissions, says Swindells. “We just got smarter about our housekeeping,” he says.

Key questions:

• What benefits could we gain from an energy audit?

• How can we improve measurement of our energy consumption?

• What changes could give us payback in at least two years?