Tag: Carbon Accounting

Washington State introduces Comprehensive Climate Change Initiatives

In December 2014, Washington State Governor Jay Inslee introduced an ambitious climate change policy agenda for 2015, including the establishment of an all-encompassing carbon pricing program. This policy follows the signing of Executive Order 14-04 (Washington Carbon Reduction and Clean Energy Action) by Governor Inslee on April 29, 2014, which set out a plan for state climate action.
If passed by state lawmakers, the program would raise an estimated $1 billion a year through a new levy on greenhouse gas emissions. In particular, the program would cap statewide pollution rates at levels that decline over time, with polluters allowed to trade state-sold pollution allowances among themselves. It would aim to address emissions covered other similar programs operating in the US, while avoiding pitfalls of other programs, such as giveaways for certain polluters. The technical aspects of Washington’s proposed program are considered best practices and as such, they have been lauded by outside observers such as the Environmental Defense Fund.
The program has been designed to help Washington get on track toward meeting its legislated goal of reducing emissions to 1990 levels by 2020, with a further 50% reduction by 2050. A November 2014 report by the Carbon Emissions Reduction Taskforce (which was established by Governor Inslee in April 2014 to provide recommendations on the design and implementation of a carbon emissions limits and market mechanisms program for Washington) concluded that Washington is not on target to comply with the 2008 law regarding required reductions in greenhouse gas pollution. It found that the requirement of reducing yearly pollution levels back to 1990 levels in 2020 would “likely” be met if a new cap and trade policy is implemented. Further steps would be needed to meet more ambitious reductions required by 2035 and 2050.
The proposed program would cover an estimated 85% of greenhouse gas emissions produced by Washington and it is anticipated that approximately 130 companies would be required to pay a levy, generating approximately $1 billion a year in revenue. Revenue generated under the cap-and-trade proposal would help to cover shortfalls in transportation and education spending, reduce taxes and fund household energy efficiency improvements for poorer residents, as well as help meeting the general costs of running the state.
Below is an overview of the legislative proposals aimed at reducing Washington’s greenhouse gas emissions:
• Carbon Pollution Accountability Act: The proposed Carbon Pollution Accountability Act (SB 5283 / HB 1314) would create a new market-based program that limits carbon emissions and requires regulated entities to pay for their emissions. The limit will decrease gradually over time, allowing emitters time to transition to cleaner technology and more efficient operations. The program will generate about $1 billion annually which will be used for transportation, education and disadvantaged communities. The draft Carbon Pollution Accountability Act can be found here.
• Clean Transportation: The Department of Transportation has three strategies to decrease transportation emissions: cleaner cars, cleaner fuels and moving people and goods more efficiently.
• Electric Vehicles (EVs): Legislation will extend tax incentives for EVs, create an EV infrastructure bank, and require urban cities and counties to adopt EV incentive programs. Draft legislation can be found below:
o Alternative Fuel Vehicle Sales Tax Exemption (SB 5445 / HB 1925): This bill extend a sales tax exemption on the first $60,000 on the purchase of alternative fuel vehicles.
o Electric Vehicle Infrastructure Carbon Pollution Accountability ActBank (SB 5444 / HB 1572): An EV bank would give financial assistance to install publicly accessible high-speed charging stations.
o Electric Vehicle Readiness in Buildings (SB 5446 / HB 1929): This bill would require urban cities and counties to adopt high speed EV charging station incentive programs.
• Zero Emission Vehicles (ZEVs): The Department of Ecology has requested legislation to allow Washington to adopt the Zero Emission Vehicle program.
• Clean Fuel Standard: The Department of Ecology is preparing a draft rule that outlines a clean fuel standard that would help the state to transition to cleaner fuels over time.
• Sustainable Transportation Planning: To reduce carbon pollution that comes from cars, trucks and other transportation-related sources, the Department of Transportation has developed a five-part action plan.

Public hearings on the proposed Carbon Pollution Accountability Act are continuing and have attracted great interest. Stay tuned for more details.

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BC Restructures GHG Emissions Regulatory Framework in Light of LNG Projects

 
On October 20, 2014, Environment Minister Mary Polak announced the first part of a restructuring of BC’s GHG emissions regulatory framework with the release of Bill 2, also known as the Greenhouse Gas Industrial Reporting and Control Act. This piece of legislation will replace the Greenhouse Gas Reduction (Cap and Trade) Act that came into force on May 29, 2008. The restructuring will continue with the release of the relevant Regulations under the new Act once it is given Royal Assent and comes into force. These regulations will include a new GHG Reporting Regulation and a new Emission Offset Regulation. It is expected that the reporting thresholds in the new GHG Reporting Regulation and the resulting obligations thereunder will remain the same. Tim Lesiuk, Executive Director and Chief Negotiator at Climate Action Secretariat, emphasized in a technical briefing the importance and responsibility of companies assuming to be below the lowest reporting threshold of 10,000 t CO2e annually (called non-reporting entities), to also monitor and document their GHG emissions in order to mitigate the risk of regulatory non-compliance and provide proof of their status as a non-reporting entity in case of an inspection.
A new Emission Offset Regulation is expected to offer an independent offset certification process from the BC Government’s Carbon Neutral purchase program. This will be achieved through a new certification and registry system. The BC Government’s existing Carbon Neutral purchase program conducted by the Climate Investment Branch will continue, but they will source their offsets from the new certification and registry system. Existing offset purchase contracts are expected to be grandfathered into the new system.
The functional new aspect in Bill 2 is the introduction of a new carbon intensity performance requirement. This carbon intensity performance target, called Regulated Operations’ Emission Limits in the Act is an additional requirement beyond the reporting obligation that only applies to industries that are listed in the Schedule of Regulated Operations and Emission Limits in the Act.
The only two listed industries so far are coal-based electricity generation operation with a limit of 0 tonnes carbon dioxide equivalent emissions and liquefied natural gas operations with a limit of 0.16 carbon dioxide equivalent tonnes for each tonne of liquefied natural gas produced. However, additional industries may be added and the BC Government has indicated that it will be announcing climate change measures in other sectors going forward.
The emission target carbon intensity performance quantification is limited to the facility level and therefore does not include any upstream or downstream emissions outside of the facility boundary. In order to meet their obligations, regulated entities with prescribed emission limits will have several compliance mechanisms available to them. In particular, they can:
• improve energy efficiency or increase the use of clean electricity through facility design;
• acquire emissions offsets by investing in BC-based emission reduction projects at market prices; or
• contribute to a technology fund at a rate of $25 per tonne of CO2e.

Besides setting up a new technology fund, Bill 2 also requires the establishment of a registry for the purposes of the Act. This registry will be the only place where offset units and earned credits, resulting from performance below the emissions limit, are tracked. This is also the only place where transactions under the Act can be executed for compliance purposes.
If you have any questions about Bill 2 and the proposed changes to the BC emission offset regime or their potential impacts on your operations or offset project, please contact GHG Accounting Services.
 

Regulatory Additionality

Regulatory additionality is a quality requirement for an emission reduction to be recognized as such.

In order for an emission reduction to be recognized, a project proponent must provide evidence that the project activities and all equipment and substances involved in the achievement of the emission reduction are beyond what is required based on applicable regulatory requirements. Only those emission reductions that are achieved beyond regulatory requirements are considered additional and therefore meet the regulatory additionality requirement test. Reductions that only meet the regulatory required levels are not considered to be real emission reductions.


	


	





	

		
		
Québec’s First Cap & Trade Permit Auction Results
	


	
	
	

		
 

In the first auction of permits under Québec’s cap-and-trade scheme on December 3, 2013, bidders purchased only about one-third of the emission allowances offered – or 1.03 million of the 2.97 million 2013 permits. As a result of the low demand, the permits cleared at the lowest possible price of $10.75 per metric tonne of carbon dioxide equivalent.


Québec said it sold a combined CAD $29 million in 2013 and 2016 allowances in the auction.  The province plans to sell the remaining 2013 carbon allowances in future auctions, which will be held every quarter starting March 4. Regulated entities will have until November 1, 2015 to acquire carbon allowances covering emissions generated in 2013 and 2014.


Yves-François Blanchet, Québec’s Minister of Sustainable Development, Environment, Wildlife and Parks said that the province is very satisfied with the results of the first auction and is confident that the remaining units will be sold at the upcoming auctions.  Bloomberg New Energy Finance market analyst William Nelson observed that it was a “surprisingly under-subscribed auction”, but went on to say that the province’s failure to sell all the allowances in the first auction was a “one-time freak result”. Nelson anticipates that future auctions will fare better as the entities that did not participate in the auction this week will eventually show up as they still need to cover their emissions for the next two years.


Quebec’s program will be integrated with the larger California cap-and-trade market in 2014, when entities from both jurisdictions will be able to buy and sell emission allowances and offsets in either jurisdiction. At California’s last auction on November 19, 2013, the state sold 16.6 million tons of carbon allowances at a price of $11.48 each, which was in line with market expectations.


The results of the Québec auction are available online (in French only)


The results of California’s November 2013 auction are also available from the state’s Air Resources Board.

 



	


	





	

		
		
BC signs Climate Action Plan with California, Oregon and Washington
	


	
	
	

		
 

On October 28, 2013 the leaders of British Columbia, California, Oregon and Washington signed the Pacific Coast Action Plan on Climate and Energy committing their governments to a comprehensive and strategic alignment to combat climate change and promote clean energy. The region covered by the Action Plan has a combined population of 53 million people and a GDP of $2.8 trillion, which represents the world’s fifth largest economy.


Through the Action Plan, all four jurisdictions will account for the costs of carbon pollution and where feasible, link programs to create consistency and predictability across the region.  In addition, the Action Plan provides for the following actions:


    

  • harmonizing 2050 targets for greenhouse gas (GHG) reductions and developing mid-term targets needed to support long-term reduction goals;
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  • cooperating with national and sub-national governments around the work to press for an international climate change agreement in 2015;
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  • enlisting support for research on ocean acidification and taking action to combat it;
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  • adopting and maintaining low carbon fuel standards in each jurisdiction;
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  • taking action to expand the use of zero-emission vehicles, aiming for 10% of new vehicle purchases by 2016;
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  • continue deployment of high-speed rail across the region;
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  • supporting emerging markets and innovation for alternative fuels in commercial trucks, buses, rail, ports and marine transportation;
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  • harmonizing standards to support energy efficiency on the way to “net zero” buildings;
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  • supporting federal policy on regulating GHG emissions from power plants;
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  • sponsoring pilot projects with local governments, state agencies and the West Coast Infrastructure Exchange to make infrastructure climate smart;
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  • streamlining approval of renewable energy projects; and
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  • supporting integration of the region’s electricity grids.
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The Action Plan provides a much needed boost to regional and national efforts climate change policy efforts.


The Pacific Coast Collaborative was established in 2008 to address the unique and shared circumstances of the Pacific coastal areas and jurisdictions in North America by providing a formal framework for co-operative action, a forum for leadership and the sharing of information on best practices, and a common voice on issues facing coastal and Pacific jurisdictions.

 



	


	





	

		
		
Release of Latest IPPC Report Spurs Calls for Action from Business Leaders
	


	
	
	

		
 


On September 25, 2013 the Intergovernmental Panel on Climate Change (IPCC) released Climate Change 2013: the Physical Science Basis, the first part of its Fifth Assessment Report (AR5). Six years in the making, the 2,200 page report was developed by 209 lead authors, citing more than 9,000 scientific publications in their analysis of key physical and scientific aspects of the climate system and climate change.


The report confirms that human influence is the dominant cause of observed warming. Scientists now state with more certainty than ever before, that it is extremely likely (95% probability) that human activities, particularly combustion of fossil fuels and changes in land use, are responsible for the 0.85ºC increase in average global temperatures that has occurred since 1880.


There has been a reduction in the rate of atmospheric temperature increases over the past fifteen years which the IPCC attributes to the absorption by the oceans of a large amount of heat, and sequestering a third of the greenhouse gas emissions. This is by no means good news, since warmer waters expands leading to rising sea levels, sea temperatures also significantly influence climate patterns and an increasing concentration of greenhouse gases in ocean waters contributes to acidification with negative impact on aquatic ecosystems. The report concludes that “human influence has been detected in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes in some climate extremes.”


The report lays out four different potential scenarios for global temperature rise over the course of the century, ranging from 0.3 ºC to 4.8ºC. In the immediate decades, all four scenarios follow a similar trajectory, showing a low sensitivity to curbing emissions in the short-term. But if current trends continue, the effects of cumulative emissions will be difficult to mitigate due to the long half-life of greenhouse gases and their continued impact on the climate long after emissions subside.


The AR5 is the first IPCC report to define a “carbon budget” – an estimate of the maximum amount of human caused emissions that can be released in the atmosphere before we experience warming greater than 2ºC – the indicative threshold beyond which extensive global environmental and socio-economic damage is expected. That carbon budget is 1,000 trillion tonnes of carbon dioxide equivalent (CO2e), of which approximately half has already been emitted. Based on carbon-intensive trajectories, this means that the world has just 30 years until it has used up its carbon budget. If we exceed this budget, the chance of staying within 2ºC of warming looks far less promising.


What does this mean for business? In short, climate change brings with it greater risks and investment challenges:


• More frequent extreme weather events: Higher temperatures and more extreme weather are among the most apparent business risks. At the World Economic Forum in 2013, financial experts named climate change as one of the top three business risks. From raging wildfires to severe flooding, extreme weather events can imperil operations throughout a company’s supply chain. Rising sea levels will also threaten shorelines. According to the IPCC, sea levels have likely risen nearly twice as fast as previously reported. More than 1 billion people worldwide, along with many financial centers, are located in low-lying coastal communities. According to the OECD, average flood losses in major cities around the world could exceed $52 billion per year by 2050, and possibly go as high as $1 trillion without additional protection. At the other end of the spectrum, some regions will be faced with greater water scarcity rather than flooding. In the Carbon Disclosure Project’s 2012 Global Water Report, 53% of respondent companies reported that they have experienced water-related detrimental impacts in the past 5 years (up from 38% in 2011), with costs as high as $200 million for some companies.


• Risks to energy infrastructure: Extreme weather also poses a threat to energy and electricity infrastructure by potentially disrupting production, delivery, and storage of energy. Many power sources depend on water and decreased water availability due to changing precipitation trends may threaten operations.


• Investment risks: Climate-related economic disruption also compounds risks to global investments. A 2011 Mercer study warned that climate change could increase investment-portfolio risk by 10 percent over the next two decades. The IPCC’s carbon budget may have implications for fossil fuel companies, which are traditionally among the higher grossing investments. Since their value is based on proven reserves, there is a risk of devaluation if a significant portion of the reserves are left untapped in order to keep within the carbon budget.


• Insurance risks: Extreme weather events are already having an impact on the insurance industry. As damage from extreme weather events increases, insurers are faced with either hiking rates or refusing to provide coverage in disaster-prone areas. Ultimately, increased costs will be passed onto businesses and consumers.


While climate change presents clear risks to business, smart responses can deliver economic benefits as well. In a 2010 report by the UN Global Compact, more than 86 percent of businesses named responding to climate change as an opportunity. This is reflected in the actions of many multinational corporations, which are already taking steps to reduce risks and lower their greenhouse gas emissions. Whether it is driving emission reductions throughout the supply chain, investing in renewable energy or phasing out the use of carbon intensive materials, companies are choosing to act.


Industry comments in response to the IPCC report highlight the urgent need for action for more, see ‘Experts React’. Nick Robins, head of the Climate Partnership at HSBC, commented that: “The IPCC report provides firmer foundations for policy action. For the world’s capital markets, climate change is an issue of strategic risk management … Our research shows that India, China, Indonesia, South Africa and Brazil are the G-20 nations that are most vulnerable to climate risks. We expect the succession of IPCC reports into 2014 to provide a renewed impetus to policy and business action through to the finalization of negotiations in December 2015.” Head of Swiss Re’s sustainability program in the Americas, Mark Way, also said: “When a body like the IPCC concludes that with 95% certainty mankind is causing climate change we would be foolish not to listen. And yet we are still not listening closely enough. The transition to a low carbon economy and a more climate-resilient society cannot be thought of as options, they are necessities.” Mindy Lubber, president of Ceres (a US-based organisation which presses for greater sustainability and environmental awareness in the business sector) summed it up nicely: “The IPCC report’s conclusion is unequivocal – climate change is happening and it’s disrupting all aspects of the global economy, including supply chains, commodity markets and the entire insurance industry. Business momentum is growing to innovate new strategies and products to manage climate risks and opportunities. But scaling these efforts to levels that will slow warming trends will require stronger carbon-reducing policies globally.”


The IPCC will release three more parts to the AR5 report in 2014: Impacts, Adaptation and Vulnerability; Mitigation of Climate Change; and a Synthesis Report. For more information on the current report, see IPCC Fifth Assessment Report: Climate Change 2013: The Physical Science Basis.


 



	


	





	

		
		
California ARB Fines Nine Companies for Late or Inadequate GHG Reporting
	


	
	
	

		
 


Nine companies have been fined by the California Air Resources Board (ARB) for violations of the state’s Mandatory Greenhouse Gas Reporting Rule (the Reporting Rule) which requires facilities, including those covered by California’s cap-and-trade regulation, to report their greenhouse gas (GHG) emissions annually. Adopted by ARB in 2007, the Reporting Rule requires facilities that emit more than 10,000 metric tons of carbon dioxide annually to report their emissions. About 600 facilities have been reporting their greenhouse gas emissions to ARB since 2008.  


Industrial facilities are required to report each April and utilities are required to do so each June. These reports are then checked for accuracy and verified by independent third parties with oversight by ARB staff.  The reporting compliance rate for 2012 was 97%. Nine companies have been fined for failure to supply complete information by the appropriate deadlines for either the reporting or verification stages. In addition to paying these fines, the violators must provide ARB with plans for complete and accurate data collection and reporting in the future. The companies fined include:


·        ExxonMobil Oil Corporation: $120,000 


·        DG Fairhaven Power: $55,000 


·        Vintage Production California: $35,000 


·        Pacific Gas & Electric: $20,000 


·        Veneco: $20,000 


·        Cemex Construction Materials: $15,000 


·        Lehigh Southwest Cement: $10,000 


·        Lhoist North America of Arizona: $10,000 


·        Tidelands Production: $10,000 


With respect to GHG reporting, ARB Chairman Mary D. Nichols said that: “Accurate reporting of greenhouse gas emissions is the foundation of our efforts to reduce carbon pollution from the state’s energy and industrial sectors.  We will continue to vigorously enforce the mandatory reporting rule to ensure that every company follows all its requirements.”


Emissions reported by facility under the Reporting Rule can be viewed online




 



	


	





	

		
		
European Commission Launches Green Products Initiative
	


	
	
	

		
 

The European Commission is proposing EU-wide methods to measure the environmental performance of products and organisations, and encouraging Member States and the private sector to take them up.


Currently, companies wanting to highlight the environmental performance of their products face numerous obstacles including the need to choose between several methods promoted by governments and private initiatives. As a result, these companies may be forced to pay multiple costs for providing environmental information and consumers are faced with confusion resulting from excessive labelling that makes products difficult to compare.


For example, a company wishing to market its product as a green product in France, UK and Switzerland would need to apply different schemes in order to compete based on environmental performance in the different national markets. In France, it would need to carry out an environmental assessment in line with the French method (BP X30-323); in the UK, it would need to apply the PAS 2050 or the WRI GHG Protocol; and in Switzerland, it would need to apply the Swiss approach which is currently under development.


According to the latest Eurobarometer on Green Products, 48 % of European consumers are confused by the stream of environmental information they receive, which affects their readiness to make green purchases.  A number of industrial groups have called for a pan-European approach built on EU-wide science-based assessments and Life Cycle Analysis.  This is because of concerns that multiple initiatives at Member State level would run contrary to Single Market principles, confusing consumers and increasing costs for industry.


To address these problems, the European Commission has launched the Single Market for Green Products initiative, which proposes the following actions:


    

  • establishing two methods to measure environmental performance throughout the lifecycle – the Product Environmental Footprint (PEF) and the Organisation Environmental Footprint (OEF);
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  • recommending the use of these methods to Member States, companies, private organisations and the financial community through a Commission Recommendation;
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  • announcing a three-year testing period to develop product- and sector-specific rules through a multi-stakeholder process;
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  • providing principles for communicating environmental performance such as transparency, reliability, completeness, comparability and clarity; and
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  • supporting international efforts towards more coordination in methodological development and data availability.
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The three-year testing period will be launched soon. An open call for volunteers will be published by the Commission on the Product Environmental Footprint and the Organisation Environmental Footprint sites, inviting companies, industrial and stakeholder organisations in the EU and beyond to participate in the development of product-group specific and sector-specific rules. On these sites, some preliminary information is already available about the objectives and expected timing of the test. For more information, please see this link.