Greenhouse Gas Accounting – Page 3

European Commission Launches Consultation to address GHG emissions from ships

The European Commission has launched an online public consultation on possible measures to reduce greenhouse gas (GHG) emissions from ships. All interested stakeholders can send their contributions until 12 April 2012.

The European Union (EU) has committed itself to reducing total GHG emissions by 2020 by at least 20% across all sectors. The 2008 legislation provides that the European Commission should make a proposal to include international maritime emissions in the EU reduction commitment if no international agreement was approved before the end of 2011 which included such emissions.

Despite significant efforts in the International Maritime Organisation (IMO) and the United Nations Framework Convention on Climate Change (UNFCCC), there has been only limited progress to date on the necessary technical, operational and market-based measures for new and existing ships. The European Commission will continue to support further efforts of these organizations for the development of global measures. The European Parliament and the Member States have therefore repeatedly called on the European Commission to take action if there is no international agreement.

International maritime transport emissions account for approximately 3% of global CO2 emissions and they are expected to more than double by 2050 if no additional action is taken. The introduction of measures to cut emissions will also reduce fuel consumption, thus bringing down transportation costs. Such action will also stimulate demand for low carbon maritime equipment and services.

World’s Leading Investors Issue Guidelines for Company Action on Climate Change

At the Investor Summit on Climate Risk & Energy Solutions held at the United Nations in New York in January 2012, the world’s largest investors issued guidelines detailing their expectations of how companies should approach responding to climate change. The guidelines, entitled “Institutional Investors’ Expectations of Corporate Climate Risk Management”, provide a unified global investor voice on the issue for the first time in response to concerns about the impact of climate change on their investments.

Co-ordinated by three leading investor groups on climate change, the US-based Investor Network on Climate Risk (INCR), the European Institutional Investors Group on Climate Change (IIGCC) and the Investors Group on Climate Change (IGCC) in Australia and New Zealand, the document outlines seven steps investors expect companies to take to minimize the risks and maximize the opportunities presented by climate change and climate policy:

Governance. Clearly define board and senior management responsibilities and accountability processes for managing climate change risks and opportunities.
Strategy. Integrate the management of climate change risks and opportunities into the company’s business strategy.
Goals. Make commitments to mitigate climate change risks: define key performance metrics and set quantified and time-bound goals to improve energy efficiency and reduce greenhouse gas emissions in a cost-effective manner; and set goals to address vulnerabilities to climate change.
Implementation. Make a systematic review of cost-effective opportunities to improve energy efficiency, reduce emissions, utilize renewable energy and adapt to climate change impacts. Where relevant, integrate climate change considerations into research and development, product design, procurement and supply chains.
Emissions inventories. Prepare and report comprehensive inventories of greenhouse gas emissions; data should be presented to allow trends in performance to be assessed and it should include projections of likely changes in future emissions.
Disclosure. Disclose and integrate into annual reports and financial filings, the company’s view of and response to its material climate change risks and opportunities, including those arising from carbon regulations and physical climate change risks.
Public policy. Engage with public policy makers and other stakeholders in support of effective policy measures to mitigate climate change risks. Ensure there is board oversight and transparency about the company’s lobbying activity and political expenditures on this topic.

In addition, the guidelines set out steps that investors will take in the following areas: analysis, inquiry, monitoring, engagement, collaboration and public policy. By moving beyond disclosure and clearly outlining the areas in which investors expect to see companies take action, the guidelines provide a platform from which investors can monitor the performance of companies and engage with them to encourage positive steps on climate change. Investors are already taking action by monitoring alignment with their expectations through initiatives such as the Carbon Disclosure Project, and collaborating with companies through investor networks and the UN Principles for Responsible Investment. This group of investors considers the guidelines to be of particular importance to companies in carbon-intensive sectors, and those who have not have adopted carbon reduction targets or a systematic approach to managing climate change risks.

New GHG Standards for Corporate Value Chain and Product Life Cycle Released

On October 4, 2011, the Greenhouse Gas Protocol launched two new standards that will enable businesses to better measure, manage, and report their greenhouse gas (GHG) emissions. Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the Corporate Value Chain (Scope 3) and Product Life Cycle Standards are aimed at saving money, reducing risks, and gaining a competitive advantage for companies. These new standards were created in response to businesses that want to better understand and measure their climate impacts beyond their own operations. By using these new standards, companies will be able to create better products and improve efficiency throughout the value chain.

Corporate Value Chain (Scope 3) Standard

The Corporate Value Chain (Scope 3) Standard is designed as a first tool that companies can use to assess their entire value chain impacts and to identify opportunities for them to make more sustainable decisions about their activities and the products they produce, buy and sell. In particular, the new standard provides a harmonized global methodology for businesses to measure corporate value chain and product GHG emissions, which will help drive strategic business decisions regarding GHG reductions. Total corporate emissions often come from Scope 3 sources (i.e. indirect emissions that occur in the value chain, including both upstream and downstream emissions), which means that many companies have been missing out on significant opportunities for improvement. Users of the new standard can no account for emissions from 15 categories of Scope 3 activities. The Scope 3 framework also supports strategies to partner with suppliers and customers to address climate impacts throughout the value chain. As a result, both large and small companies can look strategically at GHG emissions across their value chain and focus limited resources in order to yield the biggest impacts.

Product Life Cycle Standard

The Product Life Cycle Standard is a tool to help users understand the full life cycle emissions of a product and focus efforts on the greatest GHG reduction opportunities. The new standard covers raw materials, manufacturing, transportation, storage use and disposal, and is aimed at facilitating the improvement and design of new products. The results can create competitive advantage by enabling better product design, increasing efficiencies, reducing costs and minimizing risks. In addition, the new standard will help companies respond to customer demand for environmental information and make it easier to communicate the environmental aspects of products. Like the Corporate Value Chain Standard, the Product Life Cycle Standard represents a globally consistent approach to measure and manage GHG emissions.

The new standards are available in our link section.

Court gives California Green Light to Proceed with Cap-and-Trade

On September 28, 2011, a California Supreme Court judge ruled that the state’s Air Resources Board (ARB) can proceed with implementation of the California’s cap-and-trade program. The ruling was issued in the case of California Air Resources Board vs. Association of Irritated Residents, in which anti-poverty environmental justice organizations have argued a market-based approach exposes poor and minority communities to higher levels of pollution.
The implementation of the cap-and-trade program, which is scheduled to begin in California in 2012, has been held up because of a March 2011 court ruling that required the ARB to further consider alternatives to cap-and-trade that might provide more effective ways of reducing greenhouse gas (GHG) emissions. ARB says that it has adequately considered alternatives such as a carbon tax, and is appealing the March 2011 decision in Superior Court. The September 28th ruling allows the ARB to move forward on cap-and-trade before the Superior Court rules.
California’s proposed cap-and-trade program is a major component of AB32, the state’s 2006 landmark climate change legislation. Under the law, California must reduce its GHG emissions to 1990 levels by 2020. In addition, the legislation sets an overall limit on emissions from sources responsible for 85% of California’s GHG emissions. The cap-and-trade program is designed to work in collaboration with other complementary policies that expand energy efficiency programs, reduce vehicle emissions, and encourage innovation.
More information on the status of California’s cap-and-trade program is available on the ARB web site.

Australia Passes Legislation for Offsets from Farming and Forestry

On August 22, 2011, Australia’s parliament endorsed the world’s first national scheme to regulate the creation and trading of carbon credits from farming and forestry, which will complement government’s plans to put a price on carbon emissions from mid-2012.
The new law is a precursor to carbon price legislation that will be put before parliament in late 2011. Known as the Carbon Farming Initiative (CFI), the new law allows farmers and investors to generate tradeable carbon offsets from farmland and forestry projects. Land use, including agriculture, accounts for 23% of Australia’s emissions. Projects backed by the CFI include reforestation, protection of native forests, curbing methane emissions from livestock, better fire management of savannah grasslands as well as capturing methane emissions from some landfills. Excluded projects include those deemed to affect the availability of water, threaten the richness of plant and animal species in an area or might threaten jobs. Managed investment schemes for forestry are also excluded. Under the rules, a project can only earn carbon credits if the investment is additional to those that would occur normally, with the lure of revenue from credit sales making the project financially viable.
Modeling by the Australian Treasury estimates the CFI will generate credits totalling 7 million tonnes of GHG reductions by 2020. ClimateWorks, a non-profit organization focusing on low-carbon growth, has calculated the CFI could reduce emissions by up to 41.5 million tonnes by 2020, mainly through greater investment in carbon tree plantations.

The CFI scheme is expected to start off slowly until the approval of laws parliament passes laws to put a price on carbon emissions from July 2012. Under the scheme, a government panel will vet and approve the rules for each project activity and an agency will administer the scheme’s offset registry. A number of project types have already been approved, see www.climatechange.gov.au/cfi. Successful projects will earn Australian carbon credit units, or ACCUs, that can either be traded domestically or overseas. ACCUs can be compliant under the U.N.’s Kyoto Protocol, depending on the project type. Or projects can sell non-Kyoto Australian units that can be used in the domestic voluntary carbon market to help firms meet carbon neutral goals. Kyoto-compliant units can be converted into credits that can be traded internationally and sold to companies or governments with Kyoto emissions targets. To provide investor certainty, the initial crediting period for native forest protection is 20 years, 15 years for reforestation projects and 7 years for all other eligible offset projects.

Pricing of the ACCUs will depend on the demand for offsets from certain types of projects, and particularly on the price for carbon in Australia. Some analysts expect ACCUs to closely track the national price on carbon emissions from power generators, smelters, refiners and others.
Prime Minister Julia Gillard plans a carbon tax starting at A$23 a tonne on about 500 of Australia’s biggest polluters from July 2012, ahead of emissions trading from mid-2015. Agriculture is not included in the carbon price scheme, but the government wants farmers to be able to benefit from the market for carbon credits. Under the carbon price plan, Australian industries which buy carbon offsets will need to ensure at least 50% of the offsets are domestic credits.

The government estimates that the CFI will help Australia reduce its carbon emissions by 460 million tonnes by 2050. The government has committed to cut total emissions by five percent of year 2000 levels by 2020. While Australia accounts for only about 1.5% of global emissions, it is the highest per capita polluter in the developed world because coal is used to generate most of the country’s electricity.

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.

China Announces Carbon Trading Pilot Scheme

On July 17, 2011, China’s official state news agency, Xinhua, reported that the Chinese government is planning to introduce a carbon trading pilot scheme as part of the country’s measures aimed at reducing emissions from energy-intensive industries. The pilot scheme would be introduced with a view to eventually establishing a national carbon market. While no specifics were given on how and when the schemes would be implemented, Chinese officials have indicated previously that a pilot scheme would be introduced in a handful of major cities (including Guangdong, Hubei, Beijing, Shanghai, Tianjin and Chongqing) by 2013 and then expanded nationally in 2015.

Xinhua quoted Xie Zhenhua, vice-minister of China’s National Development and Reform Commission, as saying the scheme would result in more punitive electricity tariffs being imposed on energy-intensive industries in an attempt to encourage them to enhance their efficiency. The China Daily newspaper also reported comments from Xie suggesting that a new wave of carbon regulations would be introduced with the carbon trading pilot scheme. These regulations would be geared towards accelerating the development of a more standardized approach to energy efficiency and introducing tighter regulations on labeling low-carbon products. Furthermore, Xie said that the Chinese government would introduce further incentives for companies producing energy-efficient products and business models.

This move will not only provide an extra tool for China to achieve its Copenhagen commitment to reduce carbon emissions relative to economic growth by 40-45% below 2005 levels by 2020, but a Chinese carbon market could represent a major boost to the global carbon market.

Study finds that cap-and-trade more likely to trigger clean tech adoption than carbon tax

A study by Professor Yihsu Chen at the University of California Merced has found that a cap-and-trade system is more likely than a carbon tax system to trigger the adoption of clean energy technologies. The study, which was coauthored by Chung-Li Tseng of the University of New South Wales in Australia and that is published in the Energy Journal Volume 32, Number 3, 2011 (a quarterly journal of the International Association for Energy Economics) also found that the volatile pricing of a cap-and-trade system could lead to earlier adoption of clean technology by firms looking to hedge against carbon cost risks.

The study used economic models based on a framework of real options to determine the optimal timing for a coal-burning firm to introduce clean technologies using the two most commonly considered policies: (1) cap-and-trade, in which carbon emissions are capped and low-emission firms can sell excess permits to high-emission firms; and (2) carbon taxes, which employ a fixed monetary penalty for per-unit carbon emissions.

According to Professor Chen, “…cap-and-trade offers ‘carrots’ while taxes offer ‘sticks’. Cap-and-trade induces firms to explore profit opportunities, while taxes simply impose penalties to turn clean technology into a less costly option.”

For the study, researchers considered the scenario of a small firm that owns a coal-fired power plant and is obliged to supply power to its customers. They compared cap-and-trade and carbon tax models in determining when the firm would choose to add a natural gas power plant – a relatively clean energy resource – in order to meet its energy demands while maximizing its long-term profits. The study found that the cap-and-trade model triggered the adoption of clean energy technology at a lower overall carbon price than a tax policy did. Further, the study found that the volatility of non-fixed permit prices was the key difference that led the firm to add a natural gas plant earlier than it would have under a more predictable tax system. Professor Chen said that: “Based on our study, mechanisms designed to reduce cap-and-trade permit prices or suppress price volatility — which have been implemented in existing cap-and-trade programs like the Regional Greenhouse Gas Initiative — are likely to delay clean technology investments.”

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.