BT calls for tradable carbon certificates

BT has proposed that the new guidelines for renewable and low-carbon electricity tariffs should allow for a new market in tradable low-carbon certificates. It joins environmental groups in saying that the guidelines should become mandatory at some stage.

Proposals on voluntary guidelines for electricity suppliers offering green tariffs were issued for consultation by Ofgem in November (ENDS Report 395, pp 45-46 ). They suggested that the guidelines should be broadened to apply to business customers as well as households, but should be voluntary to enable them to be more easily amended in response to market developments.

Ofgem also said that to reduce customer confusion over what constitutes ‘green electricity’, there should be two rating schemes: one for renewable tariffs and another for low-carbon tariffs.

Suppliers that sign up to the guidelines would have to present information on generation in a standard format, and the information would have to be independently verified by a third party. Ofgem wants suppliers to develop the scheme within six months of the publication of the final guidelines.

Ofgem had hoped to issue the final guidelines in February and for the certification scheme to be operating six months later. But in February it announced a delay in the timetable due to difficulties in addressing ‘additionality’, the issue of whether new capacity is additional to suppliers’ legal requirements under the Renewables Obligation and the Energy Efficiency commitment. It now expects to issue the guidelines in "early summer", with the certification scheme operational by the end of 2008.

In its response to the consultation, BT - the UK’s biggest buyer of green electricity - said that while it may be appropriate for the guidelines to be voluntary "in the first instance", the availability of detailed evidence of the carbon intensity of all electricity generated in the UK "must, at some level, be mandatory" to avoid double counting.

The main electricity generators want the guidelines and the certification scheme to be voluntary, but organisations in favour of a mandatory scheme include the Renewable Energy Association and the Carbon Trust. The Energy Saving Trust says all suppliers should be required to follow the guidelines if some fail to do so voluntarily but that certification should not be mandatory.

As one of the top ten electricity users in the UK, BT sees reducing its CO2 emissions as a key plank of its corporate responsibility strategy and has a target to cut emissions by 80% over the 20 years to 2016. One way in which it is trying to do this, is through the purchase of low-carbon energy - in its case, gas-fired combined heat and power (ENDS Report 386, p 9 ).

BT’s proposals, which it has also outlined in letters to Environment Secretary Hilary Benn and Business Secretary John Hutton, say that no electricity consumer should report CO2 emissions stemming from electricity consumption on the basis of a national grid-average and a supplier’s overall fuel mix. Instead suppliers should provide emission figures for each individual tariff they offer.

Another problem, says BT, is that the fuel mix disclosure data for the UK electricity mix, published on the Business Department’s website, is inconsistent with data on UK electricity consumption, such as the emissions factors published in the Environment Department (DEFRA) company reporting guidelines for greenhouse gas emissions.

BT added that this "lack of joined-up thinking among Ofgem, DEFRA and others…may ultimately lead to a breakdown of consumer trust in CO2 information" and "provide a threat to corporate social responsibility".

If companies such as BT are to be able to report robust figures for their CO2 emissions, the tariff guidelines must be based on a methodology that requires electricity suppliers to provide data that is verifiable as equal to the data held by generators for compliance under the EU emissions trading scheme.

To achieve this, "certificates carrying actual CO2-content information should be created at the point of electricity generation, split from physical supply and traded on a separate market". This would work in a similar way to the market for renewable obligation certificates (ROCs).

Each megawatt of electricity generated would be matched at point of generation with a certificate of its carbon content. This could be done in aggregation, over a year, for each generator.

The generator could ‘borrow’ certificates, to sell ahead of settlement, provided they matched all borrowed certificates, at settlement, with actual certificates for that period.

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