Carbon dioxide equivalent – GHG Accounting

What are Greenhouse Gases?

Gases that trap heat in the atmosphere are called greenhouse gases or GHGs. When sunlight reaches the Earth’s surface, it can either be reflected back into space or absorbed by Earth. Once absorbed, the planet releases some of the energy back into the atmosphere as heat (also called infrared radiation). GHGs like water vapor (H2O), carbon dioxide (CO2) and methane (CH4) absorb energy, which slow or prevent the loss of heat in to space. This process is commonly referred to as the “greenhouse effect”, whereby GHGs act like a blanket, making the Earth warmer than it would otherwise be.

Since the Industrial Revolution began around 1750, human activities have contributed substantially to climate change by adding CO2 and other heat-trapping gases to the atmosphere. These GHG emissions have increased the greenhouse effect, leading to rises in the Earth’s surface temperatures. According to the National Research Council (Advancing the Science of Climate Change, 2010), atmospheric CO2 concentrations have increased by almost 40% since pre-industrial times, from approximately 280 parts per million by volume (ppmv) in the 18th century to 390 ppmv in 2010. The current CO2 level is higher than it has been in at least 800,000 years. The primary human activity affecting the amount and rate of climate change is greenhouse gas emissions from the burning of fossil fuels for electricity, heat, and transportation.

The main GHGs directly emitted by humans include CO2, CH4, nitrous oxide (N2O), and several others:

Carbon dioxide (CO2): CO2 is absorbed and emitted naturally as part of the carbon cycle through animal and plant respiration, volcanic eruptions, and ocean-atmosphere exchange. Human activities, such as the burning of fossil fuels and changes in land use, release large amounts of carbon to the atmosphere, causing CO2 concentrations in the atmosphere to rise.
Methane (CH4): Methane is emitted during the production and transport of coal, natural gas, and oil. Methane emissions also result from livestock and other agricultural practices and by the decay of organic waste in municipal solid waste landfills.
Nitrous oxide (N2O): Nitrous oxide is emitted during agricultural and industrial activities, as well as during combustion of fossil fuels and solid waste.
Fluorinated gases or F-gases: Chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6) are synthetic, powerful GHGs that are emitted from a variety of industrial processes. F-gases are often used in coolants, foaming agents, fire extinguishers, solvents, pesticides, and aerosol propellants. F-gases are also sometimes used as substitutes for stratospheric ozone-depleting substances. These gases are typically emitted in smaller quantities, but because of their potency, they are sometimes referred to as “High Global Warming Potential” gases. F-gases have a long atmospheric lifetime and some of these emissions will affect the climate for many decades or centuries.
Tropospheric ozone (O3): Tropospheric ozone has a short atmospheric lifetime, but it is a potent GHG. Chemical reactions create ozone from emissions of nitrogen oxides and volatile organic compounds from automobiles, power plants, and other industrial and commercial sources in the presence of sunlight. In addition to trapping heat, ozone is a pollutant that can cause respiratory health problems and damage crops and ecosystems.
Water vapor: This is the most abundant GHG and significant in terms of its contribution to the natural greenhouse effect, despite having a short atmospheric lifetime. While some human activities can influence local water vapor levels, the concentration of water vapor on a global scale is controlled by temperature which influences overall rates of evaporation and precipitation. As a result, the global concentration of water vapor is not substantially affected by direct human emissions.

The effect of GHGs on climate change depends on three main factors: (i) the concentration of GHGs in the atmosphere; (ii) the length of time that GHGs stay in the atmosphere; and (iii) the impact of GHGs on global temperatures.

The concentration of GHGs in the atmosphere is measured in parts per million, parts per billion, and sometimes parts per trillion. One part per million is equivalent to one drop of water diluted into about 13 gallons of liquid.

With respect to the length of time that GHGs stay in the atmosphere, each GHG can remain in the atmosphere for different amounts of time, ranging from a few years to thousands of years. All of these gases remain in the atmosphere long enough to become well mixed, meaning that the amount that is measured in the atmosphere is roughly the same all over the world, regardless of the source of the emissions.

In terms of the impact of GHGs on global temperatures, the two most important characteristics are how well the gas absorbs energy (preventing it from immediately escaping to space) and how long the gas stays in the atmosphere. Some GHGs have a stronger impact than others on global temperatures. For each GHG, a Global Warming Potential (GWP) has been calculated to reflect how long it remains in the atmosphere, on average, and how strongly it absorbs energy. The GWP for a gas is a measure of the total energy that a gas absorbs over a particular period of time (usually 100 years), compared to CO2. Gases with a higher GWP absorb more energy, per pound, than gases with a lower GWP, and thus contribute more to changes in global temperatures. For example, methane’s 100-year GWP is 21, which means that methane will cause 21 times as much warming as an equivalent mass of carbon dioxide over a 100-year time period.

Accurate reporting and monitoring of GHG emissions is fundamental to reducing greenhouse gases and taking meaningful action to combat climate change. After all, you cannot manage what you do not measure.

Québec Prepares to Start Emissions Trading as it Formally Adopts Cap-and-Trade Regulation

On December 14, 2011, Québec formally adopted the Regulation respecting the cap-and-trade system for greenhouse gas emission allowances (the Regulation), which came into force on January 1, 2012 and is based on the rules established by the Western Climate Initiative (WCI).

With the adoption of the Regulation, Québec officially steps to the starting line next to California. The first year of implementation of the system will be a transition year, which will allow emitters and participants to familiarize themselves with how the system works. In particular, 2012 will provide emitters and participants with opportunities to register with the system, take part in pilot auctions and buy and sell greenhouse gas (GHG) emission allowances in the market. No reduction or capping of GHG emissions will be required during this transition year. Over the course of the year, emitters will also be able to make any adjustments that may be necessary to meet their emission reduction obligations, which will come into force on January 1, 2013. Starting on January 1, 2013, some 75 operators in Québec (primarily in the industrial and electricity sectors) whose annual GHG emissions equal or exceed the annual threshold of 25,000 tonnes of carbon dioxide equivalent (CO2e), will be subject to the capping and reduction of their GHG emissions.

It should be noted that starting in 2015, companies which import or distribute in Québec fuels that are used in the transportation and building sectors (and whose combustion generates an amount of GHGs greater than or equal to 25,000 tonnes of CO2e per year) will also be subject to the capping and reduction of their emissions.

For all participating WCI members, the adoption of a cap-and-trade regulation a cap is the first of two key steps towards the establishment of a regional North American carbon market. The second step will consist of concluding a series of recognition agreements, among the different partners, to link their systems together.

BC and Ontario in the meantime continue to dither on whether to join the cap-and-trade scheme and businesses in those provinces are losing out on key opportunities to participate in the transitional market, recently valued for 2012 at almost US$ 800 million by Thomson Reuters Point Carbon. By finalizing their cap-and-trade regulations in a timely way, BC and Ontario could continue to be leaders in regional efforts to reduce GHG emissions and to spur technological innovation in their provinces.

U.S. EPA Defers Deadline to Report Factors Used to Calculate GHG Emissions

The U.S. Environmental Protection Agency (EPA) is deferring the deadline for several industries to disclose factors they used to calculate their 2010 greenhouse gas (GHG) emissions. The agency has established two deadlines for industries to report the inputs for calculations they performed to comply with the EPA’s mandatory reporting rule (40 C.F.R. Part 98), while the EPA continues to evaluate industry concerns about revealing potentially confidential business information. For factors the EPA said can be quickly evaluated, industries will be required to report their calculation inputs by March 31, 2013. For factors that will take longer to evaluate, the deadline is March 31, 2015, the agency said in a final rule to be published in the Federal Register on August 25, 2011. The EPA had proposed deferring the input reporting requirements until March 31, 2014 (75 Fed. Reg. 81,350), but now says the additional year is necessary for many of the calculation inputs because “the number of data elements that would require a more in-depth evaluation is much larger than EPA had anticipated at the time of the deferral proposal.” The final rule will require electric transmission systems, stationary sources that burn fuels, underground coal mines, municipal solid waste landfills, industrial wastewater treatment, electric equipment manufacturers, and industrial waste landfills to begin reporting several emissions inputs by March 31, 2013. The various inputs include the total heat input of fuels combusted, methane emissions, the decay rate of materials stored in landfills and the type of coverings used, and volumes of wastewater treated using anaerobic processes.

The second deadline of March 31, 2015 applies to several data elements that must be reported by stationary sources that burn fuels, adipic acid production, aluminum production, ammonia manufacturing, cement production, electronics manufacturers, ferroalloy production, fluorinated gas production, glass production, HCFC-22 production and HFC-23 destruction, hydrogen production, iron and steel production, lead production, lime manufacturing, carbonate uses, nitric acid production, petroleum and natural gas systems, petrochemical production, petroleum refineries, phosphoric acid production, pulp and paper production, silicon carbide production, soda ash manufacturing, titanium dioxide production, zinc production, industrial wastewater treatment, and industrial waste landfills.
Other industries must report inputs by September 30, 2011, which is also the deadline for all industries subject to the mandatory reporting rule to reveal their 2010 emissions.
Industries originally had until March 31 to report their 2010 emissions and calculation factors. But in March, the EPA extended that deadline until September 30th to allow the agency time to review industry concerns that some of the inputs used to calculate their emissions would be considered confidential business information (76 Fed. Reg. 14,812; 53 DEN A-4, 3/18/11). The agency has since determined that GHG emissions and the calculations and test methods used to measure emissions are public information and will not be treated as confidential. They are continuing to examine the factors used in calculations to determine if confidentiality is warranted (102 DEN A-2, 5/26/11). EPA sent another proposed rule to the White House Office of Management and Budget for review on July 13th that would define confidential business information that cannot be disclosed for eight emissions sources, including electronics manufacturing, petroleum and natural gas systems, and carbon sequestration (136 DEN A-9, 7/15/11). (Source: EPA, August, 25, 2011). For more information, see www.epa.gov.

Québec releases draft cap-and-trade regulation

On July 6, 2011, Québec’s Ministry of Sustainable Development, Environment and Parks announced the publication of a draft regulation to facilitate the implementation of its cap-and-trade system based on the Western Climate Initiative (WCI) guidelines. The regulation is now undergoing public consultation for a period of 60 days.

The regulation to be adopted following consultation will enable Québec to implement its carbon market as early as January 1, 2012. The first year will be transitional in nature, allowing emitters and market participants to familiarize themselves with how the system will work. They will be able to register as system users, take part in pilot project auctions and buy/sell greenhouse gas emission allowances through the market. This phase will also enable partners to make any required fine-tuning in order to make a smooth transition to their obligations under the cap-and-trade system that will come into force on January 1, 2013.

Industrial facilities that emit 25,000 or more tons of carbon dioxide equivalent annually will be subject to the system for capping and reducing their emissions.

The draft regulation is available here.

California to delay carbon trading program to 2013, but targets remain the same

On June 29, 2011, chairwoman of California’s Air Resources Board (CARB), Mary Nichols, announced that the state will delay enforcement of California’s cap-and-trade program until 2013. The announcement was made at a hearing on the status of California’s cap-and-trade system, which had been called to explore the implications of a law suit brought by environmental justice groups advocating policies other than cap-and-trade to reduce greenhouse gas emissions. In that law suit, a judge ruled in March that CARB had not sufficiently analyzed alternatives to cap-and-trade as required under the state’s Environmental Quality Act. CARB has appealed the decision and an appeals court ruled recently that officials could continue working on cap-and-trade regulations pending the court’s decision. Ms. Nichols indicated that the law suit was not a deciding factor in her decision to delay the first carbon trading program in the U.S.

The delay in the cap-and-trade program, which was originally scheduled to come into force on January 1, 2012, was proposed because of the need for “all necessary elements to be in place and fully functional”. In particular, Ms. Nichols cited the need to protect the cap-and-trade system from potential market manipulation. The decision came after Ms. Nichols conferred with the state attorney general’s office as well as experts on California’s ill-fated foray into deregulated electricity sales which led to widespread fraud and rolling blackouts in 2000 and 2001. However, Ms. Nichols said that the postponement would not affect the stringency of the program or the amount of greenhouse gas reductions required to be made by industries. Under the cap-and-trade program, 600 industrial facilities (including cement manufacturers, power plants and oil refineries) would be required to cap their emissions in 2012, with that limit gradually decreasing over eight years. The one-year delay will enable CARB to test the system and carry out simulation models.

Ms. Nichols said that quarterly auctions of emissions allowances that each regulated emitter must turn in would begin in the second half of 2012, rather than February 2012 as originally planned. Entities emitting more than 25,000 metric tons of carbon dioxide equivalent per year will begin trading credits at the end of 2012 to cover their emission reduction obligations for 2012 and later. Hence, the first three-year compliance period, which originally covered the years 2012 to 2014, will be shortened to two years. CARB has indicated that it will release draft regulations covering allowance distribution and details on offset protocols within the next two weeks. In addition, CARB has said that it is still on track to finish its cap-and-trade regulations by the end of October 2011.

It is likely that BC and Québec, California’s anticipated carbon trading partners, will follow California’s lead and delay their carbon markets until 2013 as well.

Creating or Buying Credits – Financing Your Next Cool Move!

Offset credits are created through the implementation of projects that result in emission reductions or removals beyond what would have been done under normal business activities (the so-called “business as usual” baseline). One credit represents the reduction or avoidance of emissions of one tonne of carbon dioxide equivalent (CO2e). Once offset credits are created and certified by accredited third parties, they can be sold to buyers in the market (usually regulated entities that need to meet certain compliance obligations). The system described above is often referred to as a “compliance market”. Offset credits can also be sold in the voluntary market to non-regulated entities who are looking to reduce their carbon footprint voluntarily.
Click on headline for more info.

Climate Change mitigation strategies aimed at reducing greenhouse gas (GHG) emissions can take any number of different forms. The most drastic one would be to simply make the emission of GHGs illegal. This is an extreme example, one that would not be a viable option in an economy based on industrial growth. A more viable options that have been implemented by some, and considered by others, to bring about GHG reductions are market mechanisms. Market mechanisms are designed to utilize market forces to change behaviour, thus leading to reductions in emissions.

Driving Behavioural Change

The most important aspect of market mechanisms is to drive behavioural change – whether by individuals, governments, companies or others – in the direction of low carbon or less emissions-intensive technologies and processes. Offset credits are one of the instruments that have been employed in the carbon market to reduce emissions. However, the market mechanisms that have emerged so far vary quite a bit in their mechanics. As a result, the offset credits generated in these markets will vary accordingly.

How does a carbon market work?

In a so called carbon market (this usually encompasses all greenhouse gases); regulated entities can buy or sell allowances or permits for emissions, or credits for reductions in emissions of specified pollutants. Carbon trading can be done at a regional, national or international level. Under a typical carbon trading regime, regulated emitters will be allocated a limited number of emissions. Emission allowances may be created by a regulating entity, through emissions reduction activities or both. These emission allowances can be auctioned or given away for free. Once initially allocated or created, emission allowances are fully fungible commodities, meaning they can be bought, sold, traded or banked for future use. Often, carbon markets will also allow the use of offset credits as a compliance tool. Allowances effectively set a price on GHG emissions while credits set a cost reward for the investment made to reduce or avoid GHG emissions.

Creating Offset Credits

Opportunities in the Carbon Market

You can purchase credits to offset unavoidable GHG emissions to either meet your own carbon neutral targets or to comply with regulatory emission requirements. You have to make sure the credits you buy are appropriate for the purpose you want to use them for. GHG Accounting can help you make the right decision and evaluate this in the most cost-effective way.

You can also create offset credits. Offset credits can help generate revenue that you can put towards your next efficiency investment. Do you have to replace old machinery, installations or boilers? Or are you changing the way you deal with waste products, energy and emissions? Even if you have done so recently, your actions may still qualify as an emissions reduction project and can earn you real cash!

What GHG Accounting Can Do For You

The effective accounting and management of greenhouse gas (GHG) emissions requires unambiguous, verifiable specifications. This will ensure that a tonne of carbon equivalent can be consistently calculated. To that end, an internationally agreed upon standard for measuring, reporting and verifying GHG emissions was introduced in 2006 by the International Organization for Standardization (ISO) and is referred to as ISO 14064. GHG Accounting Services Ltd. provides specialized GHG consulting and accounting services, including (i) emissions reporting and footprint inventory quantification, (ii) emissions reduction project planning, and (iii) quantification, documentation and carbon offset credit registration.

CO2e

CO₂e is the acronym widely used to refer to “Carbon dioxide equivalent”.

Carbon dioxide equivalent is the unit of measurement used in a GHG assertion, meaning the unit of measurement GHG emissions are expressed in.

All greenhouse gases are expressed as functionally, in regards to their green house gas effect on a 100 years time line, equivalent as would be functionally a certain amount of carbon dioxide. The functional effect is called global warming potential.