Carbon pricing should catalyse the Australian university sector to become more businesslike about the way it manages the resources, capital and infrastructure devoted to the use and management of energy.
Australia’s universities are bracing for sharp rises in electricity costs and price increases on goods and services as the prospect of a legislated carbon tax begins to hit home.
Pricing carbon will also bring complexity and urgency to universities’ financial performance, reputation, procurement, facilities management, and corporate governance.
Vice Chancellors and their senior executives will therefore need greater visibility into their institutions’ broader sustainability performance, especially big-ticket items such as electricity, gas, water, supply chain, waste, property and infrastructure.
They will also need new expertise and tools for assessing the carbon component of these items so they can make informed decisions about investing in more cost efficient energy and supply chains, and whether they can transparently absorb or pass on additional costs.
Pricing carbon: how it works and who’s affected
According to the clean energy carbon-pricing bills currently before federal parliament, corporations operating facilities that emit more than 25,000 tonnes of carbon dioxide per annum will pay a fixed price for emissions above the carbon cap. The scheme also extends to emissions of methane, nitrous oxide and perfluorocarbons as part of the national commitment to the Kyoto Protocol.
A fixed price for emissions will be in effect for three years from July 2012 before we move to a flexible, market-based pricing mechanism from July 2015. The scheme covers direct ‘Scope 1’ emissions from stationary energy, non-legacy waste, rail, domestic aviation and shipping, industrial processes and fugitive emissions, capturing some 500 liable entities from 2012.
By far the biggest impact of pricing carbon will be its indirect impacts on the price of many goods and services, higher electricity prices – power generators will incur a direct carbon tax liability – and higher supply chain costs. Treasury has estimated that carbon pricing will initially raise electricity prices by 10 per cent, and a further 16 per cent over the next five years.
Pricing carbon will hasten and reward capital investment in renewable and less carbon intensive forms of energy. In principle, this reform should hasten wider adoption of energy efficiency behaviours and programs that will reduce Australia’s greenhouse emissions and make our economy more internationally competitive in a global trading environment where carbon embedded products and services will become less price competitive.
Challenges and opportunities for the university sector
Eighty per cent of a typical university’s carbon footprint arises from electricity consumption. The carbon tax could add $20 million to the university sector’s electricity bill, according to Adelaide University’s head of services and resources, Jonathan Pheasant, who says he expects the new tax to add $1m to the university’s annual $4.5m power bill.
Adelaide University has therefore set itself a carbon reduction target of 20 per cent for electricity, paper and water by 2012 and is adopting co-generation or tri-generation technology across its properties, as one of its key energy-saving investments.
The University of Queensland is also reducing its exposure to expensive coal fired power costs by building what is believed to be Australia’s largest installation of photovoltaic panels at its St Lucia campus. The system generates 1.22 megawatts of power from the sun, harvested from some 5,000 panels on the rooftops of four of UQ’s biggest buildings.
Macquarie University uses geothermal and tri-generation energy – the simultaneous production of electricity, heating and cooling – in its air-conditioning cooling towers. About 15 per cent of Macquarie’s electricity supply comes from the alternative sources, and it is looking to generate more of its own power. The university will spend $140m in an effort to cut its greenhouse gas emissions by some 40 per cent over the next two decades.
Carbon pricing should catalyse the Australian university sector to become smarter and more efficient about the way it manages the resources, capital and infrastructure devoted to the use and management of energy.
Many of our universities publish their performance metrics for energy, water, waste and carbon emissions as part of their sustainability performance and annual reporting – or because they’re obliged to by federal and/or state compliance reporting regimes. This will become a new imperative in tertiary education as stakeholders such as governments, governing councils, private sector funders, staff and students take greater interest in carbon and energy pricing.
Integrated sustainability reporting will increasingly become the subject of review and audit – making the governance and oversight of carbon and energy management key issues for university executives. Carbon pricing will also raise the bar for CFOs and corporate governance because emissions will determine a financial liability for all universities.
Energy management imperative
Universities that act now to establish responsibility and business systems to track and manage the impacts of carbon pricing will be well positioned to offset risks to their costs, reputations and compliance reporting obligations.
This will be new terrain for many universities – or a familiar source of pain. Measuring and reporting sustainability performance can be costly, complex, and time consuming, especially for those that don’t have the requisite staff and technology.
Many universities are managing their energy and carbon performance with spreadsheets and other legacy systems. This will soon become untenable, as greater accountability and assurance demand more rigour and transparency in the way the higher education sector accounts for and manages energy and carbon pricing flow-ons.
A handful of universities have adopted enterprise sustainability software systems to streamline and automate the capture of utility and supply chain data. This technology captures granular data from any source, including smart meters, supplier reports, and internal business systems.
This shift is becoming commonplace around the globe as corporations seek to raise their ability to track and manage their energy performance and make sound data-driven investments in sustainability. Critically, these systems allow corporate budget holders like CFOs to assess the impact, payback period and return on investment of their energy efficiency and carbon abatement programs.