Today National Grid has introduced an extension of its carbon reduction target. We’ve upped it from 60% reduction by 2050 to 80%. We’re already 35% reduced on our 1990 level but we don’t think 60% is challenging enough so today we’ve announced that we’re going to increase that to 80% reduction by 2050. But we’re not just setting a target. It’s quite easy to set a target and talk about it particularly when the target is as far away as 2050. Because an awful lot of the things we’re doing today that impact that, people aren’t going to see the benefit of that immediately so we are introducing carbon budgets in every decision making process that we have in our business.
Now what does that actually mean? It actually means that we are going to price carbon. We are going to have a shadow price so that when we take investment decisions and when we think about how we take our operational decisions the cost of carbon will be part of that decision making process. I’m hugely optimistic that’s going to change not just the engineering behaviours of our business actually but it’s going to allow employees to take part in thinking about the innovative ways that we can reduce our carbon footprint. We are putting carbon budgets at the heart of our operational decision making. That means that carbon emissions therefore become one of our key performance indicators - just like reliability, efficiency, just like safety which is probably the best example.
Today already in National Grid we reward our people from the senior executives downwards - we don’t just reward people for their financial performance, we do it for those important metric, metrics that drive the business and carbon is going to be one of those going forward so it will fit absolutely in the centre of everything that we do and will drive the way we view our performance as a business and therefore our rewards. Since we’ve reduced our carbon emissions by 35% on 1990 levels this hasn’t influenced our cost base at all. On the contrary actually we have become more efficient. The section of the bill that National Grid is fundamentally responsible for as a Transmission and Distribution company is very small. It’s 15 or so per cent of the total bill but the changes that we are going to make through this first raft of changes I expect to come from efficiencies actually.
As a business ourselves one of the first things we want to do is to reduce our energy consumption. It’s the easiest way of reducing your carbon footprint. That’s going to make us more energy efficient. As I look at some of the things we are going to be doing at the back end of the timeframe - changing our equipment and investing - we’ll just be replacing equipment that’s ageing with better equipment with a lower impact. I do not believe this will impact consumers over the long run. National Grid does not set targets and then find itself in a position not to be able to measure where it actually is against those targets and have people come in from the outside and verify those measurements. We’ve always done that and in this particular area of carbon emissions as well but what we’re going to do during the course of 2008 is using the methodology of the World Resources Institute to baseline where our carbon emissions are across all our businesses today so we know exactly where we are in 2008 and then we will measure that year on year as we reduce our footprint as we go forward to 2050. This is going to change very much the core operational decisions and investment decisions in our business.
The future’s going to be quite different. National Grid is an incredibly successful company. It’s built around the performance of an awful lot of people - about 28,000 in total. We set an awful lot of challenges on our people as any business does. Every time we set our organisation, our company, our business, challenges people rise to them and deliver. We have a huge amount of talent, a lot of people who are very innovative and an awful lot of people in our organisation who passionately care about the climate and the impact that our business and the impact of all business on the climate and protecting it for their children and future generations. Setting this at the heart of our business is something I am very confident, not just optimistic but confident actually is going to get our employees very much engaged in thinking about things again, about how they can help us reach this challenge and go way beyond it. Every time we put challenges in front of our organisation, people step up and deliver and this is just going to be another one of those but it’s one that I think there is already a huge amount of pent up energy and passion of people wanting to make a difference.