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The Northwest Climate Fund. Launch Plan. May 2008. Page 1 The Northwest Climate FundLaunch Plan, May 2008

The Northwest Climate Fund. Launch Plan. May 2008. Page 2

CLIMATE CHANGE SOLUTIONS. RIGHT UP YOUR STREET.

This launch plan for the Northwest Climate Fund (the Fund) was commissioned by the Northwest Regional Development Agency (NWDA) on behalf of the Northwest Climate Change Partnership in February 2008. The plan followed a ‘concept stage’ project where the idea of a regional carbon reduction fund was drawn up with the assistance of a steering group of stakeholders from local and regional government and the private sector.

The current plan was drawn up by a consortium led by Creative Concern which included Arup, BDO Stoy Hayward LLP, Groundwork, Lancashire Wildlife Trust, Pannone LLP, Quantum Strategy Technology and Vision 21.

This launch plan incorporates business and financial planning, legal guidelines, project scoping and evaluation recommendations, market testing and strategy, national policy ‘fit’ and an independent ‘proof check’.

The plan is intended for funding consideration by the NWDA, to assist a tendering process and to ensure that should the project be given approval, there is a robust launch plan in place to help deliver a Fund that ‘hits the ground running’.


Northwest Climate FundLaunch Plan

Summary(Creative Concern)

Projects (8)(Quantum, Wildlife Trusts & Arup)

OverviewEnergy-related projectsSequestration projectsDevelopmental projectsValidation and verification

Organisation (22)(Groundwork, Pannone & BDO)

Core business unitsCarbon compensationGood causesInnovation and strategyCorporate centreOperational structureStage 1 – IncubationStage 2 – Longer termLegal status and governanceFinancial business planning and review

Marketing (37)(Vision 21 & Creative Concern)

Market testingKey findings - public surveyKey findings - organisationsMarketing strategyOrganisationsGeneral public

Proofing (46)(Arup)

Proof check and programme responses

Policy (49)National and international policy context

Conclusion (51)

Appendices (not included)

Appendix one: Scoping of energy-related projects, Quantum Strategy and Technology

Appendix two: Scoping of sequestration projects, Lancashire Wildlife Trust

Appendix three: Carbon management and the restoration of peat bogs, Sustainability Northwest

Appendix four: Restoration of moorland in the Peak District National Park, Moors for the Future

Appendix five: Outline of validation and verification process, ArupAppendix six: Operational and organisational plan, Groundwork Northwest

Appendix seven: Report on the proposed structure of the Northwest Climate Fund, Pannone LLP

Appendix eight: Draft memorandum and articles, Pannone LLP

Appendix nine: Financial business planning and review, BDO Stoy Hayward LLP

Appendix ten: Results of Northwest Climate Fund market testing, Vision 21

Appendix eleven: Marketing strategy, Creative Concern

Appendix twelve: Initial proof check, Arup

Appendix thirteen: National policy context, Arup

Appendix fourteen: Original NWCF Concept Paper, Creative Concern


Contents

The Northwest Climate Fund offers England’s Northwest a genuine opportunity to invest in an innovative and powerful carbon reduction fund for the region which could help identify, launch and fund a range of small and medium-sized projects across Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside.

The launch plan indicates that there is a strong available supply of local projects, particularly in energy efficiency and renewables, which the Fund could begin supporting from day one and which could offer measurable carbon reductions which would otherwise not be achieved through other local authority or private sector climate change programmes.

A number of genuine projects, from all areas of the region, are detailed in the launch plan to show that there is a ‘gap in the market’ that the Fund can help to fill. An initial examination of these shows that sizeable carbon reductions are possible at a cost of between £8 per tonne of CO2 saved* up to £200-300 per tonne, depending on the complexity, scale and type of project.

The launch plan proposes that these projects be supported through a new, not-for-profit company limited by guarantee which would be steered by a small board of skilled trustees and which would be subject to the scrutiny of the region’s Sustainable Development Group which was established in 2007 to provide independent scrutiny of the operations of regional government agencies.

A set of project validation and verification guidelines has been drawn up to allow the Fund to test any proposed projects against robust and transparent criteria. The most important of the verification tests is that any supported projects would be ‘additional’ to those being initiated by energy providers, local government, business or other agencies: that the Fund would go beyond ‘business as usual’. The verification guidelines outlined in the plan will allow the Fund to report openly on the level of carbon reductions which it has achieved on behalf of the Northwest region. We have deliberately drawn up a set of rules for the Fund that closely follow Defra’s recently published Code of Best Practice for Carbon Offsetting; we have done this in an attempt to adopt best practice, even though the Fund does not intend to present itself as a vehicle for ‘offsetting’ in a traditional sense.

A proposed structure for the Fund’s executive is included in the launch plan, together with initial financial projections which include operating and marketing costs, amount of support donated to carbon reduction projects and targets for income generation.

The targets for income generation have been informed by a survey which has been carried out of both the general public and businesses. This survey reveals that there is market appetite for supporting local carbon reduction schemes across both audiences, with around 17 per cent of the public for example responding that they would be ‘quite likely’ or ‘very likely’ to support the Fund. Of particular importance is the finding that more than 50 per cent of people polled would buy a product (e.g. a luggage tag or bag) if they knew it included a donation to the Fund.


Summary

The launch plan - following the concept plan - still includes a recommendation for there to be some level of voting amongst those contributing to the Fund to allow them to have a say in which validated projects are supported. The proposal of a lottery has been dropped however after market testing revealed that this would not significantly increase uptake.

A corporate support package has been drawn up to make the Fund an attractive proposition for local businesses and in parallel to drawing up this launch plan, discussions have been taken forward with a number of regional businesses both large and small as to whether they would consider becoming a significant supporter of the Fund and its beneficiary local projects.

To make the Fund an attractive proposition for the general public, an outline marketing strategy has been drawn up to help target the market segments - and opportunities - which our market testing shows will unlock the greatest level of support. This includes donations to the Fund at regional airports (more than 20 million people fly out of Manchester Airport each year, for example) and the option to make regular, monthly donations of small amounts (e.g. £5). There is also a suggested approach centred on a branded product range which would reach the 50 per cent or more who would consider giving in this way.

The launch plan also benefits from an independent ‘proof check’ by a separate team which has remained at arms length from the construction of the wider plan. Their findings are included in summary below and at greater length as an appendix. There is also a section of the plan which explains how the Fund will help to deliver regional and national strategies and how the Fund relates to the new Defra guidelines on voluntary offsets.

These component parts of the launch plan show that the Fund could be established relatively quickly and could launch with a range of projects already in the pipeline or even in delivery; in short it could start reducing carbon emissions and tackling climate change from day one. The Fund also could provide an innovative model for other regions or areas that are looking for ways to generate widespread, innovative and local action to help tackle the most pressing problem facing humankind: climate change.

* Throughout this report the term CO2 is used as shorthand to denote ‘CO2-e’ carbon dioxide equivalent. CO2-e is the measurement used to gauge releases of all six greenhouse gases as in a single measure, through the multiplication of individual greenhouse gases according to their ‘global warming potential’.



I EMIT THEREFORE I CAN.

Two factors are critical to the successful establishment of the Northwest Climate Fund: that there is a genuine appetite in both the corporate and public marketplace for a shared regional Fund that supports local carbon reduction projects and that there is a strong and sustained supply of projects which the Fund could support.

In scoping out possible projects, the team drafting the launch plan for the Fund were searching for projects that could genuinely be described as ‘additional’ to business as usual and that would not be taken forward without the Fund’s support. To use a convenient piece of economic terminology, they had to show that they were some elements of ‘market failure’ within current programmes established to mitigate climate change.

The projects outlined in this section of the launch plan fall under two broad categories: energy-focused projects that promote energy efficiency, insulation or a range of renewable energy technologies and projects which have the potential to sequester greenhouse gases through biological ‘sinks’ such as peat bogs. It is recommended that when established the Fund considers further streams of projects including low carbon innovation, possibly through supporting ‘proof of concept’ work and through extending its remit from carbon reduction to small and medium sized projects designed to help the region adapt to the impacts of climate change. At this stage however, the focus is on projects that offer a direct and immediate set of reductions in carbon emissions.

The purpose of this section of the plan is to show that there is the demand for the Fund in terms of available projects and so the list of illustrative projects included here should be seen as supporting the overall proposition of the Fund, not as an exhaustive list of projects that could go ahead: when the Fund is launched there will, of course, be a call for project proposals and a core function of the project team will be to identify ‘additional’ projects and secure a steady supply of resulting carbon reductions.

This section of the launch plan lays out the details of projects, project delivery organisations and possible levels of payback: for further detail on existing carbon reduction programmes, CO2 calculations and technical detail please refer to the appendices to this report.

Energy-related projects

Possible energy-related projects that rely on technical interventions fall into four main categories within the scope of this plan: 1) insulation projects that reduce energy demand; 2) controls and metering equipment that helps to manage energy use; 3) replacement boilers that can increase the efficiency of heat production; and 4) renewable energy schemes that reduce carbon emissions from energy generation.

A general rule for these four categories is that the higher up the listing the projects are, the better the ‘carbon payback’ in terms of tonnes of CO2 saved per pound of investment from the Fund.


Projects

In terms of ensuring that the schemes are ‘additional’ to business as usual across the region, the project team analysed a range of programmes including: the Warm Front boiler replacement programme in vulnerable households; Carbon Emission Reduction Target (CERT), a scheme that supports energy efficiency and renewables in households; the Low Carbon Buildings programme; Carbon Trust; and the region’s environmental business advice programme, ENWORKS.

The project team has identified three main ‘gaps’ in provision of services which the Fund could usefully fill. The first of these is insulation, boiler replacement and heating controls in the homes of the ‘not-quite-able-to-pay’. These are households not eligible for Warm Front as ‘vulnerable households’ but who may be unable to afford their contribution to the cost of insulation under CERT. The second is the installation of renewable energy, where the organisation involved is unable to fund the remaining contribution, especially schools and community buildings. The third gap is the provision of support services to help get individuals and community groups to the stage at which they are ready to invest in either energy efficiency or renewable energy, including the provision of specific advice, help with obtaining necessary permissions, finding contractors and seeking grant funding.

When looking at the measurement of carbon savings, technical projects do offer a real opportunity for measurable carbon reductions but there are still variants which need to be accounted for such as weather conditions, building characteristics and the behaviour of the occupants. The Fund should work where possible with established and agreed figures for CO2 savings such as those drawn up by the Energy Saving Trust. It is worth noting that some support schemes at present - such as the Low Carbon Buildings Programme - do not currently collect information on the CO2 savings resulting from their support.

At the project application stage, applicants will be asked to provide information on the expected CO2 savings from the project and then, for validation purposes, we recommend that the savings are checked against the average data and expected ranges for measures in households, taken from the EST and CERT data. A detailed listing of these data sets is included in the appendices to this report.

Where the Fund is helping to match the funding of another scheme to help get projects off the ground which would otherwise fail to find support, some care will have to be taken by the Fund as to how much CO2 it claims ‘for itself’. For example under the CERT programme, the utility company helping to install energy efficiency measures in a household will claim the entire CO2 saving even though there is a requirement for their funding to be matched; conversely the Low Carbon Buildings Programme does not claim any CO2 savings resulting from its support. It will be vital to make an assessment of ‘who can claim what’ alongside a judgement as to whether the project is genuinely ‘additional’ or not.


The initial project scoping carried out for this launch plan examined projects that have been proposed by existing delivery organisations such as local authorities or the Energy Saving Trust Advice Centres (ESTACs).

The projects they have put forward are all beyond the reach of their usually-funded activities, and so are genuinely additional, but the value of identifying projects through these established organisations is that they could quickly establish a framework agreement with the Fund to deliver projects - and CO2 savings - with a minimal input from the Fund itself; they also have precisely the kind of infrastructure required to carry out the data gathering required for both validation and verification.

The project team for this part of the launch plan is still receiving information about possible projects but at the time of writing the following energy-related projects have been identified by delivery organisations across the region.


Project title Delivery Project outline Scale Funding CO2 savings Cost £/tCO2

CumbriaRenewable Energy in Schools

Cumbria Action For Sustainability

Auditing schools in Cumbria to identify the most appropriate renewable energy technology for each school, provision of energy efficiency advice and on-going support to all schools and installation of renewable energy in the most suitable. Match funding for the renewable energy will be accessed from the LCBP

Number of schools: 40

£655,000 200 tonnes/year, lifetime savings 3,200 tonnes, assuming efficiency measures last 15 years and renewable energy measures last 20.

£202

Fuel Poverty Measures in Low Income, Rural Households

Cumbria Action For Sustainability with Housing Associations, EST & Cumbria Rural Housing Trust

Installing a range of basic energy efficiency measures and some wood fired heating in hard to heat homes, often hidden in idyllic settings within Cumbria, where some residents are spending up to 23% of their income on fuel bills and many are dependent on solid fuel.

Number of homes: 50-150

£125,000 - £375,000

150 - 450 tonnes/year, 4,500 – 13,500 tonnes lifetime CO2 over 30 years.

£28

Heron Mill Micro-Hydro Scheme

TBC Heron Mill is a restored corn mill used as a community arts and educational facility in South Lakeland. The Mill Trust intends to install a 100kW micro-hydro scheme using the existing weir, with the income used to provide long-term financial stability for the operation.

N/A £150,000 165 tonnes/year, 3,300 tonnes lifetime CO2 assuming a 20 year life

£45

LancashireCommunity Projects

Lancashire County Council

Match funding to support community-based projects applying to the Lancashire Locals Climate Change Fund, which has been vastly over-subscribed by good quality projects.

Details to be completed



Connect to Your Carbon – Lancaster

Lancaster City Council via LESS

The Connect To Your Carbon project will engage with local people in the Lancaster District to raise awareness of climate change through workshops held in communities around the district, supported by a tailored home energy assessment programme for participants and monitoring of carbon reductions in these households.

Number of workshops: 24 -Number of Energy Assessments: 170

£48,000 Behavioural measures 170 tonnes CO2 per year plus any additional insulation/renewable energy installations recommended.

Fylde Coast Energy Credit Union

Blackpool Council in partnership with Fylde and Wyre Borough Councils

Establish a credit union to enable those who cannot afford energy efficiency measures but are earning enough to not be eligible for other funding sources. Energy efficiency measures (loft and cavity wall insulation) can be obtained from Home Insulation Services for about £200 per measure.

Number of homes: 360 over 3 years

£115,000 (£45k Y1, £45k Y2, £25kY3)

520 tCO2 over 3 years, lifetime savings 14,350 tCO2 assuming an average lifetime of 30 years.

£8

Fylde Green Neighbourhoods

Blackpool Council in partnership with Fylde and Wyre Borough Councils

This project would target a small number of streets in Fylde, Blackpool and Wyre with the aim of significantly raising the energy efficiency standards of all the houses and installing microgeneration in a selection. The project would compare results across different areas (urban poor, suburban affluent and rural town/village) and from DIY installations and professional installers.

Number of homes: 60

£185,000 110 tCO2/year, lifetime savings 3,500 tCO2 assuming a range of lifetimes for different measures.

£53

Greater Manchester (further projects to be added shortly)Wood-fuelled Stoves – Trafford

Trafford Council Installation of wood-fuelled stoves that meet air-quality requirements for households in fuel poverty. This builds on a pilot project which showed a reduction in gas use of approximately 65% per year.

Number of homes - 40

£60,000 17 tonnes/year, lifetime savings 340 tCO2, assuming a 20 year lifetime.

£176



Green Concierge Service

Manchester ESTAC

Provision of tailored carbon-reduction advice to householders and support with implementing the recommendations. The householders would pay a contribution towards the costs of this service (c. £200) which would last over a period of a year.

TBC

MerseysideBoiler Replacement – Knowsley

Knowsley MB Council

Installation of replacement boilers and heating controls in fuel-poor households not qualifying for the Warm Front scheme. 50% of the cost would come from NWCF, with 25% contribution from KMBC and the remaining 25% from the householders.

Number of homes: 300

£225,000 110 tonnes/year, lifetime savings 1,320 tonnes assuming a 12 year lifetime.

£170

Insulation in vulnerable households – Wirral

Wirral MB Council Installation of loft and cavity wall insulation in homes of the fuel-poor over-60s, matching the funding available from CERT to householderʼs contribution. 50% of the cost would come from NWCF, with 50% from E.On under the CERT programme.

Number of homes: 400

£100,000 42 tonnes/year, lifetime savings 13,680, assuming measures last 40 years. (Note CERT will claim CO2 credit)

£7

Solar Hot Water in vulnerable households - Wirral

Wirral MB Council Installation of solar panels in homes identified as vulnerable and hard-to-reach, supported by Wirralʼs Decency through Thermal Comfort (DTC) scheme which provides insulation in those homes. Match-funded by Wirral Councilʼs HMRI scheme

Number of homes: 16

£48,000 6 tonnes/year, lifetime savings 150 tonnes, assuming measures last 25 years.

£320

Cheshire (more to be added)Health Through Warmth

Energy Projects Plus

Energy efficiency measures in households identified as having health problems as a result of cold/damp homes but unable to qualify for Warm Front. 50% funding available from npower.

TBC

All areas



Interest-free Loan Scheme for Micro-generation and Efficiency Investments

Suggested by respondents across the region.

Based on the Kirklees Recharge scheme and Leicester Loan scheme, interest free loans could be provided to householders for investment in energy efficiency measures (with fixed repayment period) and micro-generation (repayment either fixed or on sale of the property). The scheme would need to managed by an existing loan provider e.g. Co-op or Triodos Bank.

TBC


Sequestration projects

After energy efficiency measures and renewables, there is a second strand of proposed projects focused not on reducing energy use but on the ‘locking up’ of CO2 in biological ‘sinks’ such as peat bogs or woodlands. The evidence base for verifiable CO2 savings in this area, over reasonable timeframes, has been strengthened significantly over recent months and years and whilst there could be a need to conduct further research in this area to ensure that projects do indeed meet the strict rules of the Fund (these are outlined below), we have included these projects because they offer the promise of large CO2 savings and a much wider range of environmental benefits including habitat protection and biodiversity.

Taking peat bogs as an example, there is an existing regional target (in the region’s Biodiversity Action Plan) to improve the condition of 1,000 hectares of lowland raised bog that is degraded but readily restored by 2010. There are probably another 2,000 hectares of associated peat based soils that could be rewetted to form a hydrological buffer zone. Beyond this, there are at least a further 5,000 hectares of upland blanket bog that can be restored in the Northwest.

While peat covers only 3% of global land surface, it stores significant quantities of carbon, equivalent to twice that of all the world’s forests combined and two-thirds of all the carbon in the atmosphere. The UK has approximately 15% of the world’s peatlands, storing more carbon than in the forests of Britain and France combined.

If the upland and lowland areas of peat bog outlined above, some 8,000 hectares in total, are taken together, their degraded and unmanaged status is responsible, according to figures supplied by the Wildlife Trusts, for the release of a total of 42,500 tonnes of CO2 each year. This is the avoidable loss that could be saved each year. In addition their restoration could absorb or ‘sequester’ a further 18,500 tonnes per year, giving a CO2 ‘opportunity’ of a total of 61,000 tonnes of CO2 per year. Not included in the figures used in this launch plan is the much deeper carbon store, up to five metres deep, which would be protected through the bogs coming into a management regime. The inclusion of this would result in very low cost figures per tonne of CO2 and, arguably, the savings could not be cited as additional to business as usual. In examining the above figures and giving an

estimate for their purchase and management, the Wildlife Trusts have given an estimate per tonne of CO2 of £30.57, which puts peat bog restoration within the same costing bands of a number of the energy efficiency projects scoped out.

The current launch plan does not include any woodland projects but there is currently a CO2-related project running as a partnership between Liverpool John Lennon Airport and the Mersey Forest branded ‘Last Call’ which shows that there is market appetite for tree planting projects and when a projects call is issued by the Fund, reliable and genuinely ‘additional’ woodland projects should be given consideration, particularly as they have a possible secondary benefit due to the fact that trees and woodland can be of tangible benefit in addressing the impacts of climate change.


Project title Delivery Project outline Scale Funding from NWCF

CO2 savings (t)

Cost £/tCO2

Greater ManchesterRed Moss, Greater Manchester

Wildlife Trusts and partners

Red Moss is a designated Site of Special Scientific Interest and has been identified as a viable site for restoration and a restoration plan has already been prepared.

53 ha £143,434 4,692 tonnes £30

MerseysideKings Moss, Merseyside


Large remnant mossland site (approximately 16 ha) that is currently up for sale.Purchase and management of adjacent farmland will help to create additional wetland habitat and act as a buffer zone, reducing the effects of land drains on adjacent properties.

28ha £400,000 13,083 t CO2e over 40 yrs

£30.57

Last Call Mersey Forest and Liverpool John Lennon Airport

The extension of a current programme which operates in the departures area of Liverpool John Lennon Airport where travellers are encouraged to give donations to their local community forest for new tree planting. No current ʻoffsetʼ claims are made through the project but work could be carried out to ascertain levels of CO2 sequestered.

TBC

LancashireSimonswood Moss, West Lancashire


Fragmented mossland areas that are situated within a large-scale peat extraction site. These areas can still be saved, but urgent action is required to make this possible. Without immediate purchase/action these sites will be lost.

231 ha Up to £2.8 million

Across the entire site, up to 95,000 t CO2e over 40 yrs

£30.57

Cumbria


Project title Delivery Project outline Scale Funding from NWCF

CO2 savings (t)

Cost £/tCO2

Meathop Moss, Cumbria


A 70 Hectare SSSI and part of the Witherslack Mosses SAC. It is owned by Cumbria Wildlife Trust and has been a nature reserve since 1919. Work is required to remove about 40 hectares of conifers and birch scrub. Roughly 100 hectares of poor quality agricultural land surrounding the moss is on deep peat and could be acquired and re-wetted.

67ha £901,203 29,480 t CO2e over 40 yrs

£30.57

CheshireDanes Moss, Cheshire


Danes Moss has a further 30 hectares adjacent to the Cheshire Wildlife Trust site, currently owned by Cheshire County Council. The council is about to split and there is a danger that this land could be sold to an unsuitable buyer. It would need extensive restoration work including scrub clearance and sluice insertion.

30ha £403,524 13,200 t CO2e over 40 yrs

£30.57

Pennine edgeMoors for the Future - The Sphagnum Propagation Project

Moors for the Future

This is an investigation of mechanisms for re-introducing Sphagnum mosses to recovering moorland, particularly on blanket peat. It covers the species and situations for effective establishment, together with the effects of other moorland restoration techniques on this important group of species. This is a research and development, with a pilot large scale implementation project.

TBC


Developmental projects

It is recommended that the Fund launch with an immediate roster of projects that cut CO2 emissions from day one, but there is still an opportunity for the Trustees to consider extending their project reach to other streams of projects.

For example, this launch plan does not recommend that the Fund supports adaptation projects from the outset but regional stakeholders have, during the plan’s development, suggested that some projects should be included. Projects that could begin immediately include ‘urban cooling’ projects that would contribute to regional green infrastructure programmes and possibly also small-scale programmes to adapt homes or businesses to the possible impacts of climate change.

Care needs to be taken to ensure additionality and, naturally, CO2 savings are not an outcome of project support. This should be an issue for the Fund’s trustees to consider once the Fund is established.

Project validation and verification

Validation and verification are required to ensure the credibility of the Fund by assuring stakeholders that that the carbon reductions claimed are real, additional and permanent. This is a fundamental and overriding objective for the Fund and so the importance of the validation and verification guidelines drawn up by the project team cannot be overstated.

The guidelines are also vital because they will ‘sift out’ any inappropriate projects at the application stage.

This will ensure: a) that applicants do not exhaust too much time and resource in putting forward projects which would be ineligible; b) that the Trustees of the Fund do not have to spend too much time on project scrutiny; and c) if public/stakeholder voting on projects is carried out, the projects up for consideration have already been assessed and have passed through a validation process.

For the purposes of the Fund, the following definitions are used:

Validation: The assessment of a project’s Project Document, which describes its design, including its baseline and monitoring plan, before the implementation of the project against the requirements of a specific standard.

Verification: The assessment of the actual carbon reductions of a particular project.

When it launches the Fund needs to be aware of a wide range of existing standards and guidance relating to quantifying and verifying CO2 emissions. Although much of it is too complex for our needs, or focuses on Kyoto and Joint Implementation projects which are outside the scope of the Fund, the Fund will need to take account of the principles on which these are based and the processes they follow. This is a fast developing area and there will be continued innovation and change as experience grows.

Overall the Fund is committed to meeting the principles of Defra’s Principles for the Voluntary Offset Market and these have been taken into account in designing the validation and verification approach.


In drawing up guidelines for the launch of the Fund, the following assumptions were made:

In the early stages of the Fund is likely that a relatively small number of organisations will be involved in running projects;

Most of the projects, at least in the initial stage of the Fund, will be run by fairly large established organisations, including local authorities, charities such as Wildlife Trusts and existing energy efficiency organisations;

The annual CO2 savings for most individual projects will be less than 5000 tCO2 per year;

The majority of the energy efficiency projects and renewable energy projects are likely to be straightforward projects where there is a lot of experience in demonstrating additionality and calculating CO2 savings;

Calculating the CO2 savings of the potential peat projects is more

complex and there is less experience in demonstrating additionality and calculating CO2 savings; and

The cost of external verification will be too much of a burden for many of the small projects to bear.

These assumptions mean that:

Most of the projects will fall into the category of what organisations such as the Voluntary Carbon Standard (VCS) and Gold Standard terms a ‘micro-project’, justifying a streamlined verification approach;

The Fund will be primarily dealing with established organisations with clear governance structures who are used to being audited, making validation and verification easier to implement; and

The Fund may need a slightly different process for validating and verifying different types of project.

A two-stage validation and verification approach is proposed. Validation occurs at the design stage and is a pre-requisite for Fund approval.

Its aim is to provide assurance that the projected carbon savings are genuinely additional and the projected amounts seem reasonable.

Verification occurs during project implementation and provides assurance that the carbon savings documented at the start of the project have occurred.

Validation

The aim of validation is to check that the claims made about the proposed project seem reasonable and are based on credible assumptions and methodologies.

In particular the validation process will provide assurance that the projected carbon savings are genuinely additional and the projected amounts seem reasonable. All the information required for validation will be set out in the project document which will include:

• Project description;• Project type e.g. renewable

energy;• Demonstration of additionality;• CO2-e savings over the period of

the project and the methodology and assumptions used to calculate those savings;

• Systems for monitoring CO2-e savings including measurements that will be made, quality control, record keeping; and

• Wider contributions to sustainable development, such as biodiversity, access to wild spaces, community engagement.


The assumption made in designing the validation and verification process for the Fund is that stakeholder consultation will not be required for most of the projects because they are small scale, uncontroversial and affect few stakeholders, other than direct recipients e.g. energy efficiency projects.

If there are projects where this is not the case e.g. renewable energy installations in a particular location, purchasing of land for peat bog restoration where other stakeholders have other interests in the land, the need for stakeholder engagement will be judged at the expression of interest stage by project staff.

The validator will check that:

Appropriate additionality tests have been applied to the project and that based on these, the project is truly additional;

CO2 savings have been calculated according to the principles set out

in ISO14064-2 (see appendices for a full explanation of this international standard for carbon accounting) and that appropriate methodologies and assumptions have been used to calculate the baseline and estimate the CO2 savings;

An appropriate system for monitoring CO2 savings has been documented;

The wider sustainability benefits related to the project have been documented and seem reasonable; and

If stakeholder engagement is required, the validator will check that a reasonable process has taken place and the results support the project going ahead.

The project document will also set out the methodology used for calculating the projected CO2 savings over the lifetime of the project.

To calculate the carbon savings of a project the project implementor needs to show the CO2 savings compared to a ‘business-as-usual’ baseline. The difficulty is that that the baseline is a hypothetical scenario but it needs to be detailed enough to allow the carbon savings of the project to be estimated.

Given the relative simplicity and small scale of the Fund, a balance needs to be struck between a validation and verification process that provides confidence in the projects and the carbon savings without being overly bureaucratic and costly.

As noted above, many of the projects, such as those relating to energy efficiency, are projects where there is likely to be considerable experience in

demonstrating additionality and calculating CO2-e savings. In other cases, such as the peat projects, the calculations may be more complex and controversial and validation will require particular technical expertise.

Consequently, while external validators will always be required for some projects, if sufficient competence is built up within the Fund’s staff team to validate straightforward projects then this should be allowed.

Verification

Verification provides assurance that the carbon savings projected for the particular time period of the project in question have occurred.

Different projects will have different time-periods, for example the energy efficiency and renewable energy projects that have already been scoped as part of the launch plan assume measures last for between five and twenty years.


Each year project implementors will be asked to submit a monitoring report detailing the projects that they have underway, the results from the CO2 savings monitoring that they have in place and the annual and total CO2 savings that have resulted.

Any differences between the projections in the project document and the results need to be noted and explained.

Verification is likely to be a more straightforward activity than validation and if there is sufficient expertise and capacity within the Fund’s staff team, then verification can be carried out internally.

If verification is carried out by Fund staff, the verifier needs to be different to the staff member that carried out the validation.

Most of the verification will be a paper-based exercise checking the monitoring report against the project document, particularly for projects that have already been running effectively for several years. However phone calls and site visits may be required to check that what is being reported is happening as described on the ground, particularly in the early years of a project.

A selection of any verification reports developed internally will be checked by an independent third party and their report and all internally generated verification reports will be passed to the Fund’s board.

Each year the Fund board will issue a Verification Record, detailing all the projects funded by the Fund, their carbon savings and the total tonnes of CO2 that have been saved as a result of the Fund.


Apply to Fund

Approval by Fund Board

Monitoring GHG Savings

Project document inc. project description,

additinality analysis, GHG savings...

Validation or project document

Validation reportSelection

checked by external verifier

Monitoring report Verification of GHG Savings

Selection checked by external

verifier

Verification Statement

Des

ign

Imp

lem

enta

tio

n

Project implementer

The Fund

Internal/external

This launch plan for the Fund includes a number of recommendations regarding the operational and organisational plan for the Fund which are outlined below and detailed in more depth in the appendices to this report.

Our project team has considered the organisational structure both at launch and then in the longer term (phase one and phase two); the legal status of the organisation; its draft memorandum and articles of association; and a financial forecast for the Fund during its initial years of operation. It is intended that this aspect of our report will provide confidence that a robust organisation can be established to deliver the good works detailed in the project section of our report above.

Core business units

While the Fund’s trustees and executive will naturally set out their own strategy on appointment, the project team preparing this launch plan saw four initial business units for the Fund: carbon compensation; good causes; innovation and strategy; and corporate centre. These business units will determine the business planning of the organisation and would assist the trustees in differentiating between differing operational strands. While project delivery is a priority for the Fund, with resultant audited carbon savings, the operations of the Fund will also have to be ‘market facing’ and so in particular the carbon compensation versus good causes business units allow the Fund to develop differing business models for working with the general public, corporate supporters and public sector funding streams which offer significant opportunities for matching funds and unlocking project opportunities.


Organisation

Public donations and revenues

Good Causes

Innovation?Adaptation

Northwest Climate Fund Holding company - management, audit and accounting, reporting, governance, marketing, partnerships, strategic influence and policy

The Carbon KittyPooled resources allocated to projects. Proportion allocated between Fund aims to be determined by the Board

Corporate donations and CSR

Other contributions from public sector, section 106 etc.

Corporate income (compensation)

Compensation

Carbon compensation

The carbon compensation business unit will manage a portfolio of projects with an overt carbon focus, and will be promoted to businesses and individuals on the basis of a direct compensation for the impact of their activities on climate change. As stated above, this would be a value-added model of compensation, rather than Kyoto-style offsetting, and projects would, as well as their impact on carbon levels, have other criteria:

• Projects should be based within the Northwest;

• Sequestration projects should demonstrate how they contribute to regional biodiversity plans or other relevant strategies;

• Any carbon benefit accrues within the region;

• Projects should demonstrate clear additionality; and

• Carbon calculations should be based on robust evidence and accounting methodologies as outlined in the validation and verification guidelines.

The portfolio of projects would be procured on a framework basis, with a list of providers being selected, giving options to customers as to which particular project their specific contribution will support. Project types could include small scale renewables, energy efficiency, a ‘concierge’ service to enable people to take up renewable energy and energy efficiency, and other types of community projects.

The carbon compensation business unit will represent the ‘mainstay’ of the Fund’s business, it would accrue the majority of the Fund’s carbon savings and it would offer supporters of the Fund a direct route to carbon savings which would have an identifiable cost per tonne of CO2. It would also have some flexibility to tailor project portfolios for particular supporters or partners of the Fund.

For example if the Fund partnered with a sub-regional funding programme (e.g. Lancashire’s) to co-support projects, this could be a discrete area of carbon compensation; if a major corporate supporter came on board but had a particular type or theme of projects in mind, again a discrete portfolio of projects could be assembled by this unit.

Good causes

The good causes business unit will manage a programme of small grants within the region, supporting smaller-scale, community focused projects which have a positive impact on climate change. The hope is that decision making over this element of the work could be devolved to the sub-regional level, allowing more locally responsive allocation of resources.

The infrastructure already exists at sub-regional level – either through Sub-regional Partnerships or through the sub-regional Change Up hubs, although these partnerships have not yet been formally approached. There are also significant climate change capabilities being bolstered at the sub-regional level with a number of the Northwest’s sub-regional partnerships creating integrated climate change agencies or at the least appointing co-ordinators.

While this element of the Fund will target projects that have a positive impact on climate change, it is accepted that these projects will have a broader suite of outcomes, focused more on local priorities, than the main compensation programme.


Innovation and strategy

Of the four business units outlined in this launch plan the innovation and strategy unit is the one which has been examined in the least detail because: a) our priority for programme launch has been on immediate and demonstrable carbon reductions and b) because this business unit will leave the Fund’s Trustees and executive the ability to develop new strands of business and operations depending on the changing marketplace and demands of stakeholders.

This aspect of the Fund is also less well developed than the others, since it will require careful mapping of existing business support provision prior to launching. It is important that any innovation activity both complements existing business support mechanisms, and retains a niche and purpose specific to the Fund. Early thoughts have included the provision of specific support to businesses to enable them to

access the supply chain for the compensation work outlined above. Equally, research is needed into whether this innovation aspect would involve grants or loans to recipients.

In addition, this area of the Fund could partner with those operating innovation programmes across the region (e.g. Envirolink, NESTA, NWDA) to support high profile, public-facing campaigns to boost innovative responses to the climate challenge.

This area of operation could also examine the other strands of activity which have been recommended by stakeholders, such as considering climate change adaptation.

Corporate Centre

The Fund will require a strong corporate centre, to effectively house and manage the above three business units. Management, accounting, reporting and audit will all need to be carried out to a high standard.

Businesses, individuals and public sector financiers will all have different reporting requirements to meet if the Fund is to operate properly. In addition, there will be a high demand for marketing and business development.

The Fund will be operating in an increasingly competitive marketplace, and will need strong and active relationship management if it is to continue to generate the required revenues over the medium to long term.

Additionally, it is expected that the Fund will engage with regional strategic activity – partnership working, championing the role of positive climate change activity within the region, influencing regional policy, and supporting major infrastructure developments, even in the absence of direct funding through Fund.


Operational structure

Two distinct phases for the Fund are included in this launch plan. The first phase, while the Fund is in development, has a lesser number of staff and running costs, while the longer term organisational structure takes on board the need for ongoing marketing and business development and consequently has a higher level of cost associated with it.

When considering income and turnover, it has not been practical with the information available to make detailed income models, particularly as the Fund will need to trial and launch a number of different marketing efforts before deciding on the most lucratvie formula for securing both business and corporate support. As a result we have arrived at target income figures based on proportion of turnover to be spent on Fund management and administration.

One critical factor to examine within the operational structure and costs is the issue of what percentage of the Fund’s income is expected to be spent on marketing, management of projects and organisational overheads.

Comparator organisations in the carbon offset industry were sampled, and found to be generally in the vicinity of 45-50%, with one company sampled being as high as 60% of turnover.

To remain competitive in this marketplace, we have targeted an initial proportion of 40% of turnover being used to cover organisational costs, with a long term target of reducing this proportion to 25%. Depending on the eventual balance of the Fund between charitable activities and carbon compensation, there may need to be a review of the comparator organisations used to calculate these forecasts.

In any case, it is important that the Fund practice transparency in evidencing and clarifying its running costs to stakeholders, as this will be an important factor in promoting and maintaining public trust and goodwill, which will be crucial to the long term sustainability of the Fund.

The organisation is largely a fixed cost business, with a minimum staffing level required to deliver and account for the objectives of the Fund, which will accommodate a significant volume of business before needing to expand.

Therefore as turnover increases, the value for money offered by the Fund will also be enhanced.


Stage 1 – Incubation

This model operates during the first two years of the Fund’s life, while it is receiving support from the Northwest Regional Development Agency in covering its operational costs and providing seed funding for delivery activity. Marketing work is outsourced through a contract, to reduce overhead expenditure at this stage and to take advantage of the positioning work done in preparation to the launch of the Fund. This model is also likely to require a further element of outsourced work in setting up systems and processes, and other costs associated with business start up.

This model is scaleable, in that the Fund will be able to be launched with a lesser number of staff, but we would advise careful consideration of the balance between reducing costs during the early phase of activity, where such costs can be met through startup funding, and securing additional development capacity that early investment in staffing will bring, to secure business opportunities for the future.

There is also a key issue in that during this phase of development, the organisation will be managing NWDA funding, which brings with it an administrative and financial accounting burden which necessitates a well developed support service.


Chief Officer(Overall responsibility, strategic development)

Contract management

Marketing contract(PR & promotions,

corporate)

Fund Manager(Supporting partnerships,

strategic direction of Fund)

Procurement Manager(Framework procurement,

contract management)

Grants Officer(Management and

administration of small grants)

Administrator(Office management,

general admin)

Finance Manager(Management and statutory

accounting)

Stage 2 – Longer term

The key differential between the two models is the bringing in-house of marketing and business development. This will be more sustainable over the long term, where the advantages of having marketing outsourced are displaced by the benefits of having all functions run in-house, and being able to manage and direct the organisation more effectively.

This structure will effectively accommodate a volume of business well in excess of the levels currently being forecast, but as with the incubation phase, care should be taken when considering reducing staff numbers, not to compromise the ability of the organisation to develop and bring in new business.


Chief Officer(Overall responsibility, strategic development)

Fundraising officer(Business to business fundraising, statutory

fundraising)

Fund Manager(Supporting partnerships,

strategic direction of Fund)

Procurement Manager(Framework procurement,

contract management)

Grants Officer(Management and

administration of small grants)

Administrator(Office management,

general admin)

Finance Manager(Strategy and statutory

accounting)

Development Manager(Strategic communications, relationship management)

Finance officer(Management accounting)

Legal status and governance

This launch plan recommends that a not for profit company limited by guarantee would, in the opinion of our project team, be the simplest and most appropriate corporate structure. It is already a tried and tested route for similar companies.

During the course of this project we have investigated a number of other models including community interest companies and industrial and provident societies, but we firmly believe that a not for profit company limited by guarantee is the best model. This form of legal entity is equally suitable for charitable and non charitable entities (so avoiding any duplication of work whilst liaising with the Charity Commission).

A decision as to who are going to be the members and directors needs to be made.

One possible method and our recommendation would be to have the same people as members and directors but this will be dependent on the needs and requirements of the various stakeholders.

This launch plan recommends that the board of directors be more than just a strategic advisory board and that the articles allow sufficient flexibility to ensure that they have the necessary skills and authority in order to run the company.

The stakeholder entities could be the legal members of the Company and then they could appoint individuals from the entities to be the directors or alternatively the entities can appoint individuals at the outset to be both the member and the director in their own right.

The simplest method would be to have the same people as directors and members as this becomes a much more manageable system, however, you then do not have the split decision making.

It is our recommendation that unless there is an actual need to have a different group of decision makers at member level, the route of the members as directors is preferable. If however, the stakeholders themselves wish to be the legal members, a clear understanding needs to be reached as to the respective roles.

Depending on who the stakeholders are, consideration needs to be given as to whether additional co-opted directors with particular skills should form part of the board and if so whether this needs to be entrenched in the articles.

Whatever structure is agreed it is essential to ensure that the board has the necessary skills and expertise to run the company effectively. In fact, it is our recommendation that if possible the directors are appointed for their business or specialist skills, rather than as representatives of particular interest groups (e.g. possible beneficiaries of the Fund, sub-regional partner agencies, co-funders). This would enhance the effectiveness of the Board and it would reduce any risk of their being conflicts of interest.


To provide additional scrutiny of the Fund’s operations, consideration should also be given as to whether the existing Northwest Sustainable Development Group be asked to officially act as the Fund’s scrutiny body, with regular reports submitted from the Fund to the SD Group.

If an executive officer is appointed to actually run the company, they could either be a director (unless charitable) or they could be an observer at board meetings in order to implement the actions following the board meetings.

It is anticipated that the company would have between three and eight subcommittees (e.g. Compensation subcommittee, Good Causes subcommittee and Innovation and Strategy subcommittee and possible sub regional committees). This structure fits well with the suggested company entity, and the appropriate reporting procedures can easily be built into the Articles of Association - either on a general or a specific basis. The whole board of directors would have overall responsibility, drawing on the recommendations and advice of the subcommittees.

The company must have sufficient flexibility to address changes over the next 100 years.

It may be sensible to incorporate a company limited by guarantee at the outset and then convert to a community interest company in due course if it is decided that the company is not to be charitable.

A more detailed analysis of the organisational models considered by the project team, and a draft set of memorandum and articles of association is included in the appendices to this report.


Financial business planning and review Given the above projects roster and suggested organisational model, this launch plan includes an overview of the illustrative income and expenditure projection through to the end of financial year 2012/13.

Notes: i. The fund is assumed to commence operation from 1 October 2008 ii. Inflation has been assumed at 5% on all costs. This is considered to be a prudent estimate


Analysis of the estimated income and expenditure of the Northwest Climate Fund for the period ending 31 March 2013

Year ending 31 March

£ʼ000 2008/9 2009/10 2010/11 2011/12 2012/13 Total

6 Months

Income

Income target - 343 968 1,435 1,508 4,254

NWDA – income 253 355 200 - - 808

NWDA – revenue costs 202 315 200 - - 717

NWDA – start up costs 50 25 75

505 1,038 1,368 1,435 1,508 5,854

Expenditure

Admin and marketing costs 202 415 547 574 603 2,341

Start up costs 50 25 75

252 440 547 574 603 2,416

Surplus 253 598 821 861 905 3,438

The key assumptions associated with the projection are as follows:

Income

The Northwest Regional Development Agency (NWDA) will provide £1.6 million of start-up funding in the 20 months ending 31 March 2011. At this stage the quantum and terms applying to this potential funding have not been agreed. We have assumed at this stage that there will be no NWDA funding available beyond 31 March 2011.

The Fund will be required to raise, as a minimum, sufficient income to demonstrate a cost to income ratio of 40%, albeit that the objective would be to reduce this over time. On the above basis, the income the Fund will be required to generate in the four and a half years ending 31 March 2013 is £5.9 million. If the costs which are assumed to be funded by the NWDA during the incubation phase are discounted, the income which the Fund would need to generate from all sources to deliver the 40% fundraising ratio would reduce to £4.3 million.

Whilst not quantified at this stage, the key sources of income are expected to be as follows: NWDA start-up funding; private sector organisations (65% of respondents to the organisational market testing did not dismiss contributing to the Fund); public sector organisations; and individual public contributions (30% respondents to the public market testing indicated that they may consider contributing to the Fund).

In addition to the sources indicated above, it may be possible for the Fund to secure additional grant funding from other sources. Expenditure The expenditure assumptions have been derived from estimates prepared by the project team and benchmarked against similar organisations that channel and administer grants.

In order to present a conservative estimate the above figures assume that the organisation is fully staffed/operational from Day 1. However there is scope for the costs associated with delivering the organisation to be phased and scaled according to the levels of income and activity in the Fund.

Taxation We have assumed that the Fund will be a charitable company limited by guarantee and as such will not be liable for corporation tax and will not be required to charge VAT on its income. Where income relating to certain activities is deemed taxable, for example where the Fund is providing the donor with a service (e.g. a carbon compensation scheme), this can be undertaken in a trading subsidiary which distributes surpluses to the parent company each year. It is likely this company will need to be VAT registered and account for VAT on this income. Cashflow We have assumed that the Fund will retain reserves of two months operating costs in order to allow for any unforeseen adverse fluctuations in monthly income or expenditure.


Key risks and next steps Set out in the table below is a summary of the key risks to the delivery of the Fund and the next steps/actions required in order to address these risks


Risk Next steps/actions The Fund is unable to meet the income target required to achieve a fundraising ratio of 40%

Targeting of the largest NW based private and public sector employers in order to secure income commitments to the Fund

Agreement of the quantum and terms of NWDA support for the Fund Investigation of additional sources of grant funding

Delivery organisation is not sufficiently incentivised to maximise Fund income and performance

NWDA to ensure appropriate performance criteria, linked to the timing and quantum of NWDA funding, are included in the contract with the selected delivery organisation

Administration and marketing costs are higher than anticipated – in particular the marketing cost estimate is highly subjective

Market testing of the Fundʼs administration and marketing costs will be undertaken as part of the tender process for a delivery organisation It is anticipated that it will, to some extent, be possible to manage the quantum and scale of the Fundʼs expenditure in line with the level of income raised

In the event that none of the Fundʼs activities are deemed charitable there will be a material adverse impact on the Fundʼs financial projections

As work continues on the development of the Fund, further advice should be sought by the NWDA on the tax implications of its activities and appropriate tax planning measures are put in place

Appointment of directors and management with experience of the operational and sector issues which will be applicable to the Fund

NWDA to seek to ensure Fund directors and management have appropriate skills to manage the costs

Administration and marketing costs Set out below is an analysis of the estimated administration and marketing costs relating to the operation of the Fund. The costs have been developed from the operational model proposed by Groundwork and are described in more detail below.

Notes: i. The fund is assumed to commence operation from 1 October 2008 ii. Inflation has been assumed at 5% on all costs. This is considered to be a prudent estimate


Analysis of the estimated administration and marketing costs of the Northwest Climate Fund

Year ending 31 March

£ʼ000 2008/9 2009/10 2010/11 2011/12 2012/13

6 Months

Wages and salaries 98 195 298 298 298

Marketing and publicity 55 115 100 100 100

Office costs 18 35 60 60 60

Travel and subsistence 3 10 10 10 10

IT support 5 10 13 13 13

Events and training 8 15 25 25 25

Accounting and audit 15 15 15 15 15

202 395 521 521 521

Add: Inflation (5%) 20 26 53 82

202 415 547 574 603

Start up costs 50 25

252 440 547 574 603

Income Research and analysis on charitable organisations contained on Charityfacts.org indicates that administration and marketing costs should not exceed 40% of income. In addition, our analysis of the 2006 annual report of Climate Care, a carbon offsetting business, indicates that these costs represent around 43% of income. We have therefore estimated the quantum of income which the Fund will need to raise in order to achieve a cost to income ratio of 40%, which the above information indicates as the minimum required. These income figures are set out in the table below Notes: Administration and marketing costs exclude start up costs


Northwest Climate Fund minimum income requirements

£ʼ000 2008/9 2009/10 2010/11 2011/12 2012/13

6 Months

Administration and marketing costs 202 415 547 574 603

Income target 505 1,038 1,368 1,435 1,508

To be met by:

NWDA 505 695 400

Individuals and organisations 343 968 1,435 1,508

505 1,038 1,368 1,435 1,508

If the costs funded by the NWDA are discounted, the income which the Fund would need to generate from all sources to deliver a 40% fundraising ratio of 40% would reduce from £5.9 million to £4.3 million in the four and a half year period to 31 March 2013. Income target - NWDA funding We understand that there is potentially up to £1.6 million of revenue funding available for the Fund from the NWDA until the end of March 2011. No funding commitment has, at this stage, been made by the NWDA.

It is anticipated that this funding will be used to support both the Fund’s start-up and revenue costs as well as being used to fund awards to projects in this initial 18 month period. This will allow the delivery organisation time during the Fund’s incubation period to develop sources of income with which to meet its ongoing income target. For the purposes of this analysis we have not assumed any NWDA funding beyond March 2011.

Income target – Individuals and organisations Whilst not quantified at this stage, the key sources of income are expected to be as follows:

• Private sector organisations – 65% of respondents to the organisation market testing did not dismiss contributing to the Fund

• Public sector organisations • Individual public contributions –

30% respondents to the public market testing indicated that they may consider contributing to the Fund

In addition to the sources indicated above, it may be possible for the Fund to secure additional grant funding from other sources

Further detail on organisational costs, roles and responsibilities and tax liabilities are included in the appendices to this report.



THE POWEROF US.

Marketing

The Fund can only succeed if the projects can be found and if the support for them can be unlocked from both individuals and the corporate sector. This is where a strong, powerful marketing campaign will be critical to the Fund’s success. In preparing this launch plan the project team have undertaken an extensive market testing exercise with both the general public and corporations and then in response, the team has drafted an outline marketing strategy.

Market testing

Market appetite for the Fund was tested through two telephone surveys. For the public survey, 505 interviews were carried out with a random sample of people across the Northwest. These were stratified by area, with 101 in each sub-region (Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside). For the organisation survey, 54 interviews were conducted with individuals responsible for environmental issues or corporate social responsibility, randomly selected from the Northwest Insider’s Top 500. Of the 54 interviews, 47 were with private sector companies and 7 were with public sector organisations.

Key findings: Public survey The results from our public survey look promising for the Fund and do help to direct its future marketing strategy in certain directions, with a significant number of people reporting that they would contribute to a climate change fund that benefited local projects, however care should be taken not to over-interpret these results. Recent research on environmental behavioural change motivations has highlighted the ‘Attitude/Behaviour Gap’ which shows that individuals often commit to pro-environmental actions when asked but then fail to carry these out in practice. In response to this it is advisable to reduce market expectations by a few degrees when setting possible income targets for the general public.

In terms of survey results, nearly nine out of ten respondents (87.9%) agreed that the world’s climate is changing. When asked what they did personally, or would consider doing, to combat climate change, the most popular measures were recycling household waste (97.4%), buying energy saving light bulbs (89.7%), and spending more money insulating houses or installing more energy efficient heating (82.4%). People like local projects. We asked people what type of projects they would like to see benefit from a climate fund for the region. The most popular types of projects for the Fund to invest in were local renewable energy projects (19.2%), local community-based projects (17.8), international carbon offsetting schemes (15.8%) and local energy projects (14.9%).


Market

One in ten respondents (10.3%) said that they were ‘quite likely’ or ‘very likely’ to contribute to the Fund. A further two in ten (19%) did not rule it out. Results indicate that this proportion is similar across genders, and that younger people are less likely to rule out contributing than older people.

These results are higher than for national surveys of appetite for straight ‘offsetting’ where only around 2-5% of the population state that they are willing to offset their carbon emissions. Of the three in ten respondents who may consider contributing to the Fund (29.3%, or 148 respondents in all), 38.5% thought that they would make a one-off contribution. The most popular values for one-off contributions were £6-10 (24.6%) and up to £5 (21.1%). 12.8% thought that they would make a monthly contribution.

The most popular sum for a monthly contribution was up to £5 (47.4%). Just under half (48.0%) were not sure. A quarter (25.7%) of these respondents would be prepared to pay a premium in order to support projects in the Northwest. Just over a third (37.8%) were not sure, and a similar proportion (36.5%) would not. The three most popular descriptions of the climate fund were: ‘The Fund will achieve measurable carbon reductions’ (40.2%); ‘The Fund directly benefits climate change projects in the Northwest (39.0%); and ‘When you contribute to the Fund, you get a say in where your money is spent’ (38.8%).

The three incentives most likely to encourage people to contribute to the Fund were: ‘Seeing [their] local community benefit from the Fund’ (35.2%); ‘Being kept informed of how much carbon [they] were saving’ (21.2%); and ‘A loyalty card for carbon friendly behavior’ (12.5%). The survey has uncovered some important findings for the Fund’s future marketing strategy. Over half of all respondents (56.6%) said that they would purchase a product where the money they spent went towards climate change projects.

A sizable minority (17.6%) would make a contribution towards addressing their carbon emissions if asked to do so in an airport departures lounge, a similar proportion (17.8%) if given the option to do so by their energy provider, and fewer (8.1%) if given the option to do so by their employer.


Key findings: organisation survey Our organisational survey of FTSE-listed companies and large employers in the region showed that around two-thirds of those we interviewed were interested in supporting the Fund in some way and asked for further information about the Fund to be sent to them in due course. They were also upbeat in terms of offering us access to staff or customers as part of the Fund’s marketing efforts.

Crucially however, only a few would sign-up ‘on the spot’ to support the Fund, which perhaps would be unrealistic anyway during the course of a telephone interview; importantly there was a warm response to supporting local projects and only 20% of those we questioned ruled out supporting the Fund. Importantly the prime driver for support was corporate social responsibility (CSR) rather than a desire to amass ‘carbon credits’ of some sort.

The majority (87.0%) of organisations interviewed had programmes or policies in place to tackle climate change, most frequently: recycling schemes (25.0%), measures to reduce energy consumption (19.4%), and the use of eco-friendly products (16.0%).

Of the six organisations that did not have anything in place, only one said that they would not be interested in doing something to address climate change in the future. Most interviewees said that their organisation did not have an annual budget for reducing carbon emissions or for CSR (51.1% and 42.6% respectively), or that they were not sure (38.3% and 4.4% respectively).

When asked whether they would rather contribute to offsetting-style projects or local climate change projects in the Northwest, 11.1% thought that their organisation would be most interested in investing in offsetting-type schemes, and 27.8% in local climate change projects in the Northwest. 20.4% of respondents did not mind, and 5.6% would be interested in investing in both. In all, 64.8% of those interviewed (35 out of 50 respondents) did not dismiss contributing to the Fund at the outset. Of these thirty-five respondents, 42.9% were not sure how likely their organisation would be to contribute to the fund. 5.7% were ‘quite likely’ to contribute, 31.4% were neutral, 8.6% were ‘quite unlikely’ to contribute, and 11.4% were ‘very unlikely’ to contribute.

Half of all the organisations we spoke to about the Fund said that they would consider encouraging their staff to take measures towards addressing climate change, for example by suggesting that every member of staff who drives a company car contributes £3 a month to compensate for their carbon emissions.


Marketing strategy

The marketing strategy briefly outlined here targets the two distinct strands of possible support for the Fund: larger organisations and the general public.

Organisation – strategy

Research carried out by our project team shows that only 14% of organisations currently address their carbon emissions or monitor their carbon footprint, though 85% (almost the remainder) would be interested in doing something to address climate change in the future. 35% of organisations would not be interested in investing in the Fund, however, it has been suggested that maybe organisations need more information about the fund before we can truly gauge their interest.

65% of organisations would be interested in investing in local projects or carbon offsetting schemes (of this 65%, only 11% showed an interest in wanting to ‘offset’ their carbon emissions).

No organisation stated that the driver of the decision to contribute would be the cost per tonne of carbon saved.

A key area for organisations is their image and public perception of the organisation. 53% would contribute to the Fund to raise their profile and to be perceived as a forward thinking, responsible business. This is a crucial element of the marketing proposal.

81% of businesses stated they would want to specify the project or type of project their money would be invested in. Allocating projects in accordance with each business’ objectives is key to gaining corporate interest.

In terms of similar projects, the Fund can be most likened to some existing offset operators – organisations that also offer businesses the opportunity to ‘offset’ their carbon emissions by investing in bespoke emission reduction projects. However, our research shows that the locality of projects and perception of their business are the most important factors to organisations in the Northwest.

Previously, the benefits of carbon offsetting schemes and projects have proved difficult to clarify which may have an impact on corporate attitudes.

From a marketing perspective ‘offsetting’ is not our key message.

There is a correlation between energy expenditure amongst businesses and their interest in improving energy efficiency. 22% of organisations spend between £250,000 – £999,999 per annum, 5.6% of organisations spend more than £10 million per year.

Of those who did not mind whether they invested in offsetting schemes or local climate change projects, 66% said they would be most interested in contributing towards energy efficiency improvements in businesses.

It may be beneficial to communicate with businesses via their energy provider and give the opportunity to make a donation in accordance with their annual expenditure.


The plan

Organisations that show an interest in investing in the climate fund will go through a consultation process to assess their objectives and to identify the types of projects that will be relevant to them.

The organisation will then be provided with a corporate pack stating their contribution (this contribution could perhaps be directly linked to a business operation e.g. number of company cars the organisation funds), the project or projects that have been allocated to them, a fully integrated PR plan and a system to measure and monitor their carbon footprint based on their own operations and also taking into account how the projects they have invested in have an impact on their footprint.

(See appendix for example corporate information)

Depending on the response from energy providing organizations, the Fund should also endeavour to give corporate investors the opportunity to donate via their energy provider.

Costs to take into consideration are:

• Administration costs of consultation process

• Cost of producing corporate pack

• Administration costs attached to donating via energy provider – if any

• Cost of delivering an integrated PR strategy for corporate supporters


Individuals – strategy

Our survey shows that 90% of people agree that the world’s climate is changing - though only 8% would be prepared to donate money to compensate for their energy consumption. 57% people stated they were very unlikely to contribute to a climate fund for the Northwest.

• 57% of people wouldn’t make a donation at the airport to compensate for emissions

• 63% of people wouldn’t make adonation via energy provider

• 75% of people wouldn’t donate from their wages each month

We need to work hard to hit people with a proposition that works.

Initially the project team considered looking at charity models to gain an understanding of what income to expect from individuals in the form of a donation, however it is clear that the public en masse would not be receptive to being asked for a charity donation.

However, a significant 56.6% of people stated that they would purchase a product such as a car sticker, luggage tag or ethical shopping bag with the money spent going towards climate change projects, and 35% of people stated that seeing their local community benefit from the Fund would encourage them to donate money or purchase a product.

Previous campaigns prove that the public are receptive to this approach and are keen to show their support by purchasing and owning something that is a display of their support for a cause.

In April 2007, the ‘must have bag of the season’ was designed by Anya Hindmarch and carried the slogan ‘I am not a plastic bag’. These bags, which cost £5 and were available from selected Sainsbury’s stores, were designed to encourage people not to use plastic carrier bags. They sold out within an hour of going on sale.

The BBC claimed that ‘sustainable is the new black. Eco friendly used to be a byword for dull and worthy, but now it’s officially fashionable’. This campaign gave the public a chance to own a designer item at a price they could easily afford (Anya Hindmarch bags ordinarily retail at around £500) and to make a statement showing they were supporting this cause.


With the Fund being a Northwest focussed campaign and locality clearly being an important factor for both audiences, it would make perfect sense to appoint or recruit a designer from the Northwest to design and endorse the product created for the Fund:

Henry Holland - from Rossendale, close friends with Agyness Dene and famed for his controversial slogan t-shirts. See www.houseofholland.co.uk

Vivienne Westwood - from Glossop, Westwood is famed for applying political statements to her clothing and has just released her manifesto to encourage people to change the way they think and behave along with the ‘Worlds End’ clothing range. See www.activeresistance.co.uk

(in particular, article on how the ‘Creative Concerned’ could be the people to change the world)

Matthew Williamson - from Chorlton in Manchester, has

previously worked with Marni and Pucci, owns his own label favoured by the likes of Sienna Miller & Jade Jagger

Celia Birtwell - from Salford, Birtwell was famous in the 1960’s for working with The Rolling Stones, Pink Floyd and Jimi Hendrix among others, recently designed a clothing line for Topshop that sold out in a matter of weeks

Wayne Hemmingway - from Morecambe, co founder of Red or Dead

Peter Saville – from Manchester, most famous for his design work with Factory Records

In terms of the product itself, there are a number of options that have proven to be successful sellers:

Bags - the Anya Hindmarch bag with the slogan “I am not a plastic bag” cost £5 at selected Sainsbury's stores and sold out within an hour of going on sale. There were 20,000 bags produced, 30 bags per outlet and customers could only buy one each.

T-shirts/vests - Stella McCartney designed an exclusive limited-edition vest in support of Oxfam, which was only available at the Glastonbury festival in 2007. Festival goers happily parted with £25!

Belts & Scarves – All Saints have signature slogan belts and Vivienne Westwood has produced a series of statement scarves as part of the new Worlds End range e.g. ‘Active Resistance to Propaganda’.

Re-useable coffee cups – Starbucks are charging less for takeaway coffees if customers provide their own mug, the Fund could produce a reusable take out coffee cup.


http://www.houseofholland.co.uk






http://www.activeresistance.co.uk







Communicating with the public

Rather than paid for, above the line advertising, a PR campaign would the be most suitable way of raising public awareness of Fund. If a prestigious designer was on board with the campaign this is a news story in itself it would also be important to send a small number of products out to local or national celebrities in order for them to be seen with the product and help us to make the public aware of the campaign.

The Fund would recruit a number of ambassadors in the Northwest to show their support for the campaign and encourage the public to back the campaign e.g. tv/radio presenters.

It is important that the public understand how the fund operates and how their money will be spent.

A local building firm has offered to undertake an energy efficient regeneration project free of charge as part of a radio promotion, giving the public the opportunity to nominate and select the most worthy project and see the outcome of the building project.

This helps to demonstrate how the investors have financial ‘control’ over the fund and also demonstrates the direct benefit to the Northwest and local communities.

All activity should be supported by an online campaign through new online news services like Manchester and Liverpool Confidential, which cover much of the Northwest, though is available to everybody and gives the NWCF the opportunity to communicate with a local audience as and when necessary.

Additional ideas

Although on the whole the public were not open to making straightforward donations to the Fund and the majority were not prepared to donate via their wages, energy bills or at Point of Sale (POS), 17% would make a donation at the airport to compensate for their emissions, 17% would make a donation via an energy provider and 8% would make a donation from their wages each month.

Although these are a relatively small proportion of those interviewed, if the administration costs attached to this were not high, this approach may still be of value to the public campaign.

Costs to take into consideration

• Design and production costs of Fund promotional product

• Costs of radio promotion• Online costs• Administration costs attached to

donation via transmitters


Proof check

A section of the project team - Arup - remained independent from much of the project’s development so that they could give a more impartial ‘proof check’ of the emerging launch and business plan once it was in draft form. The full proof check is an appendix to this report.

The recommendations made by the proofing team have largely been accommodated into this final report, but a selection of key points raised by the proofing team and the responding changes made to the launch plan, are included in this section of our report.

The proof check team concluded that the proposed operational model, legal and governance structure and validation and verification model indicates that an effective organisation could be set up relatively quickly and should have the governance and processes to engender trust in the organisation.

The number and variety of projects identified suggest that there should be sufficient projects to meet initial investor interest and give them enough choice, particularly in terms of type of reduction approach and locality.

Most of the projects proposed would be run by established organisation increasing confidence that they could come on-stream quickly and could be verified as making real, permanent and additional carbon savings.

The main issues relate to money. At this point, greater confidence is required that businesses will invest in the Fund in the short to medium term, although there appears to be latent interest in the approach.

In addition, the projected cost of carbon savings in terms of tCO2-e of the proposed projects are high when compared to national and international offset firms, making it more difficult to market to companies.

The proposed approach of separating the ‘Carbon Compensation’ and ‘Good Causes’ funds and a marketing approach focusing on the wider corporate responsibility and PR benefits will help to address these issues.

In addition, the proof check team proposed that:

The search for potential projects is widened with the aim of identifying projects with a lower cost per tonne of CO2e saved and of identifying inspirational and transformational projects which could capture the imagination of the media, public and potential investors.

In response, a number of project proposals matching other funding streams such as CERT or the Low Carbon Building Programme have been included which offer much lower cost CO2 savings.

The costs of the initial set up phase are decreased by reducing the number of FTE staff to 3 or 3.5, thereby reducing the initial investment required.

Some flexibility is built into the aim of fundraising and administration costs not exceeding 40% of the income.

The expression of interest and application forms ask for appropriate information to enable streamlined validation and verification.

In response the Fund launch plan has put forward streamlined validation and verification procedures to be undertaken by delivery partners which would be subject to ‘spot checks’ by an external assessor.


Proofing

Overall proposition

The consortium has identified a suite of carbon reduction projects, across the region, which could be brought on stream quickly, enabling investors to choose projects that fit their key criteria (e.g. type of carbon reduction, locality, price, additional sustainability benefits). This should enable Fund to be marketed effectively to potential organisational and individual investors.

A practical and appropriate organisational and governance model has been identified that could be operational reasonably quickly.

The issues of demonstrating that carbon reductions related to the projects are real, additional and permanent have been identified and a credible and workable verification process has been developed.

So, provided sufficient investment can be accessed, the Fund could be established relatively swiftly and carbon savings could be demonstrated soon after establishment.

The main challenge in terms of business investment in the Fund is that the cost per tonne of CO2-e saved from all the projects is significantly higher than the market average. Voluntary offset schemes through companies such as The Carbon Neutral Company and Climate Care cost companies between £15 and £25 tCO2-e. Certified emissions reductions through schemes such as the Clean Development Mechanism are even cheaper.

A small number of the proposed energy efficiency projects and most of the peat projects are estimated at £24-30 tCO2-e, with the costs per tonne of remainder of the energy efficiency projects much higher. So if companies are looking to link their investment in the Fund to their emissions, the Fund needs

to convince them that there are considerable additional benefits to investing in the Fund over and above using a national or international offset firm.

The strategy of separate ‘Carbon Compensation’, ‘Good Causes’ and ‘Innovation’ funds is a good one, allowing projects with a high cost/tCO2-e to be considered through the Good Causes or Innovation Funds where investors are likely to be less interested in the per tonne costs and the link to emissions and more interested in the overall approach and benefits.

Organisational and legal structure and financial plan

Although the consortium has done very well in identifying projects which could come on stream quickly, the requirements of the application process and the need to ensure that the right issues have been considered in terms of additionality and measuring carbon savings means that there will be a time lag in terms of projects becoming operational and carbon savings occurring. This might affect the timing of investments and needs to be factored into the financial planning.


Marketing and market testing

The market testing was helpful and has provided useful guidance. Results from the public survey reinforce the need for a robust approach to calculating and verifying carbon savings.

They also provide helpful indications on which approaches to engaging with individuals on the Fund are likely to be successful, which the marketing plan has picked up on.

Key issues for business investors have been identified in Section 3.1 above and the marketing focus on setting out the broad PR / CSR benefits is a good one.

Interestingly, corporate interest in developing some kind of employee giving scheme does not seem to be reflected in the enthusiasm by employees reported in the results of the public survey.

There seems to be some indication that public bodies may potentially be interested in this Fund which should be investigated in more detail.

Potential projects and project application process

As well as the issues relating to projects raised above in terms of the overall proposition, three other project-related issues have been noted.

A fairly good mix of projects have been identified but few of the projects listed are likely to be seen as ‘transformational’ or ‘innovative’ projects that could really catch the imagination of the public, media and potential investors.

There is little justification or referencing for the figures used to calculate potential carbon savings leaving them open to challenge.The project application process needs to incorporate the needs of the validation and verification process

Suggestions

Widen the scope of project selection and aim to identify some potentially inspirational and transformational projects among the selection. Ideally these should also demonstrate strong regional distinctiveness, as the blanket bog projects do. Regional environmental assets such as regional parks, river systems and catchments, or cultural landscapes could be a starting point to identify. Tighten up the analysis of projects, with clearer references justifying the figures used. If there is still a good deal of uncertainty this needs to be made clear.

Ensure that the expression of interest form allows additionality to be judged at this early stage and that the project application document includes appropriate questions on additionality, calculating carbon savings, wider sustainability benefits and the monitoring process that will be in place, in order to streamline validation and verification.


National Policy and Voluntary Carbon Offsetting

Carbon offsetting – the purchase of credits for emissions reductions.Voluntary carbon offsetting - provides companies, public bodies and individuals with the opportunity to purchase credits generated from projects that reduce the amount of greenhouse gases entering the atmosphere.

Such projects might include schemes for afforestation, energy efficiency or for the cleaning up of carbon-intensive industries.Regional, local, project and sector schemes might all come under this heading.

National Policy activity

The Environmental Audit Committee held an enquiry into the Voluntary Carbon market, launching a call for evidence in December 2006 and publishing a final report in July 2007. Defra consulted on a Code of Best Practice for the Provision of Carbon Offsetting to UK Customers in January 2007. This led to the publication, in February 2008, of a Framework for the Code of Best Practice for Carbon Offsetting.

This code covers “certified emissions reductions” (CERs) that are compliant with the Kyoto Protocol, but it does allow for future expansion to industry-led voluntary emissions reductions, subject to verification. AEA Technology are the accreditation body for the scheme and Defra have effectively asked AEAT to progress this area of policy work on Government’s behalf.

The Framework for the Code is very firmly focused on the purchase of overseas carbon offsets from certified sources. The reason for this is that 'offsetting' in the UK is not additional because the UK's emissions are already capped under the Kyoto Protocol which require the government to make a certain cut in emissions.

Therefore, any individual action that seeks to pay for carbon reductions in the UK is simply helping government to meet its targets.

The informal advice from the relevant government departments is therefore that, unfortunately, local and regional schemes should avoid using the term 'offsetting’.

The EAC came to the view that it is primarily individuals who have to take steps to avoid and then reduce their own carbon emissions.

The EAC also concluded that “carbon neutral” remains a contested term and there is extreme caution in Defra about using the term.

We are currently seeing multiple definitions of zero carbon in the housing and property markets (with HMT and CLG using different standards) and there is concern this could be duplicated for “carbon neutral”.


National and international policy context

Although offset companies such as the CarbonNeutralCompany are highlighting Defra interest in the offset industry proposing a common standard for VERs (Verified Emissions Reductions) offered to consumers in the UK, our analysis is that this is not likely to be strongly pursued by Defra.

Key issues:

Care must always be taken to position carbon offsetting as action which is taken after actions on energy demand management and increasing the use of renewable resources have been taken.

The Framework for the Code refers to “offset products”. The Fund’s may choose to buy certified emissions reductions from overseas which may need careful definition in order to minimise the costs of accreditation.

The Code will only grant accreditation to providers of Kyoto-compliant emissions reductions.There does not seem to be much interest within Defra in developing a code for VERs, so the focus for the Fund should be on relevant aspects of other VER standards such as the Voluntary Carbon Standard and the Gold Standard.

International policy activityIt should be noted that IETA, the International Emissions Trading Association, is active in developing the voluntary carbon offset market. IETA is an NGO, based principally in Europe and the USA, which brings together financial and legal interests in the emerging carbon markets, with major industrial and commercial player who are responsible for emissions.

A number of the companies mentioned in IETA’s 176-strong membership list have a presence in the Northwest. IETA’s membership also includes many of the “competitor” offset schemes to the Fund.

While a feature of the international voluntary carbon offset market is that it has struggled to establish a single set of guidelines for certification, IETA still appears to be the closest that the market gets to a trade body. IETA and The Climate Group launched a Voluntary Carbon standard in March 2006.

Internationally, the focus of voluntary carbon offset is on the implementation of the Joint Implementation and Clean Development Mechanisms of the Kyoto Protocol. It seems unlikely that the Northwest Climate Fund will want to engage with these international schemes, but consistency with they standards they deploy may be useful.


Launching the Fund

The projects are available and a latent market appetite for a regional carbon reduction Fund has been identified in the work to prepare this report. If the Fund is given a positive investment decision by the Northwest Regional Development Agency it could begin to support carbon reductions and unlock additional resources relatively quickly and would provide a new focus for climate change activity right across the five sub-regions of the Northwest.

Creating a buzz

Some of the key elements in the proposed Fund, such as a transparent opportunity for supporters to ‘have their say’ in which projects get backing from the Fund, or the creation of branded, designer products that give people a new and innovative way to support strong local schemes, will create a compelling and strong message around climate change that could have the secondary benefit of raising awareness and getting both public and corporate audiences to take more action on climate change, right across the region.

Working with the sub regions

An early consideration for the Fund should be working in partnership with one or more sub-regional partners to ‘fast-track’ or pilot the Fund model in their area, particularly as there are proposals in a number of areas - such as Greater Manchester or Lancashire - to launch offset-style schemes which are similar in many respects to the proposed regional Fund. As it is recommended that the Fund operates with as localised an identity as possible, this partnership working would be wholly within the strategic framework set out in this launch plan. Sub-regional partners would benefit from the work undertaken to create this feasibility study and launch plan, and there would be the opportunity to unlock additional funding, matched to that offered through the Fund.

A new model for action

The proposed Fund is an innovative response to the climate challenge and through working with stakeholders to create this launch plan, it is clear that it will not duplicate the efforts of others but offer a new and supportive model for action that would show the Northwest region and the sub-regions of Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside as taking a bold lead on climate change that others in the UK could follow.


Conclusion

Contact

Steve Connor

Creative ConcernFourways House57 Hilton StreetManchester M1 2EJ

Telephone: 0161 236 060

Email: [email protected]


Documents

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