A report published by the Carbon Disclosure Project (CDP) has highlighted the issue of carbon leakage as a barrier to reducing emissions.  The report found that scope 1 emissions in Europe had fallen from 2010-11, but risen in every other region of the world.

The CDP put this down to ‘significant offshoring’, with them recognising the emissions reduction targets in Europe are creating a competitive disadvantage and pushing production outside of Europe to less regulated countries.

We certainly welcome these findings as this is something that manufacturers have been highlighting for a while.  However, the report then goes on to state that, whilst ambitious emission reduction targets are set in the short term, in the long term companies need to be more ambitious.  The four highest emitting sectors apparently come out the worst with reductions ‘of not even one-half a percent of their cumulative emissions’ to 2030.

I think this shows a lack of understanding of these sectors.  When by the nature of the production processes, it is energy (and therefore carbon) intensive, there is only so far you can in reducing your emissions.  This is where the source of offshoring comes from; when you cap emissions absolutely you push these sectors out to less regulated regions.  Time and time again we have argued these industries are at the heart of the low carbon economy as they are the building blocks for renewable and low carbon technologies.

To take the steel sector as an example of a sector that, at present, will only see incremental efficiency savings until there are new technologies available. Significant research and funding is needed to enable further efficiencies to be made.  This will not happen over night but the steel sector is already taking steps to get there.  The European steel industry’s ultra-low carbon steelmaking (ULCOS) research programme has already invested £66m in the last six years to find ways to halve steel making’s carbon emissions. The cost of delivering these unproven technologies at scales will run into the billions.  Pilots and demonstrations, such as HIsarna (which replaces the traditional blast furnace with a combined melting cyclone), will take time, ten years in this case.  And the UK government has also proved the difficulty in making new technologies viable when trying to establish CCS demonstration projects.

Yes, everyone should be ambitious in reducing emissions but it must be recognised that some industries have already gone as far as they can without a significant shift in energy sources and massive investment in new technologies. At least Ministers in the UK are starting to recognise this.

UPDATE:  There was an interesting debate at the House of Commons yesterday where Mary Creagh, Shadow Secretary of State for Defra, called for mandatory greenhouse gas reporting as part of her 3 point plan for Defra.We already set out our argument for why GHG reporting does not need to be made mandatory earlier in the year - read below:

The Case Strengthens for Reporting: but is mandating necessary?

EEF welcome the revised Impact Assessment estimates provided by the Aldersgate Group in conjunction with WWF, The Co-operative Group and Christian Aid, published today, as providing more evidence about the costs and benefits of reporting.  EEF are not against reporting GHG emissions and agree that there are significant benefits to be gained by reporting in company reports.

EEF represents the manufacturing industry in the UK, which is already significantly burdened with other climate change policies – CRC Energy Efficiency Scheme, CCL and CCAs, and EU ETS.  This is a lot of regulatory pressure for companies to comply with; without the addition of mandatory reporting.

Indeed, some EEF members do already report their GHG emissions in company reports, and not just in the UK, but for their global operations too – and they see the benefit in doing so.  EEF agree with many of the revised costs and benefits, such as the better scope for which costs and benefits are included, but at the same time, do not see why this means that GHG reporting should be made mandatory.   

As we have already argued in our response to the Defra GHG reporting consultation earlier this year, Government has taken little to no steps towards promoting the current guidance for GHG reporting.  The up-take in GHG reporting may have only increased by 4% since 2009, but instead of immediately jumping on the regulatory bandwagon, why not sit back and think about what the barriers to up-take have been?

To me, a logical step is to make sure that the current policy instrument is working to its full potential before introducing a new approach.  Surely this is much lower cost than introducing new regulation?  It will sit better with the Government objective to reduce the regulatory burden for business.

The commitment in the Climate Change Act – to make GHG reporting mandatory by April 2012 or present evidence as to why not - is less relevant today than when it was first published.  At that time, we did not have the crowded and confusing climate change policy landscape we have today.  It was also a commitment

It should also be remembered that UK manufacturing differs from other sectors as they are more likely to be caught under these other policies.  Discounting the person-day input doesn’t really make much difference to a lot of EEF members, who already have this many person-days through CRC so additional burden is seen by them as just that, a burden with no additional benefit.

The revised benefits assumes that, year-on-year, there are savings to be made; and for a company new to energy efficiencies this is true.  Many EEF members are already working to make their sites more efficient and for some there is no possibility to go any lower – it is just the nature of what they are producing.

Yes, EEF agree there are merits in reporting on your GHG emissions and as today’s publication shows, quantifiable benefits, but I just don’t see why it needs to be made mandatory before the voluntary approach has been taken seriously.  In order to push through with mandatory reporting there needs to be stronger evidence that the current approach is not working and a policy ‘out’ will also need to be found.

With the current Defra consultation on Greenhouse Gas (GHG) emissions reporting soon to close; EEF has discussed our initial thoughts with government on the options put forward within the consultation.

Defra has made it clear that it does not have a preferred option for GHG reporting that it wants to ‘gather views from businesses and other interested parties prior to taking that decision’.  It was also made clear that reducing regulation is a ‘key priority for the government’.

It is encouraging to hear that other stakeholders share the same view expressed previously by EEF - that government should look at the bigger picture and consider reporting alongside the crowded suite of climate change policies that are already in place, namely the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.  This is the perfect opportunity to conduct such a review – when government is seeking ways to simplify the CRC Energy Efficiency Scheme, and will be consulting on the future of Climate Change Agreements (CCAs) some time in July.

However, is anyone in government capitalising on this timing?  EEF argue this is an opportunity for government to act on its key priority and reduce some regulation, by replacing the CRC Energy Efficiency Scheme with mandatory reporting that follows it previously published reporting guidelines.  This option would use the current CRC energy threshold, of targeting organisation that are supplied with more than 6,000 MWh, as its criteria.

Keeping this flexible, by allowing companies to choose the approach that is best for them - and using Defra’s already well received guidance for reporting on GHGs - it will tick a number of boxes: reduced regulatory burden; reduced costs (both for companies and government); evolution of best practice through flexibility in approach; increased investor confidence; transparency in measurement; and increased competitiveness.

EEF will continue to lobby this point of view at further meetings with Defra officials over the coming weeks – ahead of the 5^th July close of the consultation.