Climate change scheme: milestone two

National Pig Association THE VOICE OF THE UK PIG INDUSTRY NPA is active on members' behalf in Brussels & Whitehall, and with processors, supermarkets & caterers - fighting for the growth and pros-perity of the UK pig industry.

If you don't send in your data on time, or it is inadequately completed, you will lose the discount from April for a minimum of two years - which will mean an immediate rise in electricity bills of around 6-8 percent.

At the last count (two days ago) over 100 members of the pig sector scheme had yet to return their forms. Associa, which administers the scheme for the NFU, is trying to contact non-returners, but the onus is on the producer to submit the data. As this is a milestone year, returning the forms is not optional. If you don't have a form, or if you have lost it, you can call the Associa Helpline on 08708 400 686.

Associa has agreed to extend the deadline to January 1, but there will be no further extensions. The final submission date to Defra has no flexibility. The final figures must be in on time or the whole sector will lose its discount.

If your data is not in the submission, you lose the discount, simple as that. There are no appeals and no excuses. As many cats can eat as much of your homework as you like and it will make no difference. It's not like a late tax return which means a fine and a slap on the wrist.

The current position is that the sector seems likely to achieve target. If it does, all members of the scheme will keep the discount as long as they have sent in their data. So even if you haven't reached your target, send it in.

Targets and Performance

Targets are being and have been reviewed for all sectors with Limate Change Agreements in the light of government policy and performance to date, bearing in mind that each sector which gets a CCL discount is expected to make reasonable efforts within its capability.

The figure shown for Milestone 2 (the current period) is estimated on the basis of data submitted by producers so far. It is incomplete and may change if and when more data is received, or a rash of ring fencing breaks out. Whether or not producers may need to buy carbon is not yet certain.

Despite very difficult production and trading conditions, the pig sector has so far done very well as compared to its baseline data. However it is recognised that base year data may have some underlying distortions. The revised targets do not mean that the sector is being punished for doing well, but are intended as (and accepted as being) a more realistic reflection of the potential for energy efficiency improvement in the sector.

Note that both baseline Specific Energy Consumption (kWh/kg primary) and Actual reduction achieved in Milestone1 may be significantly different from those shown in earlier documents. This is because the figures here are based on baseline data and current data of the present membership of the scheme. The data of members who have left the scheme in the meantime have been removed from the calculations. It looks as if more lower SEC members have left than high ones.

The negotiating team feels that it has been reasonably successful in putting the sector's case and avoiding excessive demands on it. Some sectors have far greater increases in their targets. We believe that the new targets - for Milestones 3 to 6, being 2006 to 2010 - are challenging, but remain realistic and achievable for committed producers, though no one ever said it would be easy.

Model 2 Agreement

There are many industrial and commercial sectors with Climate Change Agreements. (See Defra website for information on other sectors.) All the agreements take the same general form, but - since sectors vary - there are some differences in how they operate, the way that production is measured, and how passes and fails are determined.

The pig sector has a "Model 1" agreement. This means an overall sector target, but individuals have significant scope (such as to ring fence or buy carbon) and leaves a great deal of uncertainty running up to the milestone.

The sector can opt to change to a Model 2 agreement. In this case, units still have individual targets, based on their baseline data, which they are still expected to achieve, but the sector association can act on its members' behalf to ensure a sector pass.

There is no effective difference in the case of a sector pass (group verification of surpluses is technically possible, probably but economically unviable).

However, in the event of a sector failure, the sector association can buy carbon for the sector (but only just enough to achieve a pass), and pass on the costs pro rata (according to deficit) on a non-profit basis. This would almost certainly work out cheaper all around, will not cost passing members anything, and take out a lot of the worry.

However, changing to Model 2 means that most of the members have to agree, as well as the sector association. Some members could opt to stay in the scheme but stick with Model 1, as long as the majority transferred.

Changing to Model 2 would not affect the current milestone, so members need to make sure that they pass this time whether directly, as a sector, or by buying carbon.

Ring Fencing

Ring fencing means taking surpluses out of the common pot. If you take out all the surpluses, you are left with only the deficits, so the sector fails. Ring fenced surpluses can't be sold, used against future targets or given to a mate unless they are verified. This is likely to cost around 35,000 - and there's no guarantee any particular surplus will pass the tests.

35,000 would buy over 1,000 tonnes of already verified carbon, so if anyone wants some, they're better off buying it than "making their own", unless they have a massive surplus. No one in the pig sector (as far as we know) has the sort of amount liable to make it worthwhile, and liable to get verified any time real soon.

However, members have a legal right to ring fence. No one can stop you, as long as you notify Associa in writing before Jan 18th 2005.

Surpluses that are not ring fenced are set against deficits in the sector in the current milestone without needing to be verified. The only obvious reason for ring fencing is to make it more difficult for other producers. This can make the industry fail the target - as it nearly did at the last milestone. If the sector fails, producers with a deficit must buy carbon or lose their discount. While this may seem suitable punishment for those who haven't tried hard enough, it won't win any popularity contests.

If you've submitted your forms and reached your target, you don't need to do anything else except decide whether to ring fence. If, you feel a need to ring fence (why?) please do it as soon as possible to give others time to buy the carbon they may need.

Buying Carbon

If you haven't reached target, think seriously about buying carbon. Buying carbon is the only way to guarantee keeping the discount if you haven't reached your target and you don't know the sector position. The sector position can't be confirmed completely until the last minute. If you decide on that route, then it must be in place in your compliance account on 31st Jan, but you must inform Associa by 18th Jan.

Associa says that the system is improved since the last milestone, which should mean that this time around only the bare minimum necessary for an individual pass will be "retired", if it does come to that. If members decide to change to a Model 2 agreement, things will be easier next time.

Source: By Nick Bird, NPA Climate Change Group - National Pig Association - 18th December 2004