As of 2 July 2011 all my new blogs will be posted in the Institute’s new myCommunity section. To follow my blog at its new location, I invite you to login to this exciting new online resource for Institute members and finance professionals.
I look forward to hearing your views on future blog posts in myCommunity.
Regards,
Geraldine Magarey
Thursday, June 2, 2011
Wednesday, April 6, 2011
Innovation key to emissions reduction
In my previous posting, I spoke about innovation as the key to a long-term solution to reducing greenhouse gas emissions. A carbon price will provide an incentive to change behaviour, encourage organisations and individuals to reduce their emissions – but this won’t be enough. We all have to change the way we actually do things. To make that change requires innovation.
This is all straight forward. But, as we know, there generally isn’t enough private investment in innovation. Professor Garnaut recently released his updated paper number 6 `Low emissions technology and the innovation challenge’. This paper has not received as much attention or public scrutiny as his other papers. Yet this area is a crucial part of the carbon emission puzzle.
Professor Garnaut points out that global public expenditure on research, development, and demonstration of low emissions technologies increased in the aftermath of the GFC. He also highlights that a new feature of the global innovation effort is a substantial contribution from China and then India.
Encouraging and supporting innovation requires a multi-dimensional approach. We need to support both our public sector research organisations as well as the private sector with sufficient funding or incentives. This will allow them to conduct research in areas of national interest that will potentially provide low emissions technology.
Professor Garnaut outlines a four step plan to promote innovation.
1. Driving public and private basic research in low-emissions technologies
2. Market-led support for demonstration and commercialisation
3. Low-emissions technology commitment
4. Strong and independent governance arrangements.
So where is Australia in all of this? Are our existing research and development policies sufficient to encourage innovation on the scale required to develop commercial low emissions technologies? We need to be turning our minds to this part of the debate now. Research, development, commercialisation and implementation – it all takes time, let’s start moving now.
This is all straight forward. But, as we know, there generally isn’t enough private investment in innovation. Professor Garnaut recently released his updated paper number 6 `Low emissions technology and the innovation challenge’. This paper has not received as much attention or public scrutiny as his other papers. Yet this area is a crucial part of the carbon emission puzzle.
Professor Garnaut points out that global public expenditure on research, development, and demonstration of low emissions technologies increased in the aftermath of the GFC. He also highlights that a new feature of the global innovation effort is a substantial contribution from China and then India.
Encouraging and supporting innovation requires a multi-dimensional approach. We need to support both our public sector research organisations as well as the private sector with sufficient funding or incentives. This will allow them to conduct research in areas of national interest that will potentially provide low emissions technology.
Professor Garnaut outlines a four step plan to promote innovation.
1. Driving public and private basic research in low-emissions technologies
2. Market-led support for demonstration and commercialisation
3. Low-emissions technology commitment
4. Strong and independent governance arrangements.
So where is Australia in all of this? Are our existing research and development policies sufficient to encourage innovation on the scale required to develop commercial low emissions technologies? We need to be turning our minds to this part of the debate now. Research, development, commercialisation and implementation – it all takes time, let’s start moving now.
Wednesday, March 2, 2011
Short on detail but the principles are right
So we finally have some direction in terms of a carbon price. Or do we? The announcement last week of a hybrid carbon price mechanism does not contain a lot of detail and there is still a lot of work to be done to get the fundamentals right. Although we cannot evaluate the implications of the scheme until concrete details are announced, the 11 underlying principles which the carbon price mechanism will be based on are sound. We all need to ensure the government is accountable to these principles and they are truly reflected when the details of the final scheme are announced.
These principles include:
• Fairness by providing help to those individuals and groups that will need assistance in adjusting to a price on carbon
• Ensuring the competitiveness of Australian businesses
• Provide investment certainty to Australian businesses and give them confidence to make long-term investment decisions
• Ensuring the administrative requirements are simple
• Flexibility so that we can respond to changing domestic and international developments
• Accountability.
Putting a price on carbon is the initial step in reducing emissions but it is not a solution in itself. The real solution will come from innovation. The way we do things currently has to change and that is why fresh ideas are needed to develop new low emission technologies.
What happens to money raised from a carbon price? We would not support this money getting lost in consolidated revenue. It needs to be isolated and used for assistance in terms of the ‘fairness’ principle I mentioned above and to assist with encouraging and supporting innovation. We’ve long advocated for a sovereign wealth fund to hold such ‘extra’ money.
I’d be keen to hear members’ views on the hybrid system - implementing a price on carbon (from 1 July 2012) with a cap-and-trade emissions trading scheme in three to five years.
These principles include:
• Fairness by providing help to those individuals and groups that will need assistance in adjusting to a price on carbon
• Ensuring the competitiveness of Australian businesses
• Provide investment certainty to Australian businesses and give them confidence to make long-term investment decisions
• Ensuring the administrative requirements are simple
• Flexibility so that we can respond to changing domestic and international developments
• Accountability.
Putting a price on carbon is the initial step in reducing emissions but it is not a solution in itself. The real solution will come from innovation. The way we do things currently has to change and that is why fresh ideas are needed to develop new low emission technologies.
What happens to money raised from a carbon price? We would not support this money getting lost in consolidated revenue. It needs to be isolated and used for assistance in terms of the ‘fairness’ principle I mentioned above and to assist with encouraging and supporting innovation. We’ve long advocated for a sovereign wealth fund to hold such ‘extra’ money.
I’d be keen to hear members’ views on the hybrid system - implementing a price on carbon (from 1 July 2012) with a cap-and-trade emissions trading scheme in three to five years.
Friday, February 11, 2011
Reconstruction means green programs are out
Much of the debate following the government’s flood reconstruction measures has been around the introduction of a flood levy. However, the announcement of the scrapping of green programs to fund a part of this has gone without comment. Linked to the flood reconstruction measures are cuts to viable government programs providing savings of $3.8 billion over the next five years with $1.7 billion coming from various residential and industry green schemes.
Most people would agree that many of these schemes have failed to deliver. Some programs were controversial from the time of inception, such as the `Cash for Clunkers’ program, that provided a $2,000 rebate for new car purchasers who scrapped their pre-1995 passenger vehicle.
However, I read with interest the cuts to the Carbon Capture and Storage (CCS) Flagships program. The government has reduced and deferred spending on the CCS Flagships and the Global Carbon Capture and Storage Institute, announcing savings of approximately $250 million.
Carbon capture and storage is a greenhouse gas emissions-reducing option that involves three distinct steps: capture, transportation and long-term storage. Most of the technologies needed to implement carbon capture and storage are currently available but have not been put together on a commercial scale. The funding would have allowed for this to happen.
My concern is that carbon capture and storage is a big part of the modelling done by Treasury around carbon. So what is the problem with scrapping something that has not been proven on a commercial scale? Treasury reports have stated that carbon capture and storage taking effect from the 2030 onwards. So how can we reconcile an underfunded research program or even a scrapped one when Treasury considers it a part of the carbon solution?
Friday, January 7, 2011
A warm spot amidst the London chill
I recently attended the annual Accounting for Sustainability Forum in London held just before Christmas. Joining me was Lee White (the Institute’s Executive General Manager – Members) together with a 200 strong contingent from the international accounting and business communities, investors, government, academia and civil society. Addressing us at St James’s Palace State Apartments, HRH the Prince of Wales, and the Chancellor of the Exchequer, the Rt Hon George Osborne, joined forces to highlight the role businesses have to play in ensuring the future of the planet.
The fifth annual gathering of The Prince’s Accounting for Sustainability Forum stressed the ever present need for businesses to put a value on, and better account for, the social and environmental impacts of their activities. At the Institute, we have always advocated the use of Broad Based Business Reporting as a recognised method of reporting for non-financial activities.
The importance of accounting for sustainability was brought to life by a short film called ‘Business Leader or Eco-Warrior’ starring Sir Richard Branson and Dragon’s Den stars Theo Paphitis and Deborah Meaden.
Several important steps were taken to increase the profile and prominence of sustainability reports in particular. The Chancellor announced the UK Government’s plan to fully implement sustainability reporting across its business divisions starting April 2011. This is a very significant step for a government and it will be interesting to see whether other countries, including Australia, follow this show of leadership.
Should our government perhaps take a step in this direction as well? I believe they should. Sustainability reporting is relevant to everyone including government. Taking a similar step here in Australia would be a signal to the market of the importance government is placing on sustainability.
What will it mean for government departments preparing financial statements? Basically, it will be mandatory for all central government departments and the National Health Service (NHS) to publish a sustainability report in their annual reports, which will encompass carbon emissions, waste management and use of finite resources – reflecting the integrated reporting requirements recommended by Accounting for Sustainability.
Other non-financial components of the sustainability report include direct and non-direct greenhouse gas emissions, the absolute cost of waste disposal and data on water consumption. Sustainability reporting does matter. What are governments doing about it?
The fifth annual gathering of The Prince’s Accounting for Sustainability Forum stressed the ever present need for businesses to put a value on, and better account for, the social and environmental impacts of their activities. At the Institute, we have always advocated the use of Broad Based Business Reporting as a recognised method of reporting for non-financial activities.
The importance of accounting for sustainability was brought to life by a short film called ‘Business Leader or Eco-Warrior’ starring Sir Richard Branson and Dragon’s Den stars Theo Paphitis and Deborah Meaden.
Several important steps were taken to increase the profile and prominence of sustainability reports in particular. The Chancellor announced the UK Government’s plan to fully implement sustainability reporting across its business divisions starting April 2011. This is a very significant step for a government and it will be interesting to see whether other countries, including Australia, follow this show of leadership.
Should our government perhaps take a step in this direction as well? I believe they should. Sustainability reporting is relevant to everyone including government. Taking a similar step here in Australia would be a signal to the market of the importance government is placing on sustainability.
What will it mean for government departments preparing financial statements? Basically, it will be mandatory for all central government departments and the National Health Service (NHS) to publish a sustainability report in their annual reports, which will encompass carbon emissions, waste management and use of finite resources – reflecting the integrated reporting requirements recommended by Accounting for Sustainability.
Other non-financial components of the sustainability report include direct and non-direct greenhouse gas emissions, the absolute cost of waste disposal and data on water consumption. Sustainability reporting does matter. What are governments doing about it?
Friday, December 10, 2010
Water is the drop for December
With devastating floods sweeping across parts of NSW and Victoria, water is ironically in abundance this time. The Murray Darling Basin Plan came about because the Basin is under enormous stress as a result of past water-allocation decisions, prolonged drought, natural climate variability and emerging climate change.
Recent Institute events have brought the topic of accounting for water into the spotlight for members. There were some lively sessions on water accounting held at the Institute’s Business Forum in Brisbane and at the Wine Industry Day in Adelaide.
By bringing hydrologists and accountants to the table, the Water Accounting Standards Board (WASB) released an exposure draft of its first water accounting standard, called Exposure Draft of Water Accounting Standard 1: Preparation and Presentation of General Purpose Water Accounting Reports (EDWAS 1).
The purpose of the draft is to elicit practical feedback for the final Australian Water Accounting Standard. By accounting for water, valuable information will be available to different user groups about one of Australia’s most essential yet precious resources. As water becomes scarcer and competition for water grows, the need to account for how it is sourced and distributed will increase.
So what is water accounting? It is a systematic way of identifying, recognising, quantifying and reporting on water, water rights, water obligations or other claims to water. Water accounting is very similar to general financial accounting, but we’re using volumetric rather than financial measurement, and the focus is on water rather than other assets and liabilities.
The challenges of water scarcity were very evident during a discussion at the Institute’s Wine Industry Day. Water is an integral part of the process of making wine - from growing grapes to actually producing the finished product. The wine industry has been proactive in establishing new ways of doing things to reduce the need for water although, obviously, water can never be removed completely from the wine making process.
Water and the way the wine industry is starting to adapt are really good examples of why companies are embracing sustainability as core to strategy. As I have said previously, sustainability is about managing risks - water and its availability in the future will be a major risk to many organisations.
Recent Institute events have brought the topic of accounting for water into the spotlight for members. There were some lively sessions on water accounting held at the Institute’s Business Forum in Brisbane and at the Wine Industry Day in Adelaide.
By bringing hydrologists and accountants to the table, the Water Accounting Standards Board (WASB) released an exposure draft of its first water accounting standard, called Exposure Draft of Water Accounting Standard 1: Preparation and Presentation of General Purpose Water Accounting Reports (EDWAS 1).
The purpose of the draft is to elicit practical feedback for the final Australian Water Accounting Standard. By accounting for water, valuable information will be available to different user groups about one of Australia’s most essential yet precious resources. As water becomes scarcer and competition for water grows, the need to account for how it is sourced and distributed will increase.
So what is water accounting? It is a systematic way of identifying, recognising, quantifying and reporting on water, water rights, water obligations or other claims to water. Water accounting is very similar to general financial accounting, but we’re using volumetric rather than financial measurement, and the focus is on water rather than other assets and liabilities.
The challenges of water scarcity were very evident during a discussion at the Institute’s Wine Industry Day. Water is an integral part of the process of making wine - from growing grapes to actually producing the finished product. The wine industry has been proactive in establishing new ways of doing things to reduce the need for water although, obviously, water can never be removed completely from the wine making process.
Water and the way the wine industry is starting to adapt are really good examples of why companies are embracing sustainability as core to strategy. As I have said previously, sustainability is about managing risks - water and its availability in the future will be a major risk to many organisations.
Tuesday, November 9, 2010
To tax or not to tax, that is the question
Does a carbon ‘price’ mean a carbon ‘tax’?
The government’s Multi-Party Climate Change Committee met recently for the first time. It was interesting to hear the opening position of the committee: that a carbon price is necessary to reduce emissions. They went on to encourage investment in low emissions technologies and to complement its existing programs.
So the question is not whether there should be a price on carbon but, rather, how that price should be applied.
This takes us to the field. Let’s consult the major players.
The government has, therefore, established two new roundtables – one representing business and the other with Non-Government Organisations (NGOs). The business roundtable comprised key players from right across the economy: mining, transport, manufacturing, energy, retail and banking.
The NGO roundtable, on the other hand, includes leaders from across the community sector: unions, social services, environment groups and local government.
This is good initiative by government – engaging across the spectrum will likely ensure the views of business and the general community are front and centre as the government progresses this important economic reform.
Even if the starting premise is agreed, there is still so much to be worked out. A carbon tax or an emissions trading scheme, a full emissions trading scheme or a limited emissions trading scheme? What price to put on carbon? How much, if any, assistance should be paid to emissions intensive industries?
Given the problems the draft ETS had in getting agreement, it will be interesting if the committee and the roundtables can build a consensus this time around.
We’re conducting a survey at the Institute which will run for another week, asking for members’ position on the topic of carbon tax.
http://www.surveymethods.com/EndUser.aspx?B490FCE6B6F5E6E7B1
The government’s Multi-Party Climate Change Committee met recently for the first time. It was interesting to hear the opening position of the committee: that a carbon price is necessary to reduce emissions. They went on to encourage investment in low emissions technologies and to complement its existing programs.
So the question is not whether there should be a price on carbon but, rather, how that price should be applied.
This takes us to the field. Let’s consult the major players.
The government has, therefore, established two new roundtables – one representing business and the other with Non-Government Organisations (NGOs). The business roundtable comprised key players from right across the economy: mining, transport, manufacturing, energy, retail and banking.
The NGO roundtable, on the other hand, includes leaders from across the community sector: unions, social services, environment groups and local government.
This is good initiative by government – engaging across the spectrum will likely ensure the views of business and the general community are front and centre as the government progresses this important economic reform.
Even if the starting premise is agreed, there is still so much to be worked out. A carbon tax or an emissions trading scheme, a full emissions trading scheme or a limited emissions trading scheme? What price to put on carbon? How much, if any, assistance should be paid to emissions intensive industries?
Given the problems the draft ETS had in getting agreement, it will be interesting if the committee and the roundtables can build a consensus this time around.
We’re conducting a survey at the Institute which will run for another week, asking for members’ position on the topic of carbon tax.
http://www.surveymethods.com/EndUser.aspx?B490FCE6B6F5E6E7B1
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