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Cashing in on climate change
Reducing your company’s carbon footprint heightens
customer appeal and boosts green brand recognition.
Another big incentive is the thousands of dollars that a
corporate can save. Visvas Paul D Karra delves into the
business perspective of environment protection, carbon
footprint and carbon trading
The Sultanate of Oman is among the top 15 countries of
the world that have the world’s highest per capita
environmental footprint, according to a recent report by
the World Wide Fund for Nature (WWF). The Living Planet
report, conducted with the Global Footprint Network and
the Zoological Society of London, puts the Omani per
capita environmental footprint higher than 140 countries
in the world.
The other Gulf Cooperation Council (GCC) countries in
the top 15 include Qatar, Kuwait and the UAE. Oman is at
the 14th position globally.
The Living Planet Report measures humanity’s need for
natural resources such as land for crops and grazing,
fishing area, forests and others against the planet’s
ability to produce these resources. Although Oman’s
total environmental footprint is well below one per cent
of that of the rest of the world, its per capita
footprint, which is close to six global hectares (gha)
per person, is much higher than the global average.
So what is the significance of this ecological
footprint for Oman?
Scientists have long measured human demand on the
Earth’s ecosystems versus its capacity to regenerate:
this equation is called an ecological footprint. A
carbon footprint is a subset of this ecological
footprint, and is simply a conceptual measure of the
impact individual human activities have on the
environment.
Climate change
The term carbon footprint owes its origins to the
idea that a footprint is what has been left behind as a
result of individual or industrial activities. On an
individual level, you contribute through burning fossil
fuels by heating and supplying your home or business
with electricity and through the modes of personal
transportation that you choose. In industrial or
commercial applications, a carbon footprint includes the
total carbon dioxide (CO2) and other gases which
cumulatively are known as green house gases (GHGs)
accumulated over the full life cycle of a product or
service.
The GHGs are responsible for climate change and the
subsequent global warming. According to a report by
Ernst & Young (E&Y), climate change presents a new and
real threat of severe environmental, economic, political
and security impacts in the Middle East & North Africa
(MENA) region. For a region that is already vulnerable
to many non-climate stresses, climate change is more
likely to increase this vulnerability.
On a global scale, climate change is not only a serious
and growing threat to the environment and human health,
but also to economic systems. Worldwide economic losses
from natural disasters appear to be doubling every
decade and if the current trends persist, annual
economic losses will reach almost $150bn in the next
decade.
The effects of global warming are alarming to say the
least. There has been increase in average atmospheric
temperature which is expected to go up by 1-40C in the
next 100 years. A rise in temperatures will lead to
higher sea levels inundating low lying countries. Some
of the other effects are abrupt weather changes, more
frequent and intense heat waves and tropical cyclones,
more floods, fast melting of ice at Arctic and Antarctic
regions etc.
Business opportunity
The scenario seems to be bleak but there is always
hope if action can be initiated today. However, in the
corporate world which is increasingly facing topline and
bottomline pressures due to global financial
uncertainty, making profits seems to be the most
pressing matter as compared to worrying about climate
change and global warming.
But how would it sound, if someone told you that doing
something about climate change can bring your company
much needed savings and revenues? Yes, this is true and
possible. And there are two ways of doing this.
The first and the easiest is by leveraging climate
change risk as a competitive advantage by launching
ambitious carbon footprint reduction initiatives and the
second way is by implementing the clean developing
mechanism popularly known as carbon trading.
Companies in Oman can earn carbon credits for their
emissions reductions. These credits can then be sold to
companies in developed countries as per the Kyoto
Protocol so that the companies in developed countries
can remain within their carbon emissions targets. This
process is known as carbon trading.
The value that a company can get through the carbon
credit scheme per year is such that within four or five
years a business can earn money which could run into
millions of dollars, which is not small money. That is
very attractive.
According to Rajeev Singh, partner, transaction advisory
services, Ernst & Young, Oman, “there are two potential
sets of clients for whom something like carbon trading
becomes useful. One is for those who want to be good
corporate citizens. They say, OK we want to measure what
is our own carbon footprint as an organisation and see
how we can reduce it and what are the best practices
around the world.”
“There are some other companies which get attracted by
the commercial proposition highlighted by the value of
the carbon credit scheme. A borderline business case can
suddenly become commercially feasible with the help of
an earlier unexplored revenue stream, which is
significant. So the key issue is that if you can add a
few hundred thousand dollars every year for the next 7 -
10 years, I don’t think any CEO can afford to overlook
that. In this case, you may be taking a commercial
decision and incidentally you also become a good
corporate citizen,” adds Singh.
Ambitious initiatives
Companies in Oman are slowly understanding the need
to reduce the GHG emissions and they are working towards
it. For, by leveraging climate change risk as a
competitive advantage and launching ambitious low carbon
initiatives and addressing GHG emissions, companies can
identify opportunities to bolster their bottomline,
reduce risk, and discover competitive advantages.
This begins by determining their liability to climate
change regulations by measuring the carbon footprint of
their business processes/products. An effective
corporate climate change strategy requires a detailed
understanding of a company’s GHG impact.
OCTAL Petrochemicals, the largest PET sheet producer and
integrated packaging company in the world operating from
Salalah, is setting critical global industry benchmarks
in energy and natural resource efficiency and
improvement in mechanical properties. The company’s
state-of-the-art PET complex in the Salalah Free Zone
was purposely designed and built to yield superior
quality products with waste and cost reduction benefits,
increased productivity for thermoformers and unmatched
environmental advantages.
Says Nicholas P Barakat, managing director, OCTAL, “To
date, the company has invested more than $600mn in
environmental sustainability for the deployment of
ground-breaking technology and propriety production
methods to produce PET resin and PET sheet with the
lowest carbon footprint in the world. We have
successfully eliminated five energy-intensive stages of
the conventional sheet production process, reducing 67
per cent of energy consumption. With the entire energy
requirements derived from clean combustion natural gas,
the specially adapted burners consume up to 20 per cent
less gas. As a result, the company’s PET sheet, DPET,
boasts 25 per cent lower carbon footprint than
conventional APET as confirmed by Renewable Choice
Energy and Intertek Expert Services. The reduction per
tonne is equivalent to driving 4,135km in an average
passenger vehicle.”
Such revolutionary technologies have been noticed by
global companies which themselves are implementing
greener processes and this has enabled the Oman-based
OCTAL to bag manufacturing orders from all across the
world.
Reducing emissions
“At the moment, we at E&Y are working with Haya
Water to calculate the emissions they are reducing
through their sludge composting project. Haya water has
set up a composting plant to prevent methane (a
greenhouse gas) from being emitted into the atmosphere,
therefore reducing Haya Water’s carbon emissions,” says
Velika Talyarkhan, consultant, climate change &
sustainability services, E&Y Oman.
What Haya is doing with the composting project, Kala is
that they are reducing the methane emissions by
aerobically composting the sewage sludge. So instead of
sending the sludge to a landfill which could cause
methane emissions, Haya is composting it and making a
good product which can be sold in Oman itself. In doing
so they are reducing their carbon emissions.
“We have also supported Port of Salalah in measuring
their carbon footprint and now we are working with
another company to implement their environment
management system which will also help in carbon
footprint reduction and could in the future lead to
carbon trading,” Velika adds.
Companies in developing countries, like Oman, can sell
carbon credits to companies in developed nations,
including European countries, who have emissions
reductions targets to meet. It is cheaper for the
developed nations to buy the carbon credits than to pay
the penalty for not meeting the target. Instead of
trying to bring new technologies to bring down their
emissions, which will be really expensive, it is cheaper
for developed nations to invest in a developing
country’s projects carbon reduction project.
So in the specific case of Haya, the greenhouse gas they
are reducing is methane (CH4) and that actually has a
much larger global warming potential than carbon dioxide
as it is 21 times more harmful than CO2 and more
damaging to the environment.
Carbon management
Global mining giant Vale, which has its pelletising
plant in Sohar, has invested $40mn in technologies to
reduce its Oman project’s environmental impact, such as
electrostatic precipitators and a wind fence to control
particulate matter emissions in Oman. The main source of
GHG emission of the plant is during fuel consumption.
But the site also has a continuous emissions monitoring
system, and 100 per cent of the water used is recycled.
“Vale’s very large ore carriers are also designed to
reduce carbon emissions by 35 per cent per tonne of ore
transported, a green feature that won us the
Nor-Shipping Clean Ship Award in May 2011. Periodically,
Vale reports to the Omani government about the GHG
emissions monitoring and management of its operations,”
says Najla Zuhair Al Jamali, head of business and
strategic affairs, Vale Oman.
Globally, Vale emitted 16 tons of GHG emissions in 2011.
However, Vale Carbon Programme, part of the company’s
corporate guidelines on climate change and carbon, has
the goal to make Vale a leader in climate change
mitigation. The company works conscientiously and is
revising its methodology for capital project development
to include the use of alternatives to reduce the GHG
emissions in projects’ engineering design phase.
Reducing carbon footprint
Daikin, the air conditioner manufacturing giant,
which has a large presence in Oman, is compliant with
government of Oman’s directive to reduce the use of
hydrochloroflourocarbons (HCFCs), which is one of the
six major greenhouses gases depleting the ozone layer of
the earth’s atmosphere.
Oman is a signatory to the Montreal Protocol on
Substances that deplete the ozone layer and the Ministry
of Environment and Climate Affairs has issued a
notification to avoid installing new air-conditioning
systems or equipments containing HCFCs as the procedures
for reducing the production and consumption of HCFCs
will begin as of January 2013.
Geeju Paul, senior divisional manager, Muscat
Electronics, which is a distributor of Daikin in Oman,
says the Daikin Group focuses on reducing both
fluorocarbon emissions generated during product
manufacture and electricity used during air conditioner
use, the major contributors to global warming.
“We strive to reduce environmental impact through the
recovery and destruction of fluorocarbons during the
processes of production, maintenance, and product
disposal. In product development, we are shifting to
refrigerant alternatives that do not deplete the ozone
layer as we continue to work toward lessening the impact
our business has on the environment,” adds Paul.
One of the major technologies which helps reduce
Daikin’s footprint is the VRV3 which has a proprietary
inverter technology and cutting edge control technology
for the refrigerant. The VRV3 air-conditioning system
operates with outstanding efficiency and contributes to
high energy savings and brings down the carbon footprint
of buildings.
In conclusion, as the impact of climate change becomes
more frequent and prominent, governments are expected to
set new policies and provide additional market-based
incentives to drive significant reductions in emissions.
Businesses need to start planning for this transition
now while they make decisions that will lock in their
investments for years to come and more importantly there
are many benefits if carbon management strategy is
accounted for an early stage. |
