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April saw the launch of a scheme
which will result in departments paying tariffs for all their carbon emissions.
The Environment Agency’s Tony Grayling tells Ruth Keeling about a radical move
to improve sustainability

Departments
have, for some time, been under instructions to become more sustainable. After
all, how can the government tell members of the public to recycle more, use
less water, or switch to energy efficient light bulbs if public bodies are
failing to do the same themselves? Until recently, progress was patchy and, at
times, disappointing – as shown by a number of critical verdicts from bodies
such as the Sustainable Development Commission. Performance has improved,
however, and now there is a new reason for departments and other public bodies
to get their houses in order: they will soon have to pay a charge for every
tonne of carbon they emit.

The CRC
Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment
scheme), administered by the Department for Energy and Climate Change (DECC),
was established in the 2008 Climate Change Act and started operating this
month. Covering organisations in the private, public and voluntary sectors, it
is an emissions trading scheme that will punish those organisations that fail
to reduce their energy use, and reward those that do (see box for details).

The scheme
is targeted at organisations whose energy use is relatively small – at least
compared to heavy industry and other energy-intensive operations – and where
energy doesn’t represented a major corporate expense. Many such organisations
won’t have paid much attention to energy efficiency in the past. Tony Grayling,
head of climate change and sustainable development at the Environment Agency –
which has developed the scheme for DECC – says the CRC is aimed at a sector
that contributes to up to 12 per cent of the UK’s CO2 emissions, and therefore
has an important role to play if the country is to meet its target of reducing
greenhouse gas emissions by 34 per cent by 2020 (from a 1990 baseline). For
this reason, he believes the scheme “is probably the most important new
carbon-abatement policy since the introduction of the EU emissions trading
system” – the union’s flagship carbon emissions market.

The EU trading
scheme has come in for a lot of criticism because less-than-rigorous baselines
allowed “gaming” by participants, says Grayling – indeed, there were reports
that companies were over-reporting their emissions at the start of the scheme,
allowing themselves to increase emissions thereafter without penalty. As a
result, the cap on allowances – and, therefore, emissions – was set at a high
level, depressing the market value of allowances. The CRC scheme will not get
into the same problems, Grayling believes: its first year is reporting only, to
set accurate baselines; and the Committee on Climate Change, an independent
advisory committee set up by the Climate Change Act, has been asked to set the
cap on allowance sales when it comes into force in 2013-14. The Environment
Agency has already advised that the government’s initial calculation – which
envisaged that the scheme would produce an eight per cent reduction in
participants’ emissions – should be increased to 20 per cent.

Grayling,
it is worth noting, is passionate about environmental issues, which have been
central to his career. Before joining the Environment Agency, he was special
adviser to environment secretaries David Miliband and Hilary Benn while the
Climate Change Act was being prepared. He has also been the head of the
sustainability team at think-tank IPPR, and before that adviser to transport
minister Gavin Strang, working on the ill-fated integrated transport white
paper. He joined the Environment Agency, he explains, because he wanted to get some
delivery experience.

His links
to Labour – earlier in his career, he was researcher for the Labour MPs Ron
Davies and then Anne Campbell – shouldn’t count against him if the
Conservatives win the election, he says. “My job is non-party political,” he argues.
“I put aside my own political views when I come to work.” Also, he adds,
climate change and environmental protection have become non-party political
issues, with “a competition to see who can have the best policies”.

Interestingly,
Grayling once wrote a paper for the IPPR, criticising the EU trading scheme for
failing to include transport; yet the CRC scheme also does not include
transport – only emissions from ‘stationary installations’ such as buildings.
Grayling admits that his personal view is that transport should be included in
the scheme, but emphasises that that has not been the advice of the Environment
Agency to the government – though the agency has set itself targets on
emissions from travel, despite the exclusion of transport emissions from the
Office of Government Commerce’s (OGC) sustainability targets for public bodies.

Grayling
says the scheme has to start somewhere, and he and his colleagues are focused
on getting it up and running successfully. After the first reporting year,
participants will have to pay £12 per tonne of carbon emitted, but Grayling
says the financial incentive is only a part of the scheme; he believes it will
be reputational concerns that will really motivate people. The financial
penalties, when looked at in comparison to the overall budgets of the
organisations involved, “are not huge”, he points out, whereas the very public
league table “will probably affect how their customers view them”.

One of the
scheme’s aims is to get the attention of the participating organisation’s
leaders. Because these are companies whose energy bills are not huge, “there
will be energy managers within those large organisations who are concerned
about energy use, but the directors and the members of the boards probably
haven’t taken a huge amount of notice”, explains Grayling.

This
problem of leadership interest in sustainability has bedevilled the civil
service in the past, Grayling admits. “I just don’t think until recently that
it has been the focus of the attention of senior civil service and ministers –
but it is now,” he says. The change, he believes, is due to the pressure placed
on departments by the need to complete climate change action plans, and by the
inclusion of sustainability in permanent secretaries’ performance appraisals.
Now all permanent secretaries have the CRC scheme to think about, he adds,
after “the government rightly took the decision that all government departments
would be participants” – regardless of whether departments use enough energy to
formally qualify for inclusion in the scheme.

Sustainability
has long been an aspiration of government, and this might suggest that Whitehall departments may
have an advantage over private sector participants in the CRC. There will, for
example, be CRC credits for organisations which install smart metering and
adhere to Carbon Trust standards – already a requirement under the OGC’s
sustainability framework for departments. However, as the Sustainable
Development Commission’s 2009 report stated, departmental performance on such
benchmarks is still variable.

Public
bodies cannot, in other words, afford to rest on their laurels. Not only may
they have to pay out for carbon allowances at a time of falling budgets; but
they also face the embarrassing prospect of being shown to be less sustainable
than commercial counterparts, at a time when government is instructing those
same companies and members of the public to act on climate change. This would
be embarrassing for political leaders – and, thus, uncomfortable for civil
service leaders.