Potential carbon abatement from the Scottish public sector: summary report

5 Barriers to Implementation

Overview

The methods used to estimate abatement potential make the implicit assumption that 100% of measures are implemented, and that both cost-effective and non-cost effective investments are made. In reality, not all carbon saving recommendations made to organisations are implemented, for a variety of reasons. In the public sector in Scotland, around a third of recommendations made to PSBs have actually been implemented (as tracked in Close Out; this proportion will increase year by year as projects are implemented).

The most cost-effective measures, and those with the shortest payback periods, are most likely to be implemented (though other cultural, political or business barriers may impact this). In order to realise as much of the potential as possible, the right policy and incentive environment needs to be put in place, and the right support provided to public sector organisations.

Informed by the Carbon Trust's experience of working with 3,000 public sector bodies across the UK we identified 5 key barriers hindering the uptake of energy efficiency in the public sector in Scotland. The barriers are as follows (and are covered in turn in the rest of this section):

• Senior leadership and performance management;
• Effective procurement;
• Availability of financing;
• Lack of skilled resources;
• Split incentives, especially in schools and tenanted buildings.

Senior leadership

Several issues can contribute to a lack of senior leadership engagement in carbon reduction. As well as being a major barrier in its own right, lack of engagement from senior figures exacerbates many other barriers, for example it is harder to address resource allocation issues without senior support. The key issues are:

• The financial business case for carbon reduction is not understood at senior levels;
• The low materiality of energy savings in the non-energy intensive public sector means lower visibility of costs and lower priority attached to reduction efforts;
• The systems and governance are not in place to measure and track savings versus targets.

These issues are widespread but there are examples of best practice including organisations where there is clear ownership of the carbon reduction agenda by senior leadership, which raises its priority throughout the organisation and ensures appropriate resources are deployed. Well informed and engaged senior figures understand the financial benefits of carbon reduction and understand that despite energy costs being relatively small compared to other cost items, significant and valuable savings can be made that can be re-directed into frontline services.

Policy interventions that can address senior leadership barriers include the production and dissemination of case-studies that communicate the achievability (and value) of savings to senior leaders; tailored training on the financial, regulatory and climate change related business case for carbon reduction; and clear government targets for carbon reduction for PSBs, with real incentives for compliance including matched savings, public league tables and financial penalties.

Procurement

A number of procurement related issues hinder public sector carbon reduction including sub-optimal procurement guidance (especially failure to incorporate lifecycle costing for products and infrastructure, and missed opportunities around collaborative buying); inconsistent contract writing skills that can lead to unexpected additional costs or facilities management contracts that do not incentivise efficiency; and a lack of supplier and product footprinting and labelling meaning that embedded carbon is not counted (not in scope for this study but a significant opportunity for the public sector to drive carbon reduction beyond its borders).

Best practice includes enabling buyers and procurement staff to write and enforce contracts that incentivise energy and carbon efficiency; and using the public sector's purchasing power to stimulate new markets for low carbon goods and services.

Supporting policy interventions include the provision of training on lifecycle costing and other procurement good practice; supplier accreditation to increase trust and reward good performance in the energy and carbon supply market; and mandating the use of contracts ( e.g. for facilities management) that incentivise energy and carbon efficiency.

Financing

There are well known financing barriers to energy efficiency, principally relating to the lack of capital for energy and carbon saving projects. Even if available to the organisation, capital is seldom allocated to energy efficiency, despite the existence of numerous attractive and cost-effective projects. The availability of private capital is poorly understood and it is often too expensive. Lack of funding at the project development stage means many good ideas do not get off the ground.

Financing best practice includes the creation of separate budgets for energy efficiency to ensure other demands do not use up all the available internal capital, and the consideration of private capital by informed decision makers for certain projects.

Policy interventions to help address finance related barriers include linking capital budgets and carbon performance (as done by HEFCE); the provision of recoverable grants, cheap public loans or other non-profit financing vehicles; providing enabling finance to bring in private sector capital ( e.g. first loss / junior debt); and the allocation of budgets for project development.

Resources

Energy efficiency and carbon reduction are specialist, often technical subject areas. A number of resource related barriers can hinder public sector efforts, including:

• Lack of expertise: PSBs do not always have the know-how and expertise in-house to identify and develop carbon reduction projects;
• Lack of data: effective carbon reduction requires good quality data to identify the optimal opportunities and to track progress. Absence of such data can lead to poor decision making;
• Lack of capacity: even if the required skills exist within an organisation, key staff members may not have the time to focus on cutting energy use.

Best practice includes the creation of internal processes and methods, either using internal resources or partnering with external experts; and providing all relevant staff with access to specialist technical and project management skills so they can get the support they need.

Policy interventions include the provision of training and the facilitation of best-practice sharing between organisations.

Split incentives

Split incentives are common barriers to energy efficiency, especially in relation to buildings emissions, where the landlord-tenant divide is a substantial barrier. A significant portion of public sector buildings are rented and in many cases landlords have no incentive to improve building efficiency where they do not accrue the benefits (lower bills, which are paid by tenants).

Best practice relates mainly to aligning interests so that the party responsible for emissions is the one best able to reduce them and benefit from that reduction.

Policy interventions include green leases (where both landlords and tenants are obligated to cut emissions); and mandating and / or incentivising landlords and FM providers to improve efficiency.