Mandatory energy audits: will they result in a more efficient freight industry?
New requirements, under the EU's Energy Efficiency Directive, are expected to improve the way in which companies manage their energy usage. Freight Transport Association's (FTA) Rachael Dillon, explains why the voluntary approach to carbon reduction may be a better strategy
Large companies in the UK will be required to undertake energy audits every four years, with the first occurring by December 5 2015. The audits will cover transport, buildings and industrial operations.
This is the first time that transport has come under scope of a UK energy/carbon reporting scheme and the FTA is keen to ensure that requirements are kept simple and cost-effective.
The Department for Energy and Climate Change (DECC) is currently consulting on the UK's approach to the requirements and has announced the Energy Savings Opportunity Scheme (ESOS) to comply with the Directive.
Businesses including own-account operators and third party logistics companies will be required to undertake accredited assessments where recommendations will be made on how they can further reduce energy usage, although there will be no legal requirement to implement the recommendations. DECC is seeking views on how transport, buildings and industrial operations should be audited.
The ESOS will sit alongside the existing Carbon Reduction Commitment (CRC) and mandatory greenhouse gas reporting obligations for quoted companies which comes into force on October 1 2013. FTA believes that Government needs to ensure that crossover of policy does not lead to additional business burden and welcomes DECC's position that it does not intend to "gold plate" the terms of the Directive.
Existing standards such as ISO14001 which companies may have already implemented to monitor energy are acknowledged by DECC. Additionally, DECC recognises the importance of exempting de minimis energy use in order to secure a cost-effective approach for businesses. Feedback is sought on how Government should determine the de minimis level which would enable companies to exclude certain energy usage which is deemed to be insignificant but very costly to include.
The consultation is also seeking views on how the UK will meet the reporting obligations of the Directive. A range of six options are included in the consultation's Impact Assessment with a varying degree of burden on businesses.
So how will freight operators be affected?
According to the consultation's Impact Assessment, it will cost the average road haulier £23,000 to conduct an energy audit. Fuel makes up around 40% of a haulier's operating costs meaning that there is already a huge incentive to reduce energy.
The Logistics Carbon Reduction Scheme (LCRS) managed by FTA which records, reports and reduces carbon emissions from freight transport has long demonstrated the benefits of a voluntary approach to reducing energy usage. Can mandatory Energy Audits make the industry any more efficient?
The LCRS enables freight operators to contribute to a voluntary carbon reduction target for industry. In late 2012, the scheme provided significant evidence to the Department for Transport's (DfT) Freight Carbon Review which assessed the contribution the freight sector is playing towards national greenhouse gas reduction targets. This directly resulted in the Department pledging to continue to support a voluntary approach to carbon reduction from freight transport.
But it isn't just about reporting; operators are already taking huge steps to improve fuel efficiency and reduce energy and carbon through operational measures such as driver training and use of telematics to optimise routing and scheduling.
Meanwhile, some operators are heavily investing in alternative fuels such as natural gas and biomethane or switching to rail where feasible. There is obviously still more to be done but the price of fuel has always provided a focus for energy efficiency across the freight sector.
There is little detail within the ESOS consultation on exactly how commercial vehicles will be audited but there is the opportunity to submit views on this. It is sensible that DECC has proposed to only cover energy use for which organisations directly pay for or produce themselves. Thereby, commercial vehicle operators purchasing fuel would be expected to be audited.
However, if a company outsources its transportation and therefore is not directly paying the fuel bill, they would not be required to assess that element of energy usage. This stance will avoid organisations having to gather data from sub-contractors which would have been timely and costly. It will also avoid any double counting of data and follows the LCRS's approach to carbon reporting.
Rachael Dillon is climate change policy manager for the Freight Transport Association