Published: June 15, 2009
Although overshadowed by the financial tumult of recent months, there is little doubt that with the new White House administration will come significant changes in both the US stance on climate change internationally and in Federal legislation.
Energy and climate change played a significant role on the campaign trail with President Barak Obama’s platform including stimulus for alternative energy sources and an emissions cap and trade scheme promising to deliver significant cuts to emissions over coming decades.
Campaign commitments on climate and energy included:
Obama spoke of new energy to harness in his inaugural speech, following similar sentiments expressed on the campaign trail: “A clean-energy economy can be the engine that drives us into the future in the same way the computer was the engine for economic growth over the last couple of decades.”
With a lack of US legislation relating to global warming-causing GHG emissions, some voluntary programmes have emerged...
It was even mentioned in his acceptance speech, “As we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime – two wars, a planet in peril, the worst financial crisis in a century.” And more recently, in the midst of the financial crisis, he has restated his intention to launch a carbon trading scheme to a climate summit of state governors.
Clean energy also holds a significant place in Obama’s proposed economic stimulus package, promising job creation in a fledgling US “green economy”.
Although no time commitment has been made from the Obama camp, key players are anxious to maintain the momentum, Senate Environment and Public Works Committee Chair, Barbara Boxer being one. She has stated publicly that she plans to introduce a climate change bill to the new Congress that convened in January.
On the international front, the annual conference of the UN climate convention in Poznan, Poland convened last autumn. It included two weeks of talks which aimed to make progress towards a new global climate treaty to succeed the Kyoto Protocol after 2012. Obama did not attend in person but sent his own team of negotiators.
News from these talks indicated signs to move forward with carbon regulation, in the form of emissions trading schemes. [[[PAGE]]]
In addressing this question, taking a step back and recounting some “climate change 101” is advisable, starting with “Greenhouse Gas and Carbon Footprints”. By definition, corporate greenhouse gas (GHG) footprints are the amount of greenhouse gases emitted from all sources that have been defined as being within a company’s designated boundaries. In the US today, reporting of Greenhouse Gas (GHG) emissions is completely voluntary, but becoming increasingly popular; and is considered likely to become mandatory under Federal legislation during the Obama administration.
The six greenhouse gases that are currently tracked were initially defined under the Kyoto Protocol; as:
Carbon Neutral means to produce no net contribution to GHG emissions. This is accomplished first by identifying opportunities to reduce internal emission sources, then, if necessary, offsetting the remainder. Types of GHG offsets include emissions trading and green project investment. Emissions trading is currently underway under two voluntary programmes in the US: one orchestrated through the Chicago Climate Exchange and one through the EPA’s GHG Protocol. Green project investment under the programmes can include:
Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are tradable environmental commodities in the United States which represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource. They are/have:
REC generation qualifying technology includes: solar, wind, geothermal, hydro, biomass, biodiesel, and fuel cells (clean hydrogen). [[[PAGE]]]
With a lack of US legislation relating to global warming-causing GHG emissions, some voluntary programmes have emerged and are attracting a growing and diverse membership.
The GHG Protocol is a multi-stakeholder collaboration convened by the World Resources Institute and the World Business Council for Sustainable Development to design, develop and promote the use of an international standard for calculating and reporting corporate GHGs. The GHG Protocol provides standards and guidance for companies and other organisations preparing a GHG emissions inventory and consists of two modules:
1. Corporate Accounting and Reporting Standards
2. Project Accounting Protocol and Guidelines
The Protocol allows organisations to report on direct and indirect emissions for the six greenhouse gases covered by the Kyoto Protocol. Although Federal legislation will likely regulate on the facility level (similar to current SO2 regulations), it is expected that many of the general principals and calculation methodologies found in the GHG Protocol will become the foundation for future US legislation.
Johnson and Johnson pledged to reduce GHG emissions worldwide to 7% below 1990 levels by 2010 and exceeded the goal 5 years early.
The Environmental Protection Agency’s Climate Leaders Programme follows the GHG Protocol. It is a voluntary industry-government partnership programme where participating partners commit to completing an annual GHG inventory and set aggressive targets to reduce emissions. Reporting includes the six main GHG gases, as defined by the Kyoto protocol, and members include 135 companies, mostly from manufacturing sectors and utilities.
Chicago Climate Exchange (CCX):
The CCX is a voluntary GHG allowance and trading system that is the only legally binding emissions trading system currently underway in the US. Trading covers all six greenhouse gases, but participants are only required to report on CO2 in the first year. Programme membership is diverse. Participants who reduce emissions below pre-defined targets have surplus allowances to sell or bank; those who emit above the targets comply by purchasing Carbon Financial Instrument (CFI) contracts, which represent 100 metric tons of CO2 equivalents each.
Offset projects can be registered by members, offset providers and offset aggregators. Examples of projects include: agricultural methane, landfill methane, agricultural soil carbon, energy efficiency and fuel switching, renewable energy, and forestry.
Some industry experts take issue with the lack of transparency in the CCX market. Market value of credits is difficult to determine. The National Association of Securities Dealers (NASD) provides regulatory services for the exchange.
The EIA programme is a voluntary reporting mechanism overseen by the Department of Energy and referred to as a 1605b filing. Originally created in 1992 by the Clinton Administration and revised in April 2007, it is not legally binding, nor does it provide assistance in creating a reduction goal. The programme records the results of voluntary measures to reduce, avoid, or sequester greenhouse gas emissions and provides conversion factors in order to effectively record and report GHG emissions. Reporting was dominated by the electric power sector in the early years of the programme with utilities looking to register projects and gain credit for early reductions, but reporting now includes 221 companies in various industries.
California Climate Action Registry (CCAR)
Established by California statute as a non-profit voluntary registry for GHG emissions. The purpose of the Registry is to help companies and organisations with operations in the state to establish GHG emissions baselines against which any future GHG emission reduction requirements may be applied.
Assembly Bill 32
Requires the California EPA to set a statewide cap on greenhouse gas emissions, reduce these emissions from major stationary sources, and develop a mandatory reporting system for these emissions.
The New England Regional GHG Initiative (RGGI or “ReGGIe”)
Co-operative effort by 9 Northeast and Mid-Atlantic states to discuss the design of a regional cap-and-trade programme initially covering CO2 emissions from power plants; may be extended to include other GHGs. [[[PAGE]]]
Climate Savers
World Wildlife Fund (WWF) programme to establish ambitious targets to reduce company greenhouse gas emissions voluntarily. By 2010, Climate Savers companies will reduce their CO2 pollution by over 10m tons each year, the equivalent of taking 2 million cars off the road. Members include: Johnson & Johnson, IBM, Nike, Polaroid and Sony.
The Carbon Disclosure Project (CDP)
International independent non-profit aiming to create a lasting relationship between shareholders and corporations regarding the implications for shareholder value and commercial operations presented by climate change. Represents institutional investors with a combined $41tr of assets under management.
The Climate Registry
A collaboration between states and provinces aimed at developing and managing a common greenhouse gas emissions reporting system with high integrity that is capable of supporting various greenhouse gas emission reporting and reduction policies for its member states and reporting entities. It aims to provide an accurate, complete, consistent, transparent and verified set of GHG emissions data from reporting entities, supported by a robust accounting and verification infrastructure.
There are a number of ways that corporations can begin climate changes programmes...
Johnson & Johnson: Climate Leaders Programme
Johnson & Johnson pledged to reduce GHG emissions worldwide to 7% below 1990 levels by 2010 and exceeded the goal 5 years early with emissions 11.5% below 1990 levels in 2005 (with increased revenues of 350%). Johnson and Johnson is one of the largest corporate users of on-site solar photovoltaic energy in the US and one of the largest corporate purchasers of wind power. Green power was 30% of its 2005 US energy use and almost half of the company’s European electricity comes from renewable supplies. The company incorporated a 10-stage energy best practices model and reaps more than $30m in annualised energy efficiency savings from projects completed in the past ten years.
IBM: Climate Leaders Programme
IBM reported a 20% avoidance of CO2 emissions via energy conservation; and 5.7% GHG emissions avoidance associated with energy use while saving $115m on total energy costs (1.28m tons of CO2). The company also purchased 83,000 MWhrs of Renewable Energy Certificates (103,000 tons of CO2 avoidance)
The company’s energy savings projects included:
Wal-Mart: Carbon Scorecard Pilot Project
Wal-Mart developed a scorecard system by which suppliers will be evaluated for their effort to get carbon out of their products, with rewards for the top performers. The carbon scorecard is one of numerous environmental scorecards in development at Wal-Mart.
The company’s new rules for supply chain sustainability cover everything from fuel use, to facilities and equipment standards, to the overall environmental commitment demonstrated by the companies who supply, ship and store their products.
A previously-launched packaging scorecard is already pushing 60,000 suppliers worldwide to lower the amount of packaging they use by 5% by 2013, use more renewable materials and slash energy use. If the packaging reductions are met, the company estimates the effort will be equal to removing 213,000 trucks from the road, saving approximately 324,000 tons of coal and 67 million gallons of diesel fuel per year.
With no clear Federal guidelines, and during challenging financial times, many companies are understandably struggling with decisions surrounding climate change programmes and the extent to which they should devote capital and resources to them. A number of reasons can be supported for acting on corporate climate change programmes now:
[[[PAGE]]]
There are a number of ways that corporations can begin climate change programmes; and the many voluntary programmes allow participation to the extent a company is prepared to be involved.
Companies embarking on a climate change programme can join one of the voluntary programmes and stay informed about positions and programmes supported by the industries they supply. Companies are encouraged to conduct a corporate GHG emissions inventory using 2006 as a baseline year. In doing so, it is important to work with a knowledgeable firm to be sure to “get it right the first time”.
Companies are also encouraged to develop a Corporate Climate Change Strategy in order to:
Although reporting requirements and compliance are not yet clear, future regulation of global greenhouse gases is coming and companies, in the industrial and manufacturing sector in particular, will be subjected to emission disclosure and reduction activities in the coming years. Establishing an emissions history and outlining initial corporate climate change objectives today will only serve to make for a smoother transition once these Federal guidelines are established. At the very least, corporate managers should keep a close watch on global climate initiatives proposed by the Obama administration and get involved early on to influence future reduction guidelines and reporting requirements.
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
