carbon trading
2 Jul 2009
Dirty Light Bulbs And Hot Air
Remember all those people handing out free power-saver light bulbs? Dan Bishton was one of them. Now he hates the things — and he explains why
I never want to see a compact fluorescent light bulb again. One glimpse of those brittle spiralled tubes brings a flood of associations: a flash of hope, quickly dwarfed by frustration, guilt and anger.
For two years I worked for Easy Being Green, a Sydney-based carbon trading firm that operated under the NSW Greenhouse Gas Abatement Scheme. As a team leader there, I spruiked, cajoled and charmed members of the public into taking home free boxes of energy-saving CFL globes and miserly showerheads for the good of the planet. A year later, I’d climb furniture and crawl under houses to install them personally.
"100 per cent free," I’d say — "All you have to do is sign this form."
The form was a nomination form, which stated that the hapless coal-fired electricity consumer could have the bulbs for free, if they promised to use them — as long as Easy Being Green could keep the saved energy. Or to put it more accurately, claim a certificate representing a tonne of saved carbon, which could be sold on one of the world’s oldest carbon markets, the NSW Greenhouse Gas Abatement Scheme.
GGAS was launched in 2003 to limit pollution from electricity generation activities in NSW. It operated by setting a baseline for carbon emissions based on a projection of predicted levels, and establishing a marketplace for trade in carbon savings, real or theoretical. This meant that a generator exceeding their predicted emissions level would need to buy a tonne of "saved" carbon for each in excess, at a price determined by the market.
These savings were represented by certificates known as NGACs (NSW Greenhouse Abatement Certificates). These could be purchased from other electricity generators that had stayed within their allotted emissions volume, or from "Accredited Abatement Certificate Providers", such as Easy Being Green. These certificates were designed to represent carbon that was going to be saved at some point in the future; perhaps by the frazzled-looking mother scrawling her signature before tossing a box of globes into the trolley beside her screaming toddler.
Things began modestly in 2005 with giveaway stalls at train stations and shopping malls. Easy Being Green was incorporated in October that year , and by the time I joined in mid-2006, business was starting to boom. Teams of kids were bustled out of the Newtown office each morning, ferried out to shopping centres across the city in hired Corollas. Ex-Greenpeace Chairman Paul Gilding led the company with galvanising speeches about harnessing market forces and a new era in which the private sector could trump government inaction and drive technological change. Many of the initial employees were ex-Greenpeace members, taught by seasoned veterans from fundraising groups who showed how to stop a speeding window-shopper. Coaxing them into accepting a free product that saved them money was child’s play next to the usual fundraising practice of extracting credit card details.
Life was grand at first. Our little booths were mobbed by grateful Westfield shoppers keen for the latest freebies. Employees like me swallowed the rhetoric, and it did seem like we were on to something. The price for a tonne of carbon was at its peak of $25, and the nomination forms were rolling in at an incredible pace. Teams would stay in particular centres until the flow of eager punters abated, usually weeks later, before moving to a new centre for another feverish rush.
Trade of demand-side certificates mushroomed to almost 9 million throughout 2006, many times the previous year’s total. Seeing the immense ease with which NGACs could be claimed through light bulb giveaways, many more players had entered the fray, including some of Australia’s largest energy companies. By distributing bulbs themselves they were cutting out the middleman, amassing NGACs in-house without having to limit their electricity generation, or having to purchase them from new businesses such as Easy Being Green.
Despite the throngs of shoppers queuing to receive their bulbs, not many of them were interested in how they were receiving them free of charge. We’d been instructed to stress how important it was that customers actually installed the bulbs, but explaining this to the mother with kids screaming at the crowded booth was often challenging. Not many of the (often very young) staff properly understood how the company made a profit. Those who did began wondering how anyone could know if the bulbs were actually being used.
Under the scheme rules, it was Easy Being Green’s job to ensure that customers installed their bulbs. We told them that they might receive a call from the office in a few weeks to check they were being used. The scheme’s administrator was IPART, the Independent Pricing and Regulatory Tribunal. IPART used a figure called the installation discount factor to account for the risk of giveaway bulbs not being installed. This figure had been set at 0.8 since the scheme’s first year of trade, and meant that companies giving away light bulbs would receive certificates calculated at 80 per cent of each bulb’s power saving potential.
When the scheme started, just over 8000 certificates changed hands, but in just the first seven months of 2006, that number had risen to 2.5 million. It was then that IPART received the results from a Newspoll survey conducted on giveaway installation rates. Newspoll’s survey found that only four of every 10 bulbs found their way into light sockets — half the rate that the booming giveaway companies had been claiming credit for. Half-way through August, IPART made a shock announcement that slashed the installation discount factor accordingly to 0.4, halving the value of NGACs generated by giveaway programs. This also halved the income stream for companies reliant on them as their sole source of revenue, effective from 1 October 2006.
At the time, Neco was a small eco-hardware company that also survived off the back of giving away light bulbs and showerheads. Like Easy Being Green, Neco were proud of their reputation as one of the originators of the giveaway model and also as one of the most ethical companies in the sector. Ben O’Callahan was director of Neco throughout 2006 and 2007 and describes the scale of challenge presented by shocks to the market.
"It took us maybe two or three months to process NGACs, do all the paperwork, go back and confirm that they were real, claim and sell them to recoup the costs incurred. So if you’re sitting there on 100,000 NGACs that you know you have from the last three months and then suddenly the price is $4.50, and your break-even point is $9 or $10 — suddenly you’re in a very scary place, carrying a lot of debt and potentially 2-300,000 lightbulbs sitting in containers, and you’re unable to do anything with them," says O’Callahan.
The IPART announcement killed light bulb giveaways. Easy Being Green employees were given an early Christmas holiday, with no promise of a job on return, or what that job might entail. Yet concerns over the company’s future activities didn’t impede Christmas festivities. Easy Being Green had generated and sold over 3 million NGAC certificates in 2006, at an average value of $14.50 per certificate. They were so comfortable with their meteoric position in the market that they gave each employee an Easy Being Green diamond for Christmas — delivered with a quip about their carbon-based origins.
As 2007 wore on, the financial situation for companies surviving solely on NGACs became desperate. The price for a single tonne of carbon on the NSW market was plummeting and there were no mechanisms to prop it up.
IPART had offered a new kind of concession with their announcement — a compact fluorescent globe physically installed by a staff member could now be claimed for 100 per cent of its energy saving potential. So began the transition to the convoluted model of home installations.
Matthew Meagher started working for Easy Being Green in January 2007 while they road-tested the first direct installations. "Teams would go to suburbs that had large houses and lots of lights that didn’t necessarily get used," Meagher says. "There may have been only two people who lived in that huge house but if they had a lot of light bulbs that was the main thing. It would probably draw a similar amount to a small house in Penrith that only used eight light bulbs all the time, but an eight-bulb house was often not worth the effort because of the time it took."
Initial daily sales targets of 195 bulbs installed per team were cranked up to 240 per day and the pressure on employees to hit these figures increased.
"It was pretty much a ‘Your job’s on the line unless you get this many in’ kind of message from management, so it wouldn’t surprise me if people installed them where they shouldn’t have or chucked a couple of freebies in," says Meagher.
Bulbs that didn’t last, or were not used, for the full 15,000 hours intended meant less carbon was saved than was represented on a trading certificate. There were other factors that compromised the value of the bulbs as emissions reducers. Installing CFLs next to bathroom heat lamps or into sockets fitted with dimming switches could cause them to explode, but many were installed there regardless. The bulbs are also not meant to withstand extreme heat, but some teams had even been installing them in ovens.
"The important thing for the company was to have the numbers on the page at the end of the day. The scrutiny as to where those bulbs were going wasn’t that high," says Meagher.
Hugh Outhred, a University of NSW expert on the pitfalls of certificate-based schemes for driving genuine emission reductions says that the lack of transparency in the scheme’s administration means that the number of false carbon savings that were traded is impossible to measure.
"They [the certificates] basically have inflation built into them — in other words they always will be less than the stated physical emission reduction, because the drivers are just one way. If you think about the task for the person who is trying to create the certificates, they’re just trying to create them at minimum cost. So basically they just face a gatekeeper, in this case IPART, and IPART obviously wasn’t very good at looking after the gate," he says.
"The thing about markets is they’re impolite. They don’t pull their punches — if they think the scheme’s a dog, the price will reflect that. In this case market sentiment had decided that the whole thing had become so dodgy, so shot full of holes, the regulation was so weak that why would anyone bother paying anything for the damn things?"
Easy Being Green became insolvent and went into third-party administration in October 2007, when the NGAC price had tumbled to $4.50. The announcement of a new national emissions trading scheme in the lead up to the November federal election had scuppered the last shreds of faith in the future of the NSW marketplace. Easy Being Green’s directors desperately appealed to state and federal governments to prop up the market price for NGACs but failed to illicit any response. All 200 staff were made redundant and the trading name was bought by energy company Jackgreen, who now install heavily discounted solar hot water systems through the GGAS scheme.
For every observer who chooses to see this as an example of a market functioning efficiently to shut down an aberrant trading practice, there is probably someone else out there, who, like me, sees it more as a failure that such a sloppily regulated market was allowed to operate at all.
Meanwhile, Hugh Outhred says there is only one guaranteed and clear-cut method to reduce carbon emissions.
"All we really needed is for governments to impose a schedule of compulsory retirement dates on all major polluting facilities. It’s entirely straightforward in the case of NSW electricity sector, because despite its best efforts, the Government is still the owner of all of the major polluting power stations. What we can let the markets do is discover replacement technologies; we just have to rule out the inadmissible ones. The rest would then go straightforwardly towards where we need to be: low emissions. And the irony is it’s so bloody simple."
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“All 200 staff were made redundant and the trading name was bought by energy company Jackgreen, who now install heavily discounted solar hot water systems through the GGAS scheme.”
The hot water systems would have been discounted using the federal government RECs (Renewable Energy Certificates) scheme. See www.orer.gov.au.
GGAS excludes hot water systems.
http://www.greenhousegas.nsw.gov.au/acp/energy_efficiency.asp
A minor point in an otherwise good article.
douglas jones
The perverse sentiments that in part drove the world to the latest bust? Similar to the broker paid on the number of mortgages sold regardless of the likelihood of repayment.
Reading this made it easy to be green around the gills. Sickening. Thanks for the insight.
A year ago I agreed to a company installing free cfg’s in my house. They installed a cfg in my bathroom between two heaters. I was not told that it would explode. I knew that non dimmers could not be put into a dimmer setting but did not know that they could explode. Are not the cfg’s still superior to the old inefficient globes?
This light bulb ban, whether in Australia, EU or USA is pointless…
Australians choose to buy ordinary light bulbs overwhelmingly in the shops.
Banning what Australians want gives the supposed savings - no point in banning an impopular product!
All lighting devices have different advantages and give out different types of light.
That’s why they exist for people to choose.
The ordinary simple light bulb responds quickly with bright broad spectrum light, is
easy to use with dimmers and other equipment, can come in small sizes, and has safely been used for over 100 years.
For some that is a reason for banning it: Why keep simple old technology?
Because if modern lights were better, people would buy more of them instead.
Consumers don’t avoid products only because they are expensive - or no other expensive products would be sold.
Nor do they keep buying cheap but poor products.
There are - for example- well known batteries and washing up liquids that are expensive but sell well because they “last longer”
- as they show in their advertising.
Fluorescent light manufacturers and distributors are very happy to let governments promote their case,
and happy that they ban the lights that people are buying, so the fluorescent (and/or LED) light manufacturers can win market share
- why should they bother making better products and advertise them?
They can clean up the market and charge what they like when those cheap competing rivals keeping down prices are gone.
Is this the New Australia?
This is like the New EU…or New America, given the recent regulations, including on light bulbs
= You can buy any car, as long as it is an Obama car…
You can buy any light bulb, as long as it is an Obama light bulb…
Put it this way:
New LED lamps are on the way.
If they are good, people will buy them - no need to ban ordinary light bulbs (little point).
If they are not good, people will not buy tham - no need to ban ordinary light bulbs (no point).
“Look at all the energy we save”,
says President Obama, like PM Kevin Rudd!
Since when does America or Australia need to save on electricity?
There is no energy shortage, there are plenty of energy sources, and Middle East oil is not used for electricity generation.
Consumers pay for any power stations, just as they do for factories and shops generally.
Certainly it is good to let people know how they can save energy and money - but why force them to do it?
As explained on the website linked below, money/energy savings from a ban are not that great anyway.
“Look at all the emission savings”,
say President Obama and Kevin Rudd!
Do their light bulbs give out any gases?
Power stations might not either:
In the USA for example, in Washington state practically all electricity is emission-free, around half of it is in states like New York and California.
Why should emission-free households there be denied the use of lighting they obviously want to use?
Such households (in Australia too) will increase, since emissions will be reduced through the planned use of coal/gas processing
technology or energy substitution.
Again, emission savings are not as great as supposed anyway:
Why Light bulb bans are wrong (list of reasons with references)
http://www.ceolas.net/#li1x
About why all efficiency regulation is wrong,
and how they affect performance, construction, appearance, price and savings on buildings, dishwashers, cars, light bulbs etc
http://ceolas.net/#cc2x
“Meanwhile, Hugh Outhred says there is only one guaranteed and clear-cut method to reduce carbon emissions.
“All we really needed is for governments to impose a schedule of compulsory retirement dates on all major polluting facilities. It’s entirely straightforward in the case of NSW electricity sector, because despite its best efforts, the Government is still the owner of all of the major polluting power stations”
Exactly!
Let’s get 2 things clear:
Cap and Trade (emission trading) is a roundabout way of achieving nothing:
Too many offset possibilities - and too much offsetting to the future.
As shown in the USA (and EU before it), politicians and their industrial lobbyists agree to it simply because a lot of free allowance handouts and easy terms now, pushes any real action to the future.
Any bets that when the crunch comes, action will be pushed back again?
The Australian Senate is (as far as I understand) considering Cap and Trade in August.
I hope they see it for the musical-chair-game-without-end that it is.
Of course the basis is of it all is:
Do carbon dioxide reduction methods have any meaningful effect anyway?
The best way forward, in my view, comes close to what Hugh Outhred says.
What can we do that is advantageous in itself - regardless of carbon emissions - but which also happens to lower them ?
Sufficient first phase 2020 emission reduction, typically quoted at 15-20% reduction, is achieved by acting on electricity generation (coal, gas) and transport (mainly automobiles) alone, since these 2 sectors account for nearly 80% of fuel combustion emissions, and fuel combustion in turn accounted for 94% of CO2 emissions in 2007 (EPA data USA, but likely even more in Australia, given the dominance of coal use for electricity generation, in line with what Hugh Outhred says).
The focus on electricity and transport gives several advantages - apart from lowering CO2 emissions:
1. Local environmental benefit from less pollution of sulphur and all else that’s in the emissions, regardless of the less certain or immediate global benefit from CO2 reduction.
2. Electricity supply alternatives which together with improved grid distribution gives better competition and keeps down electricity bills for consumers.
3. Transport alternatives (using electricity, hydrogen and other energy sources), which also reduces the dependency on oil imports.
No Trade Problems
Unlike Cap and Trade, which (in EU and US versions) involves cement, steel and other industries having to face imports from unregulated countries, the here suggested electricity and transport changes are not just more limited, but also largely local.
Funding and Impact
Equity and long term loan finance can be used: Long term industrial loans from financial institutions, particularly if federal/state guaranteed, give low yearly interest repayments and lessen the effect on electricity bills or transport cost.
The impact on the businesses is further lessened by the stability and predictability surrounding the funding.
Since only electricity and transport are involved, other business continues as usual and consumers and society in general are spared expense and disruption.
This is even more obvious from having no energy efficiency regulation either,
disturbing their business practices and their home lives.
Compare with
today’s all-encompassing Cap and Trade (emission trading) suggestions, with unpredictability, expense, and needless disruption from normal business practice on one hand, or unnecessary profiteering from free allowance handouts with little actual emission reduction on the other hand - which in turn means having to have extensive efficiency regulation on what people can or can’t buy and use, to actually lower some emissions in the near term.
Keep Life Simple.
Where there is a problem - deal with the problem.
Understanding Cap and Trade
http://ceolas.net/#cce5x
Basic Idea — Offsets — Tree Planting — Manufacture Shift — Fair Trade — Surreal Market — Real Market — Allowances: Auctions + Hand-Outs — Allowance Trading — Companies: Business Stability + Business Cost — In Conclusion
A Different way Forward
http://ceolas.net/#cc10x
I should add:
Coal power itself is not necessarily wrong!
Re Hugh Outhred “schedule of compulsory retirement dates ” on coal power:
That is not necessary as such:
Again, dealing with emissions in a total sense, not just as carbon emissions,
if coal power can meet emission limits on different substances, by use of ever increasing inventive coal/gas processing and storage solutions
(see http://ceolas.net/#em1x )
— then there is no reason not to use coal
Any emission llinmits should be neutral as to energy source used.
Must be out of date , thought the basic problem with a fluorescent tube was the toxic substances inside like mercury that should mandate recycling , you do not want them in landfill and you certainly do no want to come in contact with that white dust inside !
Anyway consumer resistance to CFL’s is one of complexity of choice, a 60 watt incandescent in either pearl or plain , easy for the hindbrain to deal with , a cfl is colour temp and lumen output combined giving hundreds of choices.
Then there is the complexity of longevity all those cheap CFL’s handed out will not last the 8000hrs expected only $30 versions do that , then they go onto leaching mercury into the landfill for centuries.
So Dan feel guilty very guilty !
Thanks for your article Dan. It explains what happened in the small country town (where I now live) in September 2007. All residents were offered free installation of energy saving globes. I knew the Bendigo Bank organised it and the Victorian Department of Justice was involved. I assumed it was some sort of carbon credit scheme and was a bit sceptical about it all. But just searching the net, I discover that it was also an Easy Being Green project.
This project involved a lot of locals - including CFA members - who put a great deal of effort into it. I would like to think that the globes were installed correctly and that they are saving money and emissions. I wouldn’t like to think that residents were duped into participating in a dodgy scheme but it looks like that’s what may have happened. Helen
Thank you for the information, This article is interesting .I was entirely unaware of the toxins present inside the tube of a CFL.
Regards,
Carver
http://www.lyco.co.uk