Pasted on the wall beyond the sandwiches are a dozen paper slips advertising carbon allowances, either for sale or being sought. Among the lunchtime chat, trades are being negotiated. Wakefield Council is hundreds of allowances short - the result of a 50% underestimation of its carbon footprint - and looking to buy anything. Marshalls, which makes paving and other landscaping products, just wants a good price for its last few allowances.
Talk in the corridors is of bulk-buying ‘safety valve’ allowances from the EU emissions trading scheme (EU ETS) to sell on at a profit, but no one takes the plunge.
Wakefield and Marshalls are among 44 members of Carbon Trading Yorkshire (CTY), a year-long voluntary trading scheme mimicking the CRC that began in January 2009. Trades were done online through the year, but members met in Leeds in March for final face-to-face trading and to share their experiences.
Admittedly, using virtual money makes spending decisions easier, but the scheme still provides an insight into the hurdles facing CRC participants and possible market dynamics.
"It was a learning process; we wanted people to make mistakes," says Pete Stevens, an account manager at CO2Sense Yorkshire, a business advisory service and the scheme’s organiser.
Many participants struggled to collect accurate energy data, particularly historic figures, he says. Even though they could choose which parts of their emissions portfolio to include in the scheme, a fifth failed to provide complete emissions reports.
Even participants with data systems in place had problems with consistency. Seven organisations went through restructuring or mergers and several others had significant staffing changes. In one case, a disgruntled employee deleted ten years of data before leaving, says Mr Stevens. He suggests all organisations subject their energy data to at least an internal audit.
Northern Rail, another participant, monitors 787 meters across its network. Some can only be read by staff who have done a five-day safety course. Utilities manager Euan Hilton says a quarter are read regularly, with bills usually estimated for the rest.
A dispute with the firm’s former energy supplier means no billing information has been received since last June. And, he says, a facilities management company contracted to read meters twice a year often turns in incorrect data.
He is drawing up more detailed guidance on meter locations for the contractor and fitting 300 automatic meter reading (AMR) systems at sites with the biggest load. But efforts to manage emissions will still be hindered by the limited period left on Northern Rail’s franchise, minimal enthusiasm from other departments, such as IT, and station upgrades and maintenance work that can boost energy use at short notice, he says.
Wakefield Council is also putting systems in place. It managed to achieve the Carbon Trust Standard after compiling three years’ worth of energy data by hand from its bills. It is now entering the data on a computer reporting system.
The CTY started with 35 participants from Airedale NHS Trust to Young’s Bluecrest Seafood. Only one dropped out. Unlike the real CRC’s introductory phase, the CTY simulation had an emissions cap set 5% below the participants’ combined emissions and a sealed-bid auction of allowances. Altogether, about 990,000 allowances were sold at an imaginary £12 each, each representing the right to emit one tonne of carbon dioxide.
Few trades were made during the early months but in June, when ten more participants wanted to join the scheme, CO2Sense held another auction. This time, the price reached £14/t. After that, liquidity picked up and prices rose to just under £20/t.
Although the market was initially short of allowances, there was a surplus by the autumn among participants with full data sets. Over the year as a whole they cut emissions by 6%. Some of the fall can be attributed to the economic situation, but late 2009 also brought unusually cold weather which often pushes up energy use.
A CTY rule forced participants failing to supply full data to buy 10% more allowances than they would otherwise have needed. The realisation that they would need these extra allowances helped push prices up in the autumn, says Mr Stevens.
Limited liquidity probably contributed too. Only 16,000 allowances - about 1.5% of the total pool - had been traded by the live-trading day. The same thing could happen in the CRC because organisations will have most of their allowances in advance and will only be trading around the margins, he says.
An impressive 11,500 allowances were traded in Leeds in March at anywhere from £14 to just under the safety valve price of £25.33 depending on the canniness - and desperation - of the traders. Some clearly would have benefited from trading earlier.
Kath Chapman of Energy Services Partnership (ESP), a consultancy that traded on behalf of a cold storage firm, says monthly emissions data are essential to having an active trading strategy. ESP put in place the kind of management systems found on proper trading desks so every team member could react to market changes without seeking authorisation. Finance departments are better equipped to deal with this aspect of the CRC than energy or environment teams and should be closely involved, she argues.
Some CTY participants still plan to minimise the risks of trading in the real CRC by buying more allowances than they think they will need at the start of the year, says Mr Stevens. But he urges them to consider the energy saving and cost-cutting measures they could achieve with the same money.