Key Learnings for Business

Dissemination of Responsibility

Providing staff with responsibility for their own activities has proven a key driver in reducing EPA’s GHG emissions. 

Staff engagement is essential to any effective corporate emissions reduction program.  Giving staff in your organisation more control over their operations can drive engagement and enhance opportunity identification.  Developing a program which creates a friendly sense of competition between groups can also be highly effective.  Competition can improve motivation and further drive emission reduction. 

An Internal Price on Carbon

An internal price on carbon drives significant change when it is embedded within your organisational systems.  It will allow staff to consider the carbon price in addition to the regular price of a carbon intensive purchase.  For example, when a staff member chooses to fly, the cost of the flight is all that is accounted for.  Including the environmental impact into your decision making and systems will prepare you for the future, when there will be a carbon price.

A Cap and Trade Scheme can assist in setting a price on carbon.  The proposed CPRS plans to use a mix of auctioning (where companies will bid for permits at the start of the scheme for a price they feel is appropriate) and free allocation of permits. In larger schemes, auctioning permits distributes allowances more efficiently than free allocation, and creates an early and more accurate price signal.  The revenue generated through auctioning can then be used to offset scheme costs for adversely affected entities.  However the effectiveness of auctioning depends on the size of the scheme and the number of allowances available.

EPA’s Scheme is relatively small, so we chose to freely allocate permits to reduce the administrative burden.  A price signal was created by having a trade at the start of the scheme. The number of permits issued to the market will impact the strength of the price signal. The fewer permits available, the higher the price.
It is therefore important to correctly measure the emissions baseline and to set appropriate targets.

Maintain Focus on Drivers

EPA’s key focus for this Scheme was learning and development. Each business is different,, and should establish its own key drivers upfront to develop a program which appropriately reflects them. Some of your business key drivers may include:

• Reducing emissions
• Staff engagement and learning
• Reducing business costs
• Preparing for legislation
• Benefiting reputation

Simplicity and Communication

There needs to be clear and consistent guidelines on the rules for trading and participating in a Cap and Trade Scheme, or any similar carbon pricing program. 

These types of programs can be very complicated; ensuring all parties have access to the information they need and understand their responsibilities is essential for effective implementation.

Flexibility will need to be retained within the scheme to allow for adjustments in response to changing circumstances.  Businesses change rapidly and a carbon pricing program needs to be adaptable to this.  These governance changes need to be clearly communicated to all participants.

 

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