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London gets Carbon-neutral Cabs

Jessica McCallin

Recently, one of London's venerable black cab companies, Radio Taxi Group, announced that it will be offsetting its carbon emissions through forestry and energy projects around the world. The company is hoping that — as its large corporate customers come under pressure to reduce their emissions — having a "climate-friendly" cab service will give them an edge. The Ecosystem Marketplace looks at the assumptions and thinking that underpin this decision.

Recently, one of London's venerable black cab companies, Radio Taxi Group, announced that it will be offsetting its carbon emissions through forestry and energy projects around the world. The company is hoping that — as its large corporate customers come under pressure to reduce their emissions — having a "climate-friendly" cab service will give them an edge. The Ecosystem Marketplace looks at the assumptions and thinking that underpin this decision. Loved by some and hated by others, London's controversial Mayor Ken Livingstone can be accused of many things, but being frightened of making tough environmental decisions is not one of them. His decision to impose a congestion charge on private cars entering central London is a case in point. When it was introduced in February 2003, many commentators said it would be political suicide. Two years on and a 20-30% drop in cars coming into the zone combined with a majority of Londoners reporting satisfaction with the plan have confounded his critics. The congestion charge, however, is just one of Mr. Livingstone's weapons in the fight against vehicle emissions. His arsenal now includes further restrictions on more polluting vehicles, including London's world famous black taxis, with a view to only allowing cleaner cars into a 'low emission zone'. By June 2008, the diesel-run black cabs will have to meet more stringent European Commission-related Euro 3 emissions standards for nitrogen oxides and particulate matter. The move already appears to be having the desired ripple effect with Radio Taxis Group (RTG), which owns 3000 of London's 20,000 black cabs, recently announcing that it intends to go carbon neutral. RTG's decision means that it is going beyond the call of legislative duty and the move is better seen as a pre-emptive strike against future environmental legislation. Its rationale is that the Mayor's 'low emissions' move will be just the first of many legislative changes which will impact the transport sector as he pushes on with his stated desire to make London the most climate change-friendly city on earth. RTG are therefore betting that being ahead in the carbon reduction game can only be a good thing. That said, this is not the only reason for RTG to go carbon neutral as Michelle Nunan, head of marketing, explains: "We became a public company in June 2004 and our research led us to understand that being carbon neutral would make us more attractive to the kinds of shareholders and stakeholders we were seeking to attract. These include FTSE Top 50 companies, many of whom were already regular clients of ours." FTSE Top 50 companies are now required to publish annual statements on their environmental and social policies and RTG's assumption is that using a cab company that is making its own carbon neutral moves means they can concentrate on greening their core activities whilst relying on outsourced companies to do their bit. RTG is, significantly, not increasing its fares to cover the cost of the change, so it really is hoping that more progressive business practices will be enough to bring in the customers. The fact that banking firm HSBC — which last year announced that it intends to green its whole supply chain — is one of RTG's biggest clients appears to be a case in point. "Using us for their corporate transport means HSBC has one less thing to worry about when implementing its decision to go carbon neutral," adds Nunan. For its part, HSBC confirms that RTG's move is significant in ensuring the banks continued custom. "We would support any supplier wanting to go carbon neutral, whether that be the bank's gas or electricity supplier, or its airline or other transport company. When we move an executive from A to B we only want to move them from A to B, we don't want to be incurring a carbon charge. And from later this year, when we begin paying to offset carbon, the carbon produced from that travel will be an additional cost to us," says Francis Sullivan, advisor on the environment for HSBC holdings. "The current price of carbon is around 10 dollars a ton and as a huge bank with operations in over 70 countries you can imagine how much we could be paying to offset our carbon. We don't want our suppliers to cost us, so it's a huge bonus if a supplier is taking responsibility for its own carbon emissions, as RTG is. RTG is obviously only one supplier to one aspect of the bank's transport budget in one city, but every little bit helps." To achieve carbon neutrality, RTG has enlisted the services of environmental consultancy Future Forests. As its name suggests, a large part of Future Forests' work involves tree planting and the development of carbon sinks. But it's not all it does. "We choose them because unlike other carbon consultancies, Future Forests provides a one-stop shop for all our carbon neutral needs," says Nunan. "It doesn't just help with the actual process of reducing and offsetting our emissions, but with public relations and marketing as well. Also, with Future Forests, our offsetting work is insured. If the projects we invest in don't offset all our emissions, it will make up the difference." RTG's greening process began with a full evaluation of its energy use. Future Forests and its partner, the Edinburgh Centre for Carbon Management visited RTG's office to calculate exactly how much energy it uses, not just in the actual running of its cars, but in the running of all its operations. RTG has been advised on how to reduce the amount of waste generated by its back office functions and reduce the energy it uses to run its office. This has included switching to a renewable energy supplier and using the Internet to pay paperless bills. But as it is a taxi company, the vast majority of RTG's energy use, a huge 97%, goes into actually running the cabs. Switching to cleaner cars, however, is currently not an option because all black cabs have to be bought from the same supplier, Manganese Bronze Holdings, which only produces cars that run on diesel, one of the most polluting fuels. Over the next few years, new model black cabs with engines that comply with emissions legislation will be launched, further helping RTG cut carbon. But until that happens, RTG's hands are very much tied. In the meantime, the company is experimenting with a combined LPG and diesel fuel on six of its cars, but the emissions it can offset in this way are negligible. As such, much of the work has had to involve carbon offsetting rather than direct carbon reduction. RTG has chosen to do this in two ways: About 20% of its emissions will be offset by investment in forestry projects in the UK and Germany. The remaining 80% will be offset by investment in clean technology: solar power projects in India and Sri Lanka and a small hydro power scheme in Bulgaria. Using forestry projects to offset a portion of its carbon could prove problematic in years to come as not all of its clients agree that carbon sinks are the best way to cancel out carbon emissions. HSBC, for example, has adopted the WWF policy on forestry and will not be planting trees in its bid for carbon neutrality. Sullivan explains the rationale: "Personally we don't think tree planting is the solution. As a bank we have calculated that we would need to plant over 5000 acres of forest a year to offset carbon, which is not really feasible. Nor is it desirable, as there can't be any really adequate long term guarantees of what will happen to those forests; whether they will be cut down or whether the trees could burn in, say, a forest fire, and so on. Thinking you can rely only on carbon sinks is therefore quite woolly thinking. For us, the solution is to de-carbonise the economy, not try and sink the carbon. That said, RTG's [decision to go with] forestry is unlikely to be a problem at the moment. Any step is better than nothing and for now we wouldn't penalise RTG." The annual cost to RTG is £100,000, a small fraction of its £40m annual turnover, and Future Forests looks after the day-to-day implementation of all the projects. An initial two-year contract has been signed and provided all goes to plan, it can be renewed every two years. Jim Peacock, manager of public affairs at Future Forests says: "We would expect that the cost of RTG going carbon neutral will reduce year on year. As initial changes are made, so the benefits will start coming through. It's difficult for a transport company, whose hands are so tied in terms of the kinds of cars they can run, but there are other ways of reducing costs." An example would be in the preparation of RTG's annual report on its social and environmental activities. This year will be the first time RTG publishes a report on corporate social responsibility. Once the learning process is over, subsequent years should be more straightforward. As far as advertising its move is concerned, RTG is considering re-branding some of its cabs so that RTG's carbon neutral message is literally emblazoned on the side of the cars. This, however, is an expensive proposition, so, to date, it has re-sprayed only six of its cars with sunset, wave and forest designs. Giving the remaining 2,994 the same makeover could be costly. But then again, many companies would likely pay a premium for the kind of advertising exposure gained from having their messages plastered on the side of a car that regularly makes its way through a city of over eight million people. So, in this sense, RTG has a distinct advantage when it comes to communicating is carbon message to its increasingly environmentally-concerned customers. In short, the shape and body of the famous London black cabs is unlikely to change in years to come, but given recent developments in London — both on the official, legislative side and the voluntary, corporate side — it seems they will soon be cleaner and — very possibly — not all that black. Jessica McCallin is a London-based journalist writing on issues of finance and environment. She can be reached at jmccallin@btinternet.com. First posted May 31, 2005

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