Tag: reduce emissions

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.

 

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);
  • recommending the use of these methods to Member States, companies, private organisations and the financial community through a Commission Recommendation;
  • announcing a three-year testing period to develop product- and sector-specific rules through a multi-stakeholder process;
  • providing principles for communicating environmental performance such as transparency, reliability, completeness, comparability and clarity; and
  • supporting international efforts towards more coordination in methodological development and data availability.

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.



 



	


	





	

		
		
Update on China: China Steps into Leadership Role as it takes Action on Climate Change
	


	
	
	

		
 

In his first comments as China’s prime minister, Li Keqiang recently laid out a vision of a more equitable society in which environmental protection trumps unbridled growth and government officials put the people’s welfare before their own financial interests.  While the Prime Minister was short on specifics, his comments represent an encouraging acknowledgment of some of the pressing issues facing China.


Traditionally, China has been used as a carbon scapegoat and excuse for inaction by countries such as Canada and the U.S., whose per capita emissions are much higher.  However the tables are turning with China beginning to take a leadership role in addressing climate change.  China’s emergence as a climate leader means that Canada and other countries can no longer point their fingers at China as an excuse for not taking action to reduce their own greenhouse gas emissions.


China to roll out Cap & Trade in 2013


As the world’s largest emitter of carbon dioxide, China is preparing to gradually roll out cap-and-trade pilot programs in seven major cities and provinces starting in 2013.  This initiative is part of a larger goal to reduce carbon intensity – or the amount of carbon dioxide emitted per unit of economic output – by 40% to 45% below 2005 levels by 2020.


In November 2011, the Chinese government decided to implement cap-and-trade pilots in two provinces and five cities (including Shanghai, Beijing and Shenzhen) beginning in 2013 with the final goal of implementing a nationwide exchange program by 2016.  In less than two years, officials have designed and started to implement seven trading trials that cover around one-third of China’s gross domestic product and one-fifth of its energy use.  If successful, the schemes could demonstrate that an emissions trading system will be an effective way for China to manage its greenhouse gas emissions.  In addition, China’s activities may spur policy makers in other countries such as the US to act.


Bloomberg New Energy Finance previously estimated that the regional pilots would cumulatively cover 800 million to 1 billion tonnes of emissions in China by 2015, meaning that the market would become the world’s second largest after the European Union.  It has been reported that at the beginning, regional and city-wide markets will remain separate with unique rules and criteria. For example, some of the markets will cover factories and industrial operations exclusively, while others will focus on power generation or non-industrial sectors.


The first trades took place in September 2012 in Guangdong province, when four cement-manufacturing companies invested several million dollars to acquire carbon pollution permits (allowances). The Guangdong scheme is expected to cover more than 800 companies that each emit more than 20,000 tonnes of carbon dioxide a year across nine industries, including the energy-intensive steel and power sectors.  These firms account for more than 40% of the power used in the province.  The Guangdong carbon market alone will regulate some 277 million tonnes of CO2 emissions by 2015.


China plans to open six further regional emissions-trading schemes in 2013, in the province of Hubei and in the municipalities of Beijing, Tianjin, Shanghai, Chongqing and Shenzhen.  It plans to expand and link them until they form a nationwide scheme by the end of the decade. A nationwide scheme could then link to international markets.


Until now, China’s experience with carbon trading has been limited to the Clean Development Mechanism under the Kyoto Protocol.  While China’s political system could let a carbon market grow faster than anywhere else because changes can be implemented quickly, the carbon market faces challenges in China.  In particular, China needs to develop and enforce proper legislation and regulations to measure, report and verify carbon emissions from industrial sites.  It also needs to build an effective framework to oversee the reporting and trading of carbon credits.


At this stage, the most urgent issue that needs to be addressed is how China collects and analyzes data on carbon emissions.  The credibility of China’s statistics on energy use and carbon emissions has been questioned partly because of the large discrepancies between numbers calculated using top-down data and numbers calculated using bottom-up data.  Without accurate numbers, the first transaction of the Guangdong trading scheme was based on expected future carbon emissions, rather than historical data.  Improved statistical methodology and political action will be required to boost the reliability of carbon emissions data in China.  China will also need specific laws to ensure transparent reporting and strong enforcement to prevent fraudulent or misleading claims about carbon emissions.


Chinese Carbon Tax on the Horizon 


On the climate front, the Chinese government appears to be on the verge of taking a critical step which has been demonized by politicians in Canada and the USA – that is, implementing a carbon tax.  Although the carbon tax is expected to be modest, China plans to also increase coal taxes.


According to Jia Chen, head of the tax policy division of China’s Ministry of Finance (MOF), China will proactively introduce a set of new taxation policies designed to preserve the environment, including a tax on carbon emissions.  In an article published on the MOF web site in February 2013, Jia wrote that the government will collect an environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon emissions.  The local taxation authority will collect the taxes, rather than the environmental protection department.  The article did not specify the level of carbon tax or when the new measures will be implemented.  In 2010, MOF experts suggested levying a carbon tax in 2012 at 10 yuan per tonne of carbon dioxide, as well as recommended increasing the tax to 50 yuan per tonne by 2020.  These prices are far below the 500 yuan (US $80) per tonne that some experts have suggested would be needed to achieve climate stability.


It is not anticipated that China’s plan will have a significant impact on global climate change, although the tax may have some beneficial impact within China itself, where air pollution is a serious problem.  A paper from the Chinese Academy for Environmental Planning suggests that a small tax could still raise revenue and provide an incentive to reduce emissions, thus bolstering China’s renewable energy industry.


To conserve natural resources, the government will push forward resource tax reforms by taxing coal based on prices instead of sales volume, as well as raising coal taxes.  A resource tax will also be levied on water.  In addition, the government is also looking into the possibility of taxing energy intensive products such as batteries, as well as luxury goods such as aircraft which are not used for public transportation.




 



	


	





	

		
		
Canada Missing out on Growing Global Environmental Market
	


	
	
	

		
 

Despite the slow recovery of the global economy and a lack of political will for addressing environmental and climate change issues, a report by the Environmental Business Journal estimates that the annual value of the global environmental market was $866 billion in 2011, up 4% from the year before. While the US, Western Europe and Japan remain the three largest and most mature environmental markets, growth in the global environmental market in 2011 was led by Africa (up 10%), followed by the Middle East and the rest of Asia (both up 9%). In terms of business sectors, the largest is solid waste management, followed by water utilities and treatment. Recycling, green building, energy efficiency and other areas under the resource recovery and clean energy categories are all growing at faster rates than the overall economy in most nations.


In Canada, there is a large untapped potential for environmental markets.  A report released by Sustainable Prosperity in November 2012 estimates that Canada’s combined environmental marketplace is worth between $462 million and $752 million annually.  The wide gap between the high and low estimates is due to a lack of transparency and the definition of “environmental market”. In the report, an environmental market is defined as a market having a buyer, a seller and the exchange of an environmental attribute.  57 markets were covered in the report and it is anticipated that the value of the Canadian environmental marketplace will increase as new programs such as Quebec’s greenhouse gas cap-and-trade system develop. Sustainable Prosperity’s analysis indicates that markets addressing biodiversity and habitat conservation, water quality, water quantity, climate change, and air quality can provide environmental benefits inexpensively if they are well-designed markets. For investors, they also represent an opportunity for exposure to a new and growing asset class.  These markets may represent a significant financial sum as a whole, but most of the individual ones are small and underdeveloped in terms of their infrastructure and scope. Greater certainty in terms of environmental policy and regulatory flexibility to allow for the increased use of markets would help attract the necessary capital from the private sector to expand and grow Canada’s environmental marketplace.




 



	


	





	

		
		
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.


 





	


	





	

		
		
California to Appeal Superior Court Decision to Halt Carbon Market
	


	
	
	

		
On May 20, 2011, San Francisco Superior Court judge Ernest Goldsmith issued a decision requiring the California Air Resources Board (CARB) to halt action on implementing its planned emissions cap-and-trade program until it has explored alternatives to meet California’s emission reduction targets. The decision follows a ruling delivered in March 2011 in which the judge said CARB had violated the California Environmental Quality Act by failing to adequately assess alternative emission reduction mechanisms, such as a carbon tax. The ruling is the result of legal action brought by the Association for Irritated Residents and other environmental justice groups, which argued that the proposed cap-and-trade program could damage air quality in some parts of the state.


The cap-and-trade program is part of AB 32 (Global Warming Solutions Act), California’s landmark climate change law, which is designed to lower California’s greenhouse gas emissions to 1990 levels by 2020. AB 32 also includes increased fuel efficiency standards and a renewable electricity target of 33% by 2020. Under the ruling, CARB must set aside its December 2010 decision approving the trading system for emitters over 25,000 metric tons per year, and must cease all rule-making and implementation activities related to cap-and-trade until it complies with the law. In particular, the judge said that CARB must go back and show why it made the decision to implement cap-and- trade. The trading program is designed to cover 85 percent of the state’s industrial emissions by 2020 and would include emissions from power plants, oil and gas refineries, transportation fuels and other heavy industries.


On May 23rd, California’s top attorney initiated an appeal of Judge Goldsmith’s decision. Depending on the length of the appeal process, the cap-and-trade program could be delayed, perhaps until 2013. In the meantime, California can continue with its renewable energy targets, low-carbon fuel standard and energy efficiency measures, all of which are unaffected by the judge’s ruling.



	


	





	

		
		
Another Study links High GHG Emissions with Negative Impact on Company’s Value
	


	
	
	

		
A study by researchers at the University of Wisconsin-Madison, Georgetown  University and the University of Notre Dame has found that high levels of greenhouse gas (GHG) emissions can have a negative impact on a company’s value.  According to the study – Voluntary Disclosures and the Firm-Value Effects of Carbon Emissions (April 2011) – a company’s value decreases on average by $202,000 for every additional thousand metric tons of emissions it produces.


Researchers used hand-collected carbon emissions data for 2006-2008 that Standard and Poor’s (S&P) 500 companies disclosed voluntarily to the Carbon Disclosure Project to examine two issues: (1) firm-level characteristics associated with the choice to disclose carbon emissions, and (2) relationship between carbon emission levels and firm value. With respect to the first issue, researchers found a higher likelihood of carbon emission disclosures by firms with superior environmental performance, conditional on firms taking environmentally proactive actions. However, researchers found no association between inferior environmental performance and the likelihood of disclosing carbon emissions, conditional on firms taking environmentally damaging actions. Furthermore, researchers found that companies are more likely to voluntarily disclose their carbon emissions as the proportion of industry peer firm disclosers increases. In connection with the second issue, the researchers found a negative association between carbon emission levels and firm value. From its sample of S&P 500 companies, the study found that a company’s value decreases on average by $202,000 for every additional thousand metric tons of GHG emissions it produces.


In the study, researchers also pointed out that according to the 2009 Goldman Sachs’ GS Sustain Report it is expected that the relationship between carbon emissions and global climate change will drive a redistribution of value from firms that do not control their carbon emissions successfully to firms that do.

The study may be accessed online





	


	





	

		
		
UK Study finds that Measuring and Reporting GHG Emissions Delivers Cost Savings and Business Benefits
	


				

				
A research study released by PwC and the Carbon Disclosure Project (CDP) found that voluntary reporting of greenhouse gas (GHG) emissions is helping to cut costs and improve relationships for businesses.

			

		
	
	

		
On November 30, 2010, a research study released by PwC and the Carbon Disclosure Project (CDP) found that voluntary reporting of greenhouse gas (GHG) emissions is helping to cut costs and improve relationships for businesses. The research, commissioned by the UK Department for Environment, Food and Rural Affairs (Defra), surveyed more than 150 large companies and found that over 50% said the benefits of GHG reporting outweigh the costs involved. Participating businesses said the emission reports initiated board level interest in environmental issues and drove environmental change company-wide. Furthermore, 72% said they now have a corporate climate change strategy designed to reduce GHG emissions.


Measuring emissions cost less than £50,000 (approximately CAD $80,000) for 65% of the companies surveyed and approximately 14% of companies calculated energy cost savings of more than £200,000 a year (approximately CAD $320,000) as a result of GHG accounting initiatives. Against quantifiable business costs and benefits, 60% of companies found there to be a net cost of reporting, but when considering wider benefits such as reputation and consumer awareness, 53% of companies said there was a net benefit. Companies also said the distinction between voluntary and mandatory reporting is already blurred, with schemes such as CDP becoming semi-mandatory.


Joanna Lee, Chief Partnerships Officer at CDP commented that: “Reporting drives the action of measuring, helping companies to identify opportunities for emission reductions. It also helps companies set meaningful and achievable reduction targets, as well as advancing better risk management and increased awareness of new market opportunities.”


The study has been submitted to the UK Parliament as part of a wider analysis commissioned to inform the government’s decision on mandatory reporting. A decision is expected in early 2011.



	


	





	

		
		
GHG Inventory
	


	
	
	

		


Whether you are required to reduce emissions by regulation or if you choose to reduce emissions voluntarily (for purposes such as marketing, brand management or corporate social responsibility), GHG Accounting Services can assist you in quantifying your total GHG emissions based on the requirements and relevant protocols of ISO 14064-1. This will enable you to comply with required reporting standards or it could be the first step in becoming carbon neutral.