Inside Track

The opening of international talks on climate change is following a familiar pattern.  Today the governments of the world set out their opening negotiating positions – albeit after a tedious (and highly embarrassing) 40 minute wait for the president of the host country, South Africa’s Jacob Zuma, to turn up. I suppose we should be grateful he eventually did.

From tomorrow the real work will begin. We will see discussions break away into two key streams: Those of the Ad Hoc Working Group on Further Commitments which will decide the fate of Kyoto Protocol, the existing legally-binding treaty – and those of the Ad Hoc Working Group on Long-term Cooperative Action  – the group which is tasked to set the future direction for collective action on climate change post 2020.

Side discussions will, among other things, attempt to resolve issues relating to technology transfer, reporting guidelines, maritime and aviation emissions, sector approaches, deforestation, the Clean Development Mechanism, climate aid and methodology issues, so efforts can be compared on an equitable basis.

Officials will lead negotiations this week before the high-profile Ministerial segment commences next week. The aim is to agree and consolidate as much text as possible before the Ministers arrive. The reality is that not much will be agreed between now and then.

As colleagues have already reported, there is really very little change in the entrenched positions of the main negotiating blocks. Rapidly-developing countries want legally-binding targets placed on the developed world – in effect an extension of the Kyoto Protocol which expires next year - and aid to help them deal with the affects of climate change. Developed countries, including the EU and the US, want a new agreement which places targets on all major emitters regardless of their state of development, as do the small-island states.

The EU continues, however, to look isolated. It confirmed today that it is willing to commit to a second Kyoto commitment period on the proviso that a “Durban Roadmap” is agreed outlining how the world will agree a truly global agreement in future. However, the idea already seems doomed after the US quickly distanced itself from such an approach.

It is easy to forget that significant global efforts to kerb greenhouse gas emissions are already underway. Over the last two years since Copenhagen, 86 countries have made formal emission reduction pledges, capturing over 80% of the world’s man made greenhouse gas emissions. China’s latest five-year plan includes ambitious targets to reduce the carbon released for each unit of production, although not an absolute emissions cap.  Australia has recently agreed a carbon tax. California an emissions trading scheme of their own.  Indonesia and Brazil are making significant progress in addressing deforestation. And of course many businesses and manufacturers are radically reducing the amount of greenhouse gases they emit.

If all the pledges are met in full – a United Nations Environment Programme (UNEP) report concluded last week – the world would achieve almost half the reductions needed by 2020, and the rest could be made by technically available measures at no great cost. It suggests that a global agreement may not be as ambitious a task as one might think.

Yet delegates report that the mood in Durban has been soured with the bickering over the sharing of responsibility. Hopes are not high. And we may soon see the smaller island states naming and shaming developing countries that are seen to be delaying the process. It could all get rather ugly.

The European Parliament’s Environment Committee today voted to support a collection target for Waste Electrical and Electronic Equipement (WEEE) of 85% by 2016. This is poles apart from the Council's position who support target of 65% target based on goods going on sale, to be phased in to most EU countries by 2020.

This disparity now means that the Council and the Environment Committee will now have to start a negotiation process in order to seek agreement. Knowing that it was unlikely that agreement could be reached without the negotiations, is the Parliament playing for room?

Under the EU’s co-decision procedure, both the Council of Member State Ministers and the European Parliament must agree on new legislation and if they can’t agree they both must enter a negotiation process where enviably compromises are made.

By setting their stall as far from the Council as possible the Environment Committee have a greater room for negation and more scope for trade-offs. With the current state of play in co-decision is it likely that we will increasingly see this type of approach from the Parliament’s Committees?

The Parliament also agreed to introduce a separate target for re-use of 5%, this is again does not appear in the Councils proposals.

The proof however will be in what is or isn’t agreed in advance of the vote at the plenary Parliament meeting in January 2012.

Today’s vote also saw the Environment Committee in favor of a central EU registration system and a ban on exports of waste electrical and electronic equipment to non-OECD countries.

Today, we launch the start of our Climate and Environment Campaign.  This campaign is about getting policy makers to reconcile the diverging growth and environmental agendas so that the UK can place itself at the centre of a low carbon economy.

As part of the kick start, we have published some very interesting findings from a recent survey.

This executive survey of 76 senior manufacturing executives provides a focused look at current attitudes and concerns regarding climate change and environmental policy in the UK.

At a time when we are challenging government on their ambition to have both a sustainable and growing economy, we show that currently, government policies to meet these objectives are conflicting and causing unintended consequences.

While seeking to increase investment in the UK and make the leader in producing low carbon technologies, 75 per cent of our respondents feel climate and environment policies at the moment will damage UK competitiveness.

UK manufacturing is at the heart of the shift to a ‘green’ economy.  We need support from government to ensure this happens. 

Manufacturers are already taking steps to reducing the environmental impacts of their production; 80 per cent of companies have invested in energy, resource or waste efficiency.  And they want to go further than just complying with regulation; they want to be part of this emerging ‘green’ economy, with 22 per cent using the green credentials of their products as their unique selling point on the market.

However, the policies in place at the moment are having the opposite effect by raising the cost of being green – 75 per cent have experience an increase in environmental policy costs in the past two years.  However, this is increased cost has had little effect on emissions reductions.  In fact, there is no tangible link between high energy prices and a subsequent reduction in energy use.

This makes the UK an unattractive place to invest, 50 per cent of our respondents believe there are better investment opportunities for efficiency and low-carbon technologies abroad.  Surprisingly, considering another goal of government is to support medium-sized firms, it is these companies that are feeling the effects of poorly-designed policies that pull them in different directions, but ultimately raise their costs to unreasonable level; 95 per cent has seen a cost increase compared to only 82 per cent of large firms and 52 per cent small firms.

Making the UK an unattractive place to do business and to invest will drive innovation and skills to other countries.  You can download the full survey report here.

Connie Hedegaard is quoted as saying

 "What is the point of extending our commitments if none of the other big economies say that they are willing to follow, if not today, then at least at some time tomorrow?"

 It was very heartening to hear her talking common sense when asked about the future of the Kyoto Protocol after it comes to an end in December 2012.  There had been rumours that Connie and Chris Huhne would push for Europe to go it alone, which to me would be econmically damaging for Europe and won't achieve a global solution to climate change.

 A global legally binding accord would in theory be the best approach, however, we have been trying to achieve this since 1992 and how far have we come?  Kyoto set in motion the framework for a global deal, but the most significant outcome has been the increasingly isolated EU ETS cap and trade scheme. 

 It has become evident that for only Europe to have a cap and trade scheme is detrimental; it pushes up energy prices when many other countries’ energy remains low, thus pushing production to the emerging economies who are booming because of the increased demand to produce the goods demanded by European consumers.  This leads to a crucial point, are emissions actually going down, or are they just being moved to these less regulated, and cheaper to produce in countries?

 As Connie stated, “Europe represents only 11% of global emissions.  What will the other 89% do?”  We need to stop thinking that other countries will follow our lead, they aren’t and they won’t, while the EU has such a complex and costly climate change policy landscape.

 There is a need to re-evaluate the approach we take in tackling GHG emissions at the global level rather than keep hoping everyone will suddenly have a change of heart.  If the talks at Durban can recognise this, then I think the talks will start to move us out of the stalemate we are currently in.

 EEF will be closely following the talks at Durban and calling for a move away from a Europe-only view.

With the best of the summer behind us, DECC has now published its eagerly awaited consultation on the future of the Climate Change Agreements. CCA consultations appear to developing an interesting definition of the seasons with this consultation announced in the Budget for the summer, following an autumn consultation in December last year. That aside the substance of the consultation is nothing new to the CCA community having been briefed a number of times by the succession of DECC officials. However some of the additions have surprised me.

Chief amongst these is the proposal that the Environment Agency should act as the administrator of the CCAs in England. Although the proposal to appoint an administrator came as no surprise, I feel it flies in the face of the coalition government’s stated goal of reducing the administration and cost burden on industry.

I had expected something on reducing the burden on government, but we had been assured that no decision had been made as to who would administer the scheme. I understand the government’s desire to reduce costs, but I’m concerned that a move to a new administrator risks the loss of expertise both within government and industry.

I also can’t see how the additional administrative burden required to transfer all the data, history, and knowledge of the agreements of 10,000 sites to a new administrator won’t add costs and complexity.

I feel strongly, and have argued that the sector associations, who have over 10 years of experience in managing the scheme and working with their respective industries, would be best placed to take on the role of administrating the scheme. This would of course require a robust audit process, but I think it represents the best opportunity to reduce cost and administrative burden for both industry and government.

Another gripe is the decision to not allow trading in the CCA, although again not surprised by government’s proposal, I am disappointed that the CCA started as a trading system and should continue as a traded system. However, we have lobbied tirelessly on this and government knows our position well.  

Those concerns aside there are many positives and I broadly support many of the recommendations set out in the consultation, for example the proposal of two year (24 month) target periods will not only ensure government’s desire for participants to be continually measured, but reduces the burden of annual reporting.

All in all it looks like this will be an interesting consultation.

A review of the availability risks to resources in the UK first highlighted, by Defra in late 2010, the increasing need to be more resource efficient is gaining momentum.

This is something that has been on the horizon for a while and I have been anticipating would become more and more of an issue for businesses as they face increasing costs and supply chain shocks due to ever constraining resources.

An EU consultation on resource efficiency policy found the majority believe that price of resources will increase by 2020; and in the long term Europe is likely to face shortages.

Just this week, the Commission announced, in its draft roadmap “to a resource efficient Europe”, the possibility of introducing resource efficiency targets in response to this growing concern.  However this roadmap has been criticised for its vagueness.

So is this something that we really need to be concerned about or is this something the market itself will respond to without regulatory intervention?

Defra’s report certainly paints a bleak picture of the future of resource availability and the risk to UK business.  Not only are there shortages of some vital resources in the pipeline, but there are political risks as well, with China currently holding 97% of the world’s rare earths, and continuing to stockpile.

However, with every risk, there is an opportunity to be sought.  Political risk aside, increasing demand for goods and services coupled with harder-to-reach resources will always lead to demand exceeding supply.  There is an opportunity to innovate to use alternative materials and resources that are more readily available and cheaper.

This is certainly an opportunity when innovation in the materials used in production give a company competitive advantage over another because they have more stable supply chains and cheaper costs.

And the sooner this is started the less painful any potential forthcoming legislation will be.

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.

First an introduction, I’m Fergus McReynolds and I have recently joined the Climate & Environment Policy Team at EEF. I have been working in the dairy sector for the last three years as the industry’s environment manager, but joined EEF half way through July. I’m looking forward to working in a dynamic industry building on the strong environmental performance of our many members.
One of my key priorities at EEF will be working on the Waste Electrical and Electronic Equipment (WEEE) Directive, where the fun starts this autumn with the second reading of the recast of the directive in the European Parliament.
I will be heading to Brussels in September to present our position to key MEPs in an effort to ensure that the directive develops in a sensible and manageable way and that producers of EEE are given the tools they need to continue to recover, reuse and recycle WEEE.
The recast has been called because despite the rules on collection and recycling set out in the current WEEE directive only one third of electrical and electronic waste in the European Union is reported as separately collected and appropriately treated.
During the first reading of the recast directive the European Parliament and the Council came to considerably different conclusions on a number of issues, which means that there is ground to be made up by both. The EU’s standard decision-making procedure, known as 'codecision', means that the European Parliament will have to agree with the Council on any new EU legislation.
The second reading will take place under the watchful eye of the Polish presidency who have already indicated the WEEE recast as a priority. It is clear that the key sticking points will be around the national requirements verses EU wide requirements and setting targets.
There are currently discrepancies between the definitions of a “producer” and their responsibilities nationally and across Europe, including whether registration happens at a national level or pan European level.  I also expect one of chief battle grounds to be whether to extend the scope of the directive to more product categories and the development of targets. Targets for WEEE collections are currently based on the amount of WEEE generated, but it has been proposed that the targets should be based on EEE (Electrical and Electronic Equipment) placed on the market. We support a target based on WEEE generated.

The EU Regulation on Registration, Evaluation and Authorisation of Chemicals (REACH) came into force in 2007 to ensure the protection human health and the environment as well as promoting the use of alternative methods for assessment of hazards of substances.

We have launched this week a new REACH service for manufacturers.  This service includes information for manufacturers on their obligations under REACH, the most up to date information on substances registered under REACH as part of a free e-alert scheme and consultancy advice for those who are looking for more tailored advice.

There are two guidance documents published today; Guidance for Manufacturers and Obligations for Downstream Users.  The guidance for manufacturers is intended to provide members with a straightforward and practical understanding of the requirements under REACH.  Although one might think REACH is just for the chemical industry, manufacturing uses many of these chemicals and are increasingly coming under pressure to find less hazardous substitutes for commonly used chemicals; REACH is expected to affect around 30,000 substances on the EU market.

REACH will not only affect manufacturers who directly use chemicals in production, it will also affect manufacturers that assemble imported components into products that are eventually placed on the European market.  The second guidance document published this week is dedicated to providing these ‘downstream users’ with information about their obligations, namely in ensuring that your uses are registered and you following the Safety Data Sheets.

It is important to understand what risks you might be exposed to through REACH, even if you are not directly obligated.  As a ‘downstream user’ of chemicals registered under REACH, you will face some specific legal obligations and importantly, some business continuity risks.

A substance that is present in one of your products may be restricted under REACH, and could even risk being withdrawn from the market; this will disrupt your supply.  There may be reputational damage with your customers by failing to comply with the REACH disclosure requirements, if you are not fully aware of the chemicals present in your products, you cannot make them aware of them. This could lead to loss of business and a threat of fines and prosecution if you do not fully comply with the legal requirements of REACH.

In a nutshell, you need to make sure that you are fully aware of the chemicals present in the products you produce and sell and ensure that your customers are also aware of these by communicating this information to them.

As part of this launch, we are also offering members the opportunity to sign up to e-alerts that will keep you informed with the most up to date REACH information, such as latest changes or additions to Candidate Lists of Intended Substances of Very High Concern (SVHCs), which can affect your business continuity.  You will have the most up to date information about which chemicals are under consideration, restricted, banned or authorised under REACH; ensuring you can reduce this business risk.

Please visit www.eef.org.uk/reach to download the guidance document, sign up to the e-alert system or seek consultancy advice.

Today UK MEPs defied David Cameron by voting against the proposed move to a -30% reduction target for EU ETS.  There are cries of heresy and betrayal, that these MEPs are throwing our future away and Europe will lose out to race to a ‘green economy’.  But let’s just take a step back and remember why this vote was even on the agenda.  EUROFER’s director general, Gordon Moffat stated in a press release recently that:

“After the Copenhagen failure, the EU would be foolish to again unilaterally increase its GHG objective.  Before Copenhagen, the Union affirmatively stated that it would only move to -30% if binding measures would be taken by other countries, comparable to the EU’s -20%. Clearly no other country has followed Europe. It cannot therefore credibly justify a move to -30%.”

It is very important to remember this point.  It was never on the agenda because Europe didn’t think we were not going far enough with our carbon reduction targets, but because it was meant to act as an incentive to entice other countries to set reduction targets.

When talking about this race to a green economy, I wonder if we have lost sight of the goal:  We, in Europe, are the only ones with such a scheme.  Our biggest competitors, China and the US, do not have carbon reduction targets.  How can we lose if we are the only ones in the race? 

If Europe continues to impose higher costs than other countries - unregulated countries – production will be pushed out of Europe and to our competitors.  This will in no way reduce carbon emissions; it will merely move it to these more unregulated areas and at the same time Europe loses the jobs and investment that a tighter target will supposedly bring.

Martin Callanan MEP was quoted in the Guardian as stating: "Conservative MEPs have always been sceptical of the EU unilaterally increasing its target to 30% without a worldwide agreement. I am in favour of increasing the EU target to 30%, or even higher, in the context of a global agreement where our competitor countries take similar action. Increasing our own targets while the rest of the world does nothing will have virtually no measurable effect on global emissions, because it will force large EU emitters to relocate to other countries outside the EU where they will continue to emit at a much lower cost.  We are also concerned that the higher carbon emission costs resulting from an increased target will feed through into energy price increases for domestic consumers"

It is also important to remember that this vote was not so narrowly lost as some would like to think, the vote was lost by more than a third.  So perhaps those voting against it are not just blindly doing so, maybe they are also looking at this from a common sense perspective?