Dirty Light Bulbs And Hot Air

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."