Increasing energy prices have spiked the attention of manufacturers over the past five to ten years, and with the impending arrival of the Australian emissions trading scheme, which will place a price on carbon, energy prices will only escalate further.
Add to that the new requirements on businesses to report on their emissions and energy consumption and production under the National Greenhouse and Energy Reporting Act 2007, and you have reason enough to get serious about managing carbon emissions.
“Increasing energy prices and the new reporting requirements will force manufacturers to put in place energy efficiency measures and implement appropriate systems to help manage emissions inventories and reporting obligations,” Logica energy consultant Paul Glover told FEN.
“With the introduction of legislation that is going to require manufacturers to start reporting upon their energy use, the industry’s incentive to accurately monitor energy consumption and carbon emissions is growing,” Glover said.
Business Risk
Key Energy Consultant Mark Searle agrees that carbon emissions are becoming a growing a business risk for manufacturers.
“Ten years ago there was some scepticism and genuine ignorance that energy consumption and carbon emissions were going to pose a real problem for manufacturers,” Searle told FEN.
While a lot of industries are doing nothing about energy efficiency because the requirements are too complex, according to Searle, the steps towards managing carbon emissions and improving energy efficiency are simple.
“There is a degree of inertia in the market place over this issue. Measuring your emissions is the first step, and a simple one at that,” Searle said.
According to Searle, the state and federal government have imposed a very bureaucratic solution to the problem of carbon emissions on manufacturers.
“There is currently confusion in the domestic market over what is actually required for cutting carbon emissions and this is transferring to the industrial market. Manufacturers need some clear and consistent guidelines to show how they should monitor emissions,” Searle said.
“There is no doubt that the Australian Carbon Emissions Trading Scheme, if designed properly, could be an effective instigator of a national response to energy consumption,” Searle said. The beginning of the Australian carbon emissions trading scheme, which is scheduled to start at the beginning of 2010, will see carbon emissions have a price allocated to them.
“Emissions have always been an externality associated with many industrial activities, however, carbon will have a price under the emission trading scheme and companies will have to account for that price in their day-to-day decision making process,” Glover said.
“There are a few reporting requirements out there at the moment including the Energy Efficiency Opportunities Act and the Greenhouse Challenge Plus which actually encourage business to start putting in place programs to reduce their emissions,” he said.
National greenhouse and energy reporting legislation will require all companies that emit carbon dioxide over a certain threshold to start monitoring those emissions and report that to the government on an annual basis.
“The national greenhouse and energy reporting compliance period will start on July 1, 2008, and manufacturers will have to start actively recording energy consumption and production data, with first reports required by 31 October, 2009,” Glover said.
“Manufacturers must start to look at their processes internally to begin to capture this information. They also have to implement quality control processes to ensure that their annual emissions report is not materially misstated”
Penalties
The penalty for not doing so will rest with the CEO, and could possibly result in fines of up to $220,000.
“Australian manufacturers have had no incentive to do anything about managing carbon emissions, but now there is a clear incentive. Carbon will have a price, and if manufacturers don’t effectively manage that risk to their business, they will be out-competed within their own market,” Glover said.
“This isn’t just about compliance reporting, this is about accounting for the cost of emissions to your business from a whole of operation level. Research suggests that companies can easily reduce their energy consumption by up to 10% and when prices are allocated to emissions a 10% reduction may represent a significant saving.”
Measuring your emissions can be childishly simple, according to Searle.
“Once manufacturers know their energy consumption it is easy to calculate their emissions,” Searle said.
“Getting a benchmark of emissions versus production is not difficult and most people have that sort of data available. I predict there will be a business environment where people prefer to give their business to companies that are environmentally conscious.”
Searle’s message is simple; manufacturers should just get the job done now.
“Manufacturers need to get a hold of the last two years of energy and production data and set a bench mark on their energy consumption and carbon emissions. Even a quick review of work practices and energy flows can be helpful to establish a plan for energy reductions,” Searle said.
According to Glover, managing this issue on a spreadsheet is no longer going to cut the mustard.
“The issue needs to be taken seriously now. Manufacturers don’t need a PhD in engineering to target the most achievable goals to reduce energy consumption. They should target the simple things and in 12 months time they will see the savings,” Glover said.
Cutting emissions can be as simple as rolling out company-wide campaign to raise awareness and get staff feedback on a company’s processes, according to Glover.
“Ultimately it will be factory staff that has the best understanding about the stages where energy savings can be made,” Glover said.
“Abatement projects may come at a cost for companies, but evaluating and implementing abatement projects that reduce emissions at low cost will reduce the carbon exposure of a company and provide it with a competitive advantage.”
Key contact:
Logica
02 8062 3000
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