Once again California leads the way on energy efficiency

In California, providing full transparency on Scope 3 emissions will now become mandatory for larger companies. Andrew Warren, Chairman of the British Energy Efficiency Federation, in the October issue of Energy in Buildings & Industry, discusses latest developments in California and what it means for all of us.

The west coast shows the way

Yet again, California is set to lead the way  on increasing investment in energy efficiency. Effectively the world’s sixth largest economy, the Golden State has a long track record of introducing of pioneering effective policies that reduce energy wastage.

It was in California that electricity and gas companies were first required to assess formally whether it was really cheaper to build yet more power stations, rather than  investing in greater energy efficiency.

Such calculations led to traditional fuel providers becoming major installers of energy saving measures, not just in the rest of the. USA but throughout the world. Following this “polluter pays” principle is providing the sums that fund Britain’s Energy Company Obligation scheme, and will pay for a new £300m p.a. insulation scheme.

California shows the way

It was California that first set mandatory mileage per gallon performance requirements for cars. And it was California that first introduced the concept of efficiency labelling as well as mandatory minimum standards which revolutionised the energy efficiency of so many everyday household goods- from washing machines to refrigerators to TVs, again copied throughout the world. Democrat-dominated California has long has had some of the strictest environmental rules in planning policy, particularly  after passing its’ climate change law way back  in 2006

Now California’s state Senate has approved a new bill requiring large companies to report annually upon their  entire carbon footprint, sending the bill to Governor Gavin Newsom . On October 14 the Governor is due to endorse  it.  Putting California significantly ahead of any OECD government in  setting corporate climate rules.

The number of fossil fuel companies setting net-zero emissions targets has risen sharply over the past year, but they still  fail to address key concerns regarding fuel usage . Making them largely meaningless.

Some 75 of the world’s largest 112 fossil fuel companies have now committed to reach net zero   – the point at which greenhouse gas emissions are negated by deep cuts in output elsewhere and methods to absorb atmospheric carbon dioxide. That is up from just 51 a year ago, according to an assessment of publicly available data by Net Zero Tracker, run  by the British-based Energy and Climate Intelligence Unit and the University of Oxford.

But these targets do not fully cover and certainly lack transparency on Scope 3 emissions — which emphasise the use of a company’s products. That is the biggest source of emissions for fossil fuel companies. The report also found that none of the fossil fuel companies were making the needed commitments to move away from fossil fuel extraction or production.

Shareholder pressure

Companies have been under mounting pressure from shareholders to disclose in full their contributions to greenhouses gases, that endanger traditional business models.

The new California bill  requires all 5,000 companies operating in the state with an overall turnover of more than $1 billion a year , to measure categories of emissions, including an (acknowledged complex) category linked to supply chains and end-users, known as Scope 3.  This will establish just how efficiently their fossil fuel products are being consumed.

Scope 3  is a category familiar to any company undertaking voluntary net zero planning. There remains a number of ways of addressing this voluntarily – for instance, the US Securities and Exchange Commission is still set to issue its own guidance.

The difference is that, in California, providing full transparency on Scope 3 emissions will now  become mandatory for larger companies. This has been welcomed by several big companies including Apple, Ikea and Microsoft. But is strongly opposed by the  California Chamber of Commerce. It calls it “onerous, with. emissions tracking and paperwork requirement that will increase costs on California businesses”.”

‘Good’ net-zero strategy

As it stands, some 4,000 countries, states, regions, cities and companies globally have now committed to net-zero. Last November, the U.N .issued  guidance on what a ‘good’ net-zero strategy should look like, in order to avoid greenwashing.

“We haven’t yet seen a huge move from fossil fuel companies or other companies on meeting those guidelines, so there’s still a lot of work to do to come up to that level,” warned Thomas Hale of the University of Oxford, who co-authored the report.

In the UK, the Sunak government seems increasingly to be relying upon purely voluntary actions to meet our statutory net zero requirements. Sunak himself continues to own property , and is a long-standing taxpayer,  in California.

He of all people should now appreciate that it is only via California-type mandatory measures that we stand a chance of ever complying with our legal obligations.