Sustainability Committee

Inquiry into Carbon Reduction in Wales: Carbon Reduction by Industry and Public Bodies

Response from Barry & Vale Friends of the Earth

Barry & Vale Friends of the Earth

Cyfeillion y Ddaear, y Barri a'r Fro

Virginia Hawkins, Clerk to the Sustainability Committee
Sustainability.comm@Wales.gsi.gov.uk

Evidence to Inquiry: Carbon Reduction by Industry and Public Bodies

We put an argument for use of the shadow price of carbon in licensing (PPC permitting) and in energy assessments for planning purposes. Central government required in December 2007 that 'shadow' carbon costs are to be used in day-to-day policy and investment decisions by Westminster government Ministers. That general policy requirement has been developed over 2-3 years by an interdepartmental project and subjected to peer review. www.defra.gov.uk/environment/climatechange/research/carboncost/index.htm

We propose extending that policy requirement to Environment Agency and Local Authority decision-making relating to industrial processes. Planning Policy Wales (as amended by MIPPSs) and "sustainable development” covers CO2 and energy efficiency in planning, Integrated Pollution Prevention & Control (IPPC) covers industrial and waste management processes. Annex A (GWA’06 Sch 7, Field 4) says pollution from electricity generation and encouragement of energy efficiency other than by regulation are included.

Energy efficiency and CO2 abatement are requirements of PPC permitting of industry by the Environment Agency Wales (EAW) and local authorities (except for CO2 in respect of EU ETS companies). However, EAW in our experience applies it with too light a touch and is less than effective.

As example we give Aberthaw Power Station, where EAW have recently permitted an ash-washing and drying process, where the ash is dried via a 3.5MW butane gas burner (7000 tonnes CO2 per yr). The Power Station generates masses of waste heat which is dumped in cooling water from the Severn Estuary. But EAW failed to even question the company on using waste heat to dry the ash.

EAW permitting of Aberthaw Power Station

With no evidence from the company, EAW give the excuse ([1] p. 81)
"The thermal load of the ash drying stage is relatively low (around 3.5 MWth) and the thermodynamics and economics of transferring relatively high grade heat from the boiler/steam circuits will not be viable.”

EAW say [1] that because the power plant comes under EU ETS, the regulations prevent their addressing CO2 directly
"In our determination of the application we have concluded there is no need to set an ELV, equivalent parameter or technical measure in respect of carbon dioxide emissions from the installation.”

However, the EA and EAW have to address "energy efficiency” of power generation. For Aberthaw, EAW point out the thermal efficiency is only 38%, including 3% "works power” despite using waste steam for pre-heating feed water. They have therefore set [1]
Improvement condition reference IC10
Written proposals shall be submitted to the Agency for the retrofitting of high efficiency steam turbines to each unit and include dates for implementation.

The problem here is that this retrofit and other measures are assessed against BAT (Best Available Technology) criteria, and may fail on economic grounds. As is well-known, the carbon price under EU ETS is very low and give little incentive to industrial processes covered by it. This would change if the shadow price of carbon were used instead. A company would not itself choose to use the shadow price, but EAW can require its use for determining the economic aspect of BAT.

Further examples are given of the Barry chemical complex [2] licensed via IPPC and the Aberthaw ash transportation [3] that comes under local authority planning.

Under the specific questions, we comment

Q1. 'Areas of devolved competence' covers planning; the full terms of reference cover scrutiny of the Welsh Assembly Government on its progress in contributing to the UK’s carbon reduction targets, so cover non-devolved IPPC (see detail below). Industrial processes must surely be included (and we argue ways to include the EU ETS plants Port Talbot steel works and Aberthaw Power Station in this as they contribute 33% of Wales’s CO2 emissions) for Wales to make its full contribution to meeting UK-wide targets.

Q3. We propose adopting the shadow cost of carbon. The strongest driver to reduce emissions is the cost of energy. The shadow cost was set to correspond to a real economic cost in global climate change (though higher levels could be argued) so in logic this must be used in decision-making. The low price under EU ETS is a problem, which the shadow price in part gets around; Welsh government must make every effort to implement the latter.

Q8. The PPC Regulations have been drawn wider than the EU ETS Directive amendment of the IPPC Directive, in prescribing that a "permit shall not include an [ELV], equivalent parameter or technical measure” when the Directive specifies only the ELV (emission limit value). Thus if PPC competence was devolved to Wales, we could narrow down this EU ETS exclusion. Carbon Capture and Storage (CCS) would then be a specific technical measure implementable through IPPC.

Q9. Targets should be set and reported by sector - hospitals (health authorities) separate from schools (education), from Further and Higher education, and from waste management.

Specific reporting and target(s) should be set for CIA Cardiff-Wales Airport, for it provides a public service and claims wider importance for Wales, yet does very poorly on public transport access. Air travel gets taxation advantages yet this Airport shows no public responsibility for the CO2 emissions over which it could have some influence.

Statutory Guidance and PPC Licensing

WAG officials have argued that since IPC and by implication its successor IPPC is not devolved, the Welsh government has no say over PPC licensing. We argue otherwise. PPC licenses are given for waste dumps and processing, and waste management is devolved. WAG issues statutory guidance [4] in parallel with statutory guidance issued by Defra for England, and this guidance covers all the Environment Agency activities in Wales (guidance on radioactive substances is separate; separate Welsh and English drafts went out for consultation in ~2005; there appear to be efforts to unify them to retract on this devolved responsibility). Third, the Welsh Minister can issue guidance or directions under the Environment Act, section 40 [5].

Conclusion

The Committee should

Recommend to the Minister using her S.40 power of direction and/or issue amended statutory guidance to EAW to adopt the shadow price of carbon in industrial regulation and to give explicit consideration to greenhouse gases under PPC (except for EU ETS companies)
recommend to the Minister that she issues a MIPPS (Interim Planning Policy Statement) amending Planning Policy Wales on the use of the shadow cost of carbon.
Recommend separate reporting and targets for various public sectors, but also for bodies providing public services (defined as public bodies for Environmental Information Regs) including Cardiff Airport, Bus companies and utilities operating wholly or largely in Wales.

Notes

[1] Determination of Application RP3133LD / RWEnpower for a Permit under the PPC Regulations 2000 (SI 2000 No.1973) Decision document recording the decision-making process, 21 Dec. 2007

[2] Barry Chemical Complex and IPPC
On Barry’s Chemical complex, we have a 230MW gas-fired power station whose waste heat of ~200MW goes straight to the atmosphere. The original concept was a CHP plant supplying heat to adjacent industries, but the dash-for-gas led to an AES electricity-only power station instead. One potential user, Dow Corning, instead built their own CHP generating plant.

Though EAW licenses all the chemical plants, there has been no pressure to use the waste heat from AES (subsequently TXU Power). Its 'energy efficiency’ criterion is applied only to the individual company. Of course, separate companies prefer to be independent of each other, but do in fact cooperate over materials (Cabot Carbon with Dow Corning). They need pressure to cooperate over heat supply. If EAW had to apply the shadow price for carbon, it would give them more clout both for individual companies and getting cooperation overCHP/waste heat.

[3] Ash Conveyor and the Planning Regime
The ash processing plant is a joint project between RWE and Lafarge, who are purchasing cleaned ash for use in cement on their adjacent site. We asked the Vale of Glam planners to seek use of a conveyor pipeline rather than moving it by lorry (~3 km round by road). The LA refused to even ask for the information on practicability (incl. cost) and environmental benefit. Planning legislation could and should require them to get this information and a cost-benefit assessment. The 1-km conveyor is expected to be more CO2-efficient than lorry transport. For the costing, the shadow cost of carbon should be required.

[4] www.environment-agency.gov.uk/commondata/acrobat/s4guidance_wls_1800041.pdf

This statutory guidance:

sets out the principles which the Environment Agency should follow in deciding its priorities;
states the objectives which it should pursue over the next few years; and
identifies its roles in contributing to the achievement of sustainable development

This guidance relates to Wales; the Department for Environment, Food and Rural Affairs (DEFRA) has issued separate guidance in relation to England.

1.3 The Agency is required to take into account any likely costs in achieving its principal aim, and to take account of the likely costs and benefits in exercising its powers. This includes both costs to people and organisations, and costs to the environment.

1.4 The Assembly is required by section 4 of the 1995 Act, after consultation with the Environment Agency and other interested parties, to give guidance to the Agency from time to time with respect to:

the objectives which it considers it appropriate for the Agency to pursue in the discharge of its functions; including
the contribution it considers it appropriate for the Agency to make towards the objective of achieving sustainable development.

The Agency must have regard to such guidance.

[5] Environment Act 1995, s.40 Ministerial directions to the new Agencies

(1) The appropriate Minister may give a new Agency directions of a general or specific character with respect to the carrying out of any of its functions.
(2) The appropriate Minister may give a new Agency such directions of a general or specific character as he considers appropriate for the implementation of—
(a) any obligations of the United Kingdom under the Community Treaties, or
(b) any international agreement to which the United Kingdom is for the time being a party.