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Carbon Management & Carbon Neutrality in the FTSE All-Share
03 July 2006
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Key Findings
- Efficiency measures are the most important and often the most economical step in reducing corporate emissions. It should be the first course of action for most companies.
- For companies regulated by trading schemes, emission trading is usually the most economic method to reduce emissions after all reasonable energy efficiency measures have been implemented.
- CDM and JI are credible and verifiable ways of offsetting emissions, but the market is subject to restricted supply and relatively high set-up costs.
- Voluntary offsetting is often cheaper, but the market is currently unregulated and the actual emissions offset are often difficult to measure and verify.
Extract
This report outlines how to develop a carbon management strategy from measurement to abatement, trading and offsetting. At each stage the opportunities and complications are discussed. The aim is to assist companies embarking on carbon management strategies and give investors key information that will allow them to understand and evaluate the different approaches that companies employ. The growing importance of carbon emissions as an issue and the rapid development of products and markets with new and unfamiliar terminology have created some confusion regarding the precise meaning of some of the concepts involved. This report is an attempt to clarify some of these issues.
Why did Standard Life Investments and the Environment Agency commission the research?
It is generally recognised by business and investors that in order to manage financial risks from climate change impacts and to exploit financial opportunities from carbon management, the businesses we invest in will need to reduce their carbon ‘footprints’ and develop new low carbon products and services. Increasingly, companies are seeking to demonstrate that they are meeting these challenges by using ‘carbon neutrality’ as part of their response to a lower carbon economy. Yet there is no commonly agreed definition of the term ‘carbon neutral’ and there is evidence of this being exploited for PR purposes.
In addition, there has been little debate by business and the investment community about the role and relative efficacy of ‘carbon neutrality’ compared to other carbon management strategies, or its relevance as applied in different business sectors. The motivation of Standard Life Investments and the Environment Agency in sponsoring this research was to promote a timely discussion of these key issues by the business and investment community, and we look forward to a lively debate which leads to better awareness, understanding, and disclosure of carbon management strategies by FTSE listed businesses.
Report Image: Emission reporting boundaries
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