Firms unsure on how to lower emissions

In a recent report conducted by the Australian Industry Group (Ai Group), it was found that the vast majority of Australian companies want to reduce their greenhouse gas emissions, but only 10% say they have the know-how to do it.

A survey of 800 companies from the manufacturing and commercial construction sectors in Victoria, NSW, Queensland and South Australia revealed a wide variety in levels of understanding with regards to climate change. A further 56% saw opportunities from climate change to promote their company as socially responsible and to improve energy efficiency and lower costs, while 78% felt that it was responsible to reduce carbon emissions even if it added to costs.

But only one in 10 companies said that they had enough information to appropriately manage the risks associated with climate change.

Victorian Minister for the environment and climate change, Gavin Jennings said that the first step for businesses wanting to reduce their carbon footprint was measuring their current emissions.

"By developing a baseline, businesses can begin to apply smart and often quite simple solutions to reduce their emissions," he said, adding that businesses will also save money because actions that save energy, water and resources can lower costs as well as reducing greenhouse gas emissions.

The government's role

In December 2006, the Howard government announced the establishment of a joint government-business Task Group on Emissions Trading, which was made up of leading business and government advisors and was supported by a joint government-business secretariat. The aim of the task group was to ensure that in "assessing Australia's further contribution to greenhouse gas emissions ... (economic) advantages must be preserved."

But what are trading schemes and who are they going to have the biggest impact on?

According to the report, the most common type of emissions trading systems are known as 'cap and trade' schemes. Under such a scheme, the government determines limits on greenhouse gas emissions and issues tradable emissions permits up to this limit. Each permit represents the right to emit a specified quantity of greenhouse gas. The report goes on to say that businesses must hold enough permits to cover the greenhouse gas emissions they produce each year. Permits can be bought and sold, with the price determined by the supply of and demand for permits. Governments can choose how they wish to allocate permits by auctioning, grandfathering, benchmarking, allocating to meet specific equity objectives, or any combination of these options.

At this stage it's hard to determine what the long- and short-term benefits will be for an emissions trading scheme, but the task group believes that the benefits outweigh the costs, especially if Australia adopts the scheme early. The report concludes that some of the short-term benefits are:

• Enhanced business certainty — there is evidence that investment in key emissions-intensive industries and energy infrastructure is being deferred and the development of a clear and coherent national framework for dealing with carbon constraints will improve the business environment.
• Position Australia for international developments. Adopting an Australian cap and emissions trading scheme ahead of comprehensive global action would demonstrate Australia's clear and contained commitment to making a fair contribution to the overall global response. It would also enable Australia to engage early with major emitters and key developing countries and to respond flexibly to the broad range of possible international developments.

The report goes on to say that in the longer term, it is widely acknowledged that the use of new and presently immature low emissions technologies (along with the more widespread use of existing technologies) will be needed to deliver deep and sustainable emission reductions. It is also becoming increasingly clear that many low emissions technologies will require a carbon price signal to make them competitive. The introduction of an emissions trading scheme can play an important role in motivating development and deployment of low emissions technologies.

The way forward for industry

Ai Group chief executive Heather Ridout said industry shared an understanding of its obligations but was also aware of the risk to their competitiveness from higher costs.

"Companies need more information on how they can improve sustainable practices, they need a better understanding of an emissions trading scheme and they need better incentives, particularly for small to medium firms."

"Companies are deeply conscious of the need to lower their greenhouse emissions, and are taking steps to reduce their electricity, gas, water usage and waste productions," she said.

There is still a long road ahead with the implementation of a successful emissions trading scheme, and according to the task group there is no room for complacency. It involves government working with industry and the community.

Currently, Australia represents 1.5% of the world's greenhouse gas emissions and is on target to reduce emissions by 87 million tonnes per year by 2010. It is a global issue, and for emissions trading to be effective both environmentally and economically, it has to have a global response; it is the only way forward.