Carbon trading needs carbon training

It seems that everyone is talking about the Gillard Government’s carbon plan. Some are yelling. Meanwhile, an essential legislative precursor – the ‘National Greenhouse and Energy Reporting (NGER) Act’ – was enacted in 2007 without a peep. This act requires all organisations with emissions and energy consumption above certain thresholds to report this data to the Federal Government. We have to know ‘who produces what’ regardless of whether we are to tax them, have them trade permits or undertake Tony Abbot’s ‘direct action’.

An interesting question arises:  How does an organisation know if they are above the mandatory reporting thresholds? Answer: They only know after they have determined their data to the NGER requirements.

In other words, just being a ‘smaller polluter’ doesn’t mean that the effort of complying with the NGER Act can be avoided. The work still needs to be done in-house, or consultants brought in, even if it is just to determine that nothing needs to be reported!

NGER compliance can pose particular challenges for such organisations. Our biggest organisations can usually afford in-house specialists in energy and emissions. However, many organisations cannot, leaving some scrambling in achieving reporting compliance, let alone having enough time to think about how best to improve their energy and greenhouse performance.

The Australian Industry Group is on the record as saying that many such organisations see both these compliance and strategic tasks as areas of significant skills shortage. This is backed up by the NGER data itself – the Federal Government has to date received significantly fewer NGER reports than anticipated. This could be in part conspiracy rather than cock-up, but given that most organisations were already flat out prior to passage of the NGER Act, the latter seems much more likely. Once carbon is priced, all of this starts to directly affect the bottom line, so the workload should increase.

(As an aside, the University of Melbourne sees this as an opportunity and has established a degree aimed at addressing this need – the Master of Energy Systems.)

It will take us a while to get the hang of such a major change to business. It is therefore good policy to fix the price on carbon whilst we are in ‘carbon training’ – trading can wait until we really know what we are doing. Let’s wait and see when the Government of the day decides that our training is complete and allows trading to commence.

Which brings us to important questions: How accurately can I determine my organisation’s greenhouse gas emissions and how does the government know if I am telling the truth? This is particularly an issue for methane emissions from both coal and natural gas. Given methane’s high global warming potential, relatively small errors in its emissions can lead to significant changes in CO2 equivalent emissions. This, in turn, poses many other important operational questions: Are my gas meters accurate and regularly calibrated? How do I know if I have significant gas leaks? The list goes on.

Our carbon training is therefore very much a work in progress. As this new world unfolds, we will work out how to do all of this much better – more accurately, quicker and cheaper. Auditors, technical and business consultants will be an important part of our developing national capability.

Indeed, might this government-mandated training result in export opportunities for consulting firms, as other countries work out their own greenhouse plans?

This is an edited version of an article that appeared in the Winter 2011 edition of National Outlook Magazine. Michael Brear is an Associate Professor of the Melbourne School of Engineering at the University of Melbourne.