Addressing the Challenge to the I ndustry

A few slides on:

Why have a carbon management strategyThe UK carbon challengeLatest policy driversConsumer pressure on the supply chainReducing carbon in the supply chain & carbon labelling

W hy Manage Carbon?

Company

Policy & Regulation

Costs

Reputation &

Consumer pressure

Existing pressures

Reduce CostsReduce energy bill through energy management important as prices have risen significantlyImprove operational effectiveness

Com ply w ith Regulat ionEnsure compliance for up-coming rounds of Climate Change legislation, EU ETS, Buildings Directive, and more

Enhance or Maintain ReputationMaximise brand & reputational impact of reducing carbon emissions

lead to opportunities to..

The UK carbon challenge

The UK s direct emissions of CO2 are 560 million tonnes(MtCO2) a year

40% of UK CO2 emissions are created by business

The Government s target is to reduce the UK s emissionsby 60% by 2050

The move to a low carbon economy presents significant challenges but huge opportunities

Meeting the projected 60% emissions reduction requires technology innovation in addition to energy efficiency

Meet ing the UK carbon challenge

* Assumes full implementation of all CCPR measures and central impact of energy white paper measures. Sources: Climate Change Programme Review (CCPR), Energy White paper emissions projects, June 2007. Note that current BAU emissions projections post 2020 show rising emissions which would tend to increase the size of the gap to the 2050 60% reduction target

UK CO2 Emissions Trajectories

Moving the debate forw ard

Scientific Case In 2007, 600 scientists on the UN Intergovernmental Panel on Climate Change (IPCC) agreed that climate change is caused by human activity

Economic Case In October 2006 the Stern Review on the Economics of Climate Change found that if climate change is left unchecked it could cost the equivalent of 5-20% of Global GDP to tackle

Political Case Business and the public are increasingly calling on the Government and politicians for leadership

Policy Latest Budget 2 0 0 8

UK is taking a leadership role on EU and international action:

Phase III of the EU ETS20% target reductions by 2020 20% renewables by 2020Regulatory framework for carbon capture & storageLondon promoted as centre for expertise in carbon trading

Other Highlights

Carbon budgets to be set alongside financial budget for 2009Incentives for increased use of bio-fuelsAll new commercial buildings zero carbon by 2019Promotion of energy servicesIncreased support for R&DIncreased Climate change levy ratesProportion of electricity from renewables x3 by 2015

EMPHASIS IS ON A COMMERCIAL APPROACH

Energy Perform ance Cert ificates

Required on construction, sale or letApril 08 >10,000m2

July 08 >2,500mNovember 08 the restLast for 10 years

UK Quarterly press coverage of climate change issues

Source: Factiva and Lexis Nexis: UK English language press mentions including global warming, climate change, greenhouse effect or greenhouse gas

0100020003000400050006000700080009000

94 95 96 97 98 99 00 01 02 03 04 05 06

Stakeholder aw areness is grow ing

People do not think business is doing enough to cut carbon emissions and tackle climate change

Consumers remain sceptical of green claims currently being made by business

79% do not think businesses is doing enough to help consumers make informed choices about the carbon footprints of the products they sell

70% of respondents in the UK said that climate change claims should be proven by independent parties. Scientists, environmental groups are seen as credible.

Responsibility

67% say they are more likely to buy a product with a low carbon footprint

Consumers say they are willing to alter their purchasing decisions based on product/service carbon footprint information

Consum er behaviour

W hat is the footprint of a product?

Aluminium ProductionSugar farming

Cola productionPackaging

TransportationChilled storage

Refrigeration Can collectionRecycling or disposal

Disposal & recycling

Consumer use

Raw material

Product manufacturing

Total carbon footprint of the can of cola (illustrative)

Supply chain / value chain of a can of cola

Distribution & retail

Hot topic: food m iles

W alkers34.5g Cheese & Onion

I nnocent250ml Mango & Passion Fruit

Total = 75g CO2e Total = 294g CO2ePotato distribution: <1%

Making nitrogen fertiliser: >15%

Source: Carbon Trust Low Carbon Supply Chain Pilot, March 2007

Cutting food miles is important to reduce transport impactsBUT

Food miles is a poor indicator of the overall impactLocal sourcing m ay increase the footprint of a product

Growing & Packing: 23%Raw materials transport: 14%

Making the packaging: 30%

Smoothie-making: 21%

Distribution: 10%Disposal: 2%

I n March 0 7 , launched the init iat ive w ith 2 com ponents

2. Company Engagement1. Standards Setting

Developing standards to:Measure;Reduce; andCommunicate

the GHG emissions from goods & services

Product footprinting & reduction projectsTesting the Carbon Reduction Label

About the Carbon Trust

The Carbon Trust was set up by government as an independent company

Our mission is to accelerate the move to a low carbon economy

We work with organisations to reduce carbon emissions and develop commercially viable low carbon technologies

To deliver our mission we bring together public and private funding and encourage cross sector partnerships

As a Company Limited by Guarantee any profits we make are reinvested to help deliver our mission

Our act ivit ies cover 5 com plem entary business areas

Insights

Explains the opportunities

surrounding climate change

Innovations

Develops lowcarbon technologies

Investments

Finances clean energy businesses

Solutions

Delivers carbon reduction solutions

Enterprises

Creates lowcarbon businesses