Water Journal : Water Journal November 2012-1
carbon footprint refereed paper 76 NOVEMBER 2012 water technical features Abstract Sydney Water has completed an extensive analysis of its supply chain carbon footprint and has estimated that the carbon price will increase our operating costs by up to $15.4 million a year and capital costs by up to $3 million a year, after allowing for emission reduction initiatives. As with many other companies, a significant proportion of Sydney Water’s carbon price exposure rests within the supply chain. Supply chain pass-through costs are not transparent at this point in time and, therefore, must be estimated. Sydney Water is using the footprint tool developed by the Integrated Sustainability Analysis (ISA) group at the University of Sydney and tailored for the water industry through a collaboration with the Water Services Association of Australia (WSAA). While a carbon price will increase costs for the water industry, the supply chain carbon footprint method is helping Sydney Water to manage carbon costs and identify opportunities arising from Australia’s move towards a low carbon future. Introduction Sydney Water is planning for the impacts of climate change on the delivery of water, wastewater and recycled water services. These services require large amounts of energy for both treatment and pumping. Sydney Water’s carbon emissions intensity is approximately 160 tonnes of carbon dioxide equivalent (t CO2-e) per million dollars of revenue (Scope 1 and 2 emissions only). This puts Sydney Water among Australia’s most carbon-intensive businesses (Energetics, 2011). Sydney Water met its milestone target of 60% reduction in energy related greenhouse emissions in 2011–12 against a 1993–94 baseline. This was achieved through a combination of energy efficiency, renewable energy generation and the surrender of NSW Greenhouse Abatement Certificates (NGACs). Quantifying Sydney Water’s carbon risk exposure is imperative in managing our carbon costs. The national legislated carbon price which commenced 1 July 2012 could significantly increase the costs of electricity, construction projects and other areas of Sydney Water’s operations. To assess the impacts and opportunities of the carbon price, Sydney Water used a method that measures both the direct liabilities and the more complex indirect costs likely to be passed on by our suppliers. Details on the carbon price used in Sydney Water’s estimate are based on our understanding of the Clean Energy Act 2011, associated legislation and Treasury modelling released under the Federal Government’s Clean Energy Future package as at December 2011. The actual carbon price pass-through on contracts may differ from these estimates. Methodology The methodology for examining the impacts of a carbon price on Sydney Water involved three parts: • Quantifying Sydney Water’s full supply chain carbon footprint; • Estimating Sydney Water’s direct liability; • Examining the potential for cost pass- through by suppliers who are liable for their emissions under the carbon price. Sydney Water’s ‘carbon footprint’ is the total greenhouse gas emissions produced by our operations and in the supply of the materials, energy and services needed to provide water and wastewater services. It is expressed in terms of the equivalent amount of carbon dioxide (CO2-e). The carbon price uses this unit to include not just carbon dioxide but also emissions of methane, nitrous oxide and perfluorocarbons. Following national and international guidelines, emissions are categorised into three types or ‘scopes’, as shown in Table 1. Supply chain footprint method Quantifying Sydney Water’s full carbon footprint is challenging because much of the potential impact is indirect, embedded in the supply chain. Sydney Water is using a methodology known as hybrid Environmentally Extended Input Output Analysis (EEIOA) developed by the Integrated Sustainability Analysis (ISA) research group at the University of Sydney and tailored for the water industry through a collaboration with the Water Services Association of Australia (WSAA). The ISA footprint tool, which is based on the EEIOA method, provides a unique combination of simplicity of use with inclusion of the full supply chain. The methodology uses the macro-economic technique of input-output analysis. The input-output analysis is integrated with national physical accounts data to calculate the amount of CO2-e ‘embodied’ in the dollar value of an organisation’s purchases. The advantage of the hybrid EEIOA method is that it provides a comprehensive, boundary-less estimate of all supply chain emissions combined F Hartley, P Woods Extensive analysis points to increases in operating and capital costs EXAMINING THE LIKELY IMPACTS OF A CARBON PRICE USING SUPPLY CHAIN CARBON FOOTPRINTS Table 1. Greenhouse gas scopes. Scope 1 Release of greenhouse gas into the atmosphere as a direct result of activities at facilities owned or controlled by Sydney Water. Scope 2 Release of greenhouse gas as a result of the generation of purchased electricity or heat consumed by Sydney Water. Scope 3 Release of greenhouse gas into the atmosphere that is generated in the wider economy as a consequence of Sydney Water’s activities, but that are physically produced by another entity/company but that are not Scope 2.
Water Journal December 2012
Water Journal September 2012-1