Environmental cost statement
In our accounting, we aim to show more fully the impacts of our operations on the environment.
The sustainability charity Forum for the Future developed the approach we use to shed light on an organisation’s impacts on the atmosphere, water, land and biodiversity. Some of our environmental impacts are directly regulated, such as those on rivers and coastal waters. Our resulting investment to improve the environment is already embedded within the profit and loss account.
So the following environmental cost statement attempts to put a monetary value on impacts that have not yet led to investment.
Once these are identified, we estimate what a sustainable level of impact would be and compare it with the actual impact that we have had during the reporting year.
Then, the financial effect is calculated based on the theoretical cost of reducing impacts to a sustainable level, either by investment, offsetting, markets or shadow prices.
The impacts illustrated in the accounts are those for which Wessex Water is directly responsible and/or has the greatest ability to control. We acknowledge that the accounts are sensitive to the scope of the impacts considered and assumptions about valuation of impacts.
Environmental cost
The overall environmental cost for Wessex Water in 2009-10 was £14.7m, leaving the sustainable level of profit for the company at £97.6m.
Emissions to air
In the long term we aim to be carbon neutral. We are also monitoring our emissions of three major greenhouse gases – carbon dioxide, methane and nitrous oxide – compared with the target reduction path in the UK Climate Change Act. This path identifies an 80% cut between 1990 and 2050.
Our total carbon dioxide equivalent emissions were 179,902 tonnes in 2008-09. This is 52,605 tonnes above a reduction pathway that matches the Climate Change Act’s target as shown in the environmental cost statement table (available to download opposite).
The abatement cost shown in the environmental cost statement relates to these surplus emissions above the reduction pathway for an 80% cut between 1990 and 2050.
The financial cost for reaching the target uses the price of £7.50/tonne for carbon dioxide equivalent emissions from electricity, gas, diesel oil, transport, methane and nitrous oxide This is the price offered by Climate Care to offset carbon dioxide through renewable energy projects and forestry.
If, instead of a carbon offset purchase price, we were to use HM Treasury’s Shadow Price of Carbon, the unit value of greenhouse gas emissions would be £26.50 per tonne carbon dioxide equivalent. This would increase the environmental cost in the table above by £1m.
Impacts on water
Some of the rivers and streams in our region experience low flows from time to time due to the combined effects of dry weather and Wessex Water’s abstraction of groundwater. We have a programme of investigations looking at the effect of abstraction on the ecology of the rivers and streams in question.
In tandem we have investigated potential solutions whereby the water supplied to our customers can be taken from alternative sources. The costs of the investigative part of this programme are accounted for within this AMP period and are therefore not represented in these accounts.
In July 2007 the EA advised us that for our draft water resources management plan and business plans, we should assume a reduction in source outputs of 23.5 million litres a day.
Recent work has shown that the replacement cost stands at approximately £5m per million litres. On this basis, with the total investment discounted over 20 years at 6%, we estimate that this is equivalent to £13m per annum. The costs of accommodating this change will be internalised in the next AMP period. At that point this line would no longer appear in the environmental cost statement.
Impacts on land
Environmental site risk assessments have been carried out on a number of Wessex Water sites to identify any contaminated land that might require remedial action. At present, based on the risk assessments, there are no known sites where Wessex Water will need to carry out contaminated land remediation. Therefore, there is no abatement cost.