1.  The Carbon Trust was established in 2001 to help businesses and public sector organisations in the United Kingdom to reduce their carbon dioxide emissions and to support the development of commercial low carbon technologies. It does this primarily by working with businesses and public sector organisations to identify carbon dioxide emissions, providing advice from its consultants on how emissions could be reduced, and supporting the development of commercially promising new technologies through partnerships, funding, expert advice and large scale demonstrations.

2.  The Carbon Trust is a private company limited by guarantee and is a key part of the Government's Climate Change Programme to cut United Kingdom annual carbon dioxide emissions by 20% by 2010 from a baseline in 1990 of 592 million tonnes (equivalent to a reduction of 118 million tonnes). Some 27% of the 118 million tonne reduction (32 million tonnes) was expected to come from businesses, and the Department set the Carbon Trust a target to reduce carbon dioxide emissions in this sector by 4.4 million tonnes a year by 2010. In 2006-07, the Carbon Trust received public funding of £103.2 million, of which £77.1 million was provided by the Department for Environment, Food and Rural Affairs (the Department).[2]

3.  Through its work with businesses and public sector organisations, the Carbon Trust achieved a reduction of between 1.2 million and 2.0 million tonnes of carbon dioxide emissions in 2006-07, and was on track to meet its target of an annual reduction of 4.4 million tonnes of carbon dioxide emissions on 1990 levels by 2010. With increased public recognition of the need to reduce carbon emissions and higher fuel prices, the Carbon Trust has an opportunity to deliver much higher reductions than it has already achieved.[3] Further reductions depend upon:

• encouraging businesses and public organisations to seek advice from the Carbon Trust; and
• persuading senior managers and staff in client organisations to implement recommendations on how to reduce carbon emissions.

4.  Market penetration by the Carbon Trust has remained relatively small compared to the number of businesses and public sector organisations operating within the United Kingdom. The Carbon Trust estimated that it had worked with at least 12% of companies in the United Kingdom with energy bills of more than £50,000 a year and at least 24% of corporate groups. Only a small percentage of businesses with energy bills of £50,000 or less had sought advice from the Carbon Trust. Just 30% of local authorities, 40% of universities and 12% of hospital trusts had made use of the Carbon Trust's services.[4]

5.  The Carbon Trust is required to comply with European Union rules on State Aid, which prohibit Member States from giving state resources to organisations where such resources have the potential to distort competition. As a consequence, initiatives to encourage businesses to reduce their carbon emissions could not be targeted at specific organisations within a sector, such as the larger businesses likely to generate bigger volumes of carbon dioxide. The Carbon Trust was not therefore able to target the two-thirds of businesses with energy bills of greater than £500,000 a year with which it had not previously worked and which collectively caused around one third of all United Kingdom business carbon dioxide emissions.[5] The Department was unable to confirm whether it had made representations to the European Union on the potential merit of excluding this type of support from State Aid rules given the increasing challenges posed by climate change.

6.  The attitude of United Kingdom businesses towards climate change appeared to be changing. In 2007, the Carbon Trust reported that 68% of FTSE 100 companies were either treating climate change as a key issue or actively addressing it, compared with 38% of companies at the end of 2004. Increasing numbers of businesses saw climate change as an opportunity to develop new products as well as a risk. 20% of businesses were looking to develop new products and services related to climate change. Institutional investors and other shareholders were unlikely to take climate change seriously, however, unless they believed that it would enhance long term share values. The Carbon Trust had taken over the Energy Efficiency Accreditation Scheme two years ago to enable businesses to derive commercial benefit from their climate change initiatives. The Scheme had made a small profit last year, but only around 200 organisations had been accredited. The Carbon Trust acknowledged that it was now appropriate to extend the scheme along the lines of the Investors in People model.[6]

7.  The Carbon Trust had improved the quality and timing of advice offered to businesses. The introduction of 38 direct account managers and 14 contract account managers had enabled the Carbon Trust to time its interventions better, for example, by offering advice to retail chains when they were due to refurbish their stores. The Carbon Trust had also reduced from 95 days to 45 days the time between their visit and despatch of their report.

8.   Less than 40% of the carbon savings identified by the Carbon Trust over the period 2003 to 2006 had been implemented by its customers by 31 March 2007. Simple, practical recommendations could be readily implemented to generate immediate financial benefits as set out in Box 1. In practice, some of the Carbon Trust's recommendations were more difficult to implement, such as recommendations to use biofuels. The longer term goal of carbon free industry partly depended, however, on the Carbon Trust's ability to convince senior management boards that there was a business advantage in taking forward all recommendations.[7]

Box 1: Simple and practical recommendations from the Carbon Trust can generate immediate financial savings to an organisation Lighting systems at a large hangar for RAF Nimrod aircraft came on at four o'clock in the morning and did not switch off until midnight. Changing to a demand managed system instead by installing a red button in the hangar to enable staff to switch on the lighting for an hour at a time has generated a considerable reduction in energy usage. The East stand of Manchester United's Old Trafford Stadium was performing better in terms of energy consumption than either the North and South stands because the substation and monitoring arrangements resulted in the lighting being left on for longer periods of time in the North and South. As a result of advice from the Carbon Trust the lighting system for the whole stadium was put on to a common basis, resulting in an 18% reduction in energy usage.

9.  Approximately 22% of the Carbon Trust's recommendations were adopted in the first year, but further take up depended on working with businesses. The main barriers to implementing recommendations were cost or lack of funding, lack of time, and insufficient benefit to the business (Figure 1). For the vast majority of businesses, investing in energy efficiency measures was cost effective, but 65% of businesses still believed that the cost of mitigating climate change was too high. Energy efficiency measures were crowded out of the management agenda by investment opportunities perceived as more interesting or offering better returns. Businesses often lacked data on energy usage, finding it difficult to monitor their energy consumption accurately. They relied instead on estimated figures from suppliers, which did not show them how energy had been used within the business, and, therefore, how savings could be made.[8]

10.  Encouraging greater take up of recommendations depends in part upon supporting energy consultants to work more effectively with businesses. The Carbon Trust had developed a consultant accreditation scheme to standardise and raise the quality of advice offered. The chargeable rates of £435 for a standard site survey and up to £700 a day for more specialist advice, however, restricted the time that could be spent with businesses due to the limits on public funding and the restrictions on the level of financial support to each organisation to meet European Union requirements on State Aid. Any step change in take up without a corresponding increase in government funding would be likely to depend on franchising specified services for accredited third parties to market competitively.[9]

Figure 1: Cost was the main barrier to organisations implementing the Carbon Trust's recommendations

Source: National Audit Office

11.  One of the difficulties faced by organisations was finding the financial resources to implement the Carbon Trust's recommendations, particularly to support investment by businesses in energy efficient equipment or other measures which required an up front cash injection. In 2006-07, the Carbon Trust offered 482 loans worth around £18 million to help businesses invest in new equipment to reduce energy costs. The provision of loans was restricted by the funding available and any significant expansion of the loan scheme would depend upon working more closely with the private finance sector to raise capital. The public monies available might be leveraged more effectively to achieve change in a greater number of businesses if the Carbon Trust moved away from providing 100% interest free funding in all eligible cases.[10]

3   Qq 2, 47; C&AG's Report, para 2.3 Back

4   Qq 7, 13-14; C&AG's Report, para 2.13 Back

5   Qq 96, 114; C&AG's Report, Appendix 4 Back

6   Qq 10, 15, 16, 61; C&AG's Report, para. 2.11
The Investors in People Standard is a business improvement tool designed to advance an organisation's performance through its people. Over 30,000 organisations in the United Kingdom are recognised as Investors in People. Further information on the Investors in People Standard is available at www.investorsinpeople.co.uk. Back

7   Qq 6, 62, 89; C&AG's Report, para 2.7 Back

8   Qq 9-11, 53-54, 66-68; C&AG's Report, para 2.8 Back

9   Qq 66, 104; C&AG's Report, para 15 Back

10   Qq 17, 49; C&AG's Report, para 2.1 Back