Baseline information key to establishing company’s carbon footprint

25th January 2008 By: Guy Copans

Establishing an accurate baseline for a company’s carbon emissions is essential if a company is to formulate a sustainable policy to combat carbon emissions, says Marbek Resource Consultants MD Geoff Stiles.

Using the Clean Development Mechanism (CDM), a company in South Africa can develop projects to reduce carbon emissions, and can then sell these ‘carbon credits’, to other countries. The goal of the CDM is to allow organisations in industrial countries that need to reduce their own carbon emissions to invest in CDM projects in developing countries such as South Africa, and through this investment use the South African credits to offset their own national commitments to reduce greenhouse gas emission, by about 25% of these commitments, although the amount varies by country. In this way, the CDM helps to reduce global greenhouse-gas emissions, since greenhouse gases are a global pollutant, not a local pollutant, says Stiles.

Although South Africa has not yet set its own carbon emission targets, and CDM projects are, therefore, voluntary, companies may still benefit from selling carbon credits to entities in industrial countries, and, in so doing, also improve their own greenhouse gas emissions. Stiles points out that by developing a detailed record of their baseline carbon emissions over the past three to five years, South African companies will be able to identify CDM project opportunities more easily, ensure better environmental ‘housekeeping’, and possibly reduce other emissions in the process.

Despite the opportunity for inter- national companies to buy carbon credits directly by investing in CDM projects in South Africa, this rarely occurs, Stiles comments. Instead, most local companies have decided to incur the costs of the project themselves, increasing the prospect of selling the credits later at a higher price, he notes. Credits for reduced emissions are denominated in tons of carbon dioxide equivalent, no matter which greenhouse gas is being reduced.

Stiles says that South Africa’s large industrial economy places it in a good position to obtain carbon credits through the CDM from foreign countries.

Unfortunately, he adds, since South Africa’s energy prices are quite low, companies will often not see an immediate financial payback from implementing projects to reduce emissions, such as improved energy efficiency or the introduction of renewable energy sources. The CDM can, however, provide an addi- tional revenue stream that makes such projects more financially attractive. For example, he says, if one wants to install a solar water heater in one’s home, the payback period will be about eight to nine years for high-income homes, and 13 years for low-income homes.

Qualifying a project for the CDM is also a very bureaucratic process and can take some time, with the company often having to bear the cost upfront, says Stiles.

One of the latest environmental trends in combating greenhouse gas emissions is capturing methane gas from landfills, and using the flammable gas to generate electricity, thereby both destroying the harmful gas and providing a non-carbon source of electricity. Stiles says that a ton of methane destroyed is worth 21 to 22 carbon credits, making it worthwhile for companies to invest in capturing and destroying methane gas. Other examples of viable CDM projects include coal-to-gas conversion, wind farms, and small hydro-plants. However, most renewable energy projects tend to be more small scale, so the amount of work put in is often disproportional to the benefit, he comments.

Stiles says that, based on the first report from the National Business Initiative’s Carbon Disclosure Project, the chemical, smelting and metallurgical industries tend to be the largest carbon emitters. He adds, however, that although it is difficult for these industries to limit their emissions, as they are energy-intensive industries, most of those reporting have achieved significant improvements. He also notes that large-scale industries have only recently started applying best practices in cutting carbon emissions, and that options such as solar energy, while effective for smaller businesses and households, are not likely to become a substantial means of reducing carbon emissions for industry in the foreseeable future.

Stiles says that the South African government is committed to meeting certain environmental targets, but has not set greenhouse gas targets, as it is still navigating the best way forward. It will, therefore, be a challenge, he says, for companies to meet the as yet undefined expectations of the government regarding greenhouse gas emissions.