Wednesday, 24 December 2008

Carbon Clear's View on Radiative Forcing

At Carbon Clear we pride ourselves on work that is backed by sound science and ethics. This is true for everything we do, including our carbon calculations. Effective immediately, we have changed the way we account for the carbon footprint of airplane flights.

There has been a great deal of controversy about the global warming impact of high altitude airplane flights. Most scientists recognise that emissions from burning jet fuel at altitude leads to a greater warming effect than if that fuel were consumed at ground level, but the exact amount o that impact depends on a number of complicated assumptions. This has led to different carbon calculators using multiplication factors ranging from 1.0 to 4.0 to account for this increased warming. Defra, the UK's main environment agency, uses a factor of 1.0 on its online carbon calculator, and the European Environment Agency looks set to follow suit.

Until recently, Carbon Clear has followed Defra's example with an emissions factor of 1.0 - a litre of fuel was assumed to have the same warming impact wherever it is consumed. However, after consulting a range of expert stakeholders, we now base our aircraft emissions factors on work commissioned by the Intergovernmental Panel on Climate Change, or IPCC entitled "Aviation and the Global Atmosphere". The IPCC's work represents the consensus opinion of climate scientists from around the world.

While the IPCC report notes that it is prudent to provide a range rather than a single number, the most likely estimates centre around a Radiative Forcing Impact (RFI) from high altitude flights that is approximately 2.7 times the global warming impact of ground transport. This means that we need nearly three times as much carbon reducing activity to compensate for the effects of customer flights. We will monitor the RFI debate and encourage a policy and scientific consensus so that we can continue to provide the best possible advice to our customers.

Every individual and company has a role to play in tackling climate change. At Carbon Clear we're committed to helping you control your carbon impact.

(Carbon Clear website)

Tuesday, 23 December 2008

Emissions Trading - Going Global

The original version of this article appeared in the June 2008 (No. 60) issue of The Environmentalist.

Greenhouse gas emissions impose a serious cost. For over a century, the main cost of releasing carbon dioxide (CO2) from factories and vehicles has been borne by the environment, in the form of gradually rising global temperatures and the cumulative impacts of climate change. The 2006 Stern Report suggests that climate change, left unchecked, could cost as much as 5% of GDP.

However, the main emitters – operators of vehicles, factories, and power plants –have rarely had to bear the full environmental cost of their actions. Without clear price signals, polluters have had little incentive to reduce their CO2 emissions.

This situation is changing. Since 2005 governments around the world have been phasing in pricing systems that give polluters a financial incentive to reduce their CO2 emissions. The most popular approach, called cap-and-trade, sets a gradually diminishing quota on allowable greenhouse gas emissions, based on historic performance. Firms that emit more CO2 than their allowance must pay a hefty fine or purchase pollution rights from another firm at a mutually agreed price. Firms that emit less than their allowance can sell their excess allocation. In other words, regulators use market mechanisms to find and implement the fastest and most cost-effective emissions reductions, wherever they occur.

The most established CO2 emissions trading system is the European Union Emissions Trading Scheme (EU ETS) launched in 2005 to help European nations meet their commitments under the Kyoto Protocol. EU-ETS focused initially on those large industrial emitters collectively producing almost half of the EU’s CO2 emissions from about 11,500 sources: iron and steel, certain mineral industries (including the cement industry), energy production (including electric power facilities and refining), and pulp and paper.

The trial phase of the ETS ran from January 2005 until December 2007. The second phase of the scheme, launched in January 2008, reflects the EU’s 8% binding reduction target by 2012, and imposes a lower emissions cap than did the first phase.

There are two main ways the EU scheme can expand: by including additional sectors, and by including additional countries and linking to other cap and trade schemes. The EU system is open to cooperation with compatible systems in other countries. This year, EU ETS will undergo its first enlargement when Norway, Iceland and Liechtenstein join.

The European Union is including aviation emissions into the system from 2011 and considering expanding the system to further industrial sectors and other greenhouse gases from 2013. For companies across Europe, the price of carbon is getting higher.

The UK’s Carbon Reduction Commitment
While the EU-ETS is a cap-and-trade system designed to help European countries meet their Kyoto obligations, the UK Government wants to use cap-and-trade to achieve even greater reductions. The proposed Carbon Reduction Commitment (CRC) is a cap-and-trade system aimed at large, non-energy intensive companies whose emissions may not be covered under the ETS. These companies’ UK energy consumption exceeds 6,000 MWh per year – equivalent to an energy bill of around £500,000.

Participating companies would include supermarket chains, hotels, office buildings, and government departments. These businesses account for nearly 10% of the UK’s annual emissions.

Under the CRC, companies will self-report their direct and indirect energy emissions (see our December 2007 Environmentalist article “Whose footprint is it anyway?” for an overview of emissions categories). Companies covered by the CRC will have to purchase their initial allowances and will eventually be assigned an emissions reduction target. Firms can then trade any allowances surplus to their requirements or purchase extra if there is a shortfall. CRC participants will also be able to buy (but not sell) allowances from the EU-ETS instead of from their counterparts within the CRC.

The Government intends to publish a league table comparing CRC participants’ progress in reducing emissions, and will refund all or part of the allowance fees in proportion to each company’s league rankings. It is expected that the need to purchase credits, the promise of a cash rebate linked to performance, and the threat of being branded a climate change laggard in the league tables will provide incentives for rapid emissions reductions.

The carbon price is influencing behaviour. In recent conversations with large companies, Carbon Clear's advisory team has found that anticipation of the CRC is encouraging more firms in Britain to measure their carbon footprint and identify rapid emissions reduction opportunities.

Cap-and-trade in the USA
In December 2007, the Climate Security Act (S. 2191) was approved by the US Senate Environment Committee- the first global warming bill to make it out of any committee in the US Congress. Sources responsible for eighty-six percent of US emissions would be covered by the Bill, with targets to reduce emissions by 18%-25% by 2020, and by 62% by 2050. The Bill contained provisions for selling, transferring, retiring, and borrowing emissions allowances.

The Senate Bill establishes a Carbon Market Efficiency Board to determine the number of emissions allowances under this cap-and-trade scheme and set up allowance auctions. Unlike the UK's CRC, which rebates the proceeds from the sale of allowances, the Carbon Market Efficiency Board would use auction proceeds to support energy efficiency and other low carbon technology investments.

In addition, while the US cap-and-trade scheme is not part of the Kyoto Protocol, it allows up to 15% of a company’s emissions reduction obligations to be met through the purchase of international credits from other recognized trading systems.

While the Climate Security Act ultimately failed in the face of an election-year economic downturn and spiraling fuel prices in the first half of 2008, it generated considerable political support and provides a template for future legislation.

Preventing “carbon leakage”
Across the industrialised world, cap-and-trade schemes and voluntary carbon-neutrality pledges are helping companies incorporate the price of carbon into their business decsions. But the same does not hold true everywhere. Countries with less stringent requirements may see a net gain in heavy industry, where the cost of carbon can have a major impact on profitability. Where this happens, emisions reductions in industrialised countries may be negated by increases in other parts of the world.

Without a global climate change agreement, “carbon leakage” to rapidly growing developing countries such as India and China is inevitable. German Chancellor Angela Merkel has urged EU leaders to back measures to prevent industries such as cement and steel from leaving the EU as tighter limits on CO2 emissions are imposed in the Community after 2012. Two options are under consideration for post-2012 Europe:

  1. Granting free emission allowances to industries which are particularly exposed to international competition, or
  2. imposing a "carbon tax" on imports from countries with no CO2 emission constraints of their own.

It remains to be seen whether these proposals survive local lobbying and the give-and-take of international negotiations.

Cross-system linkages?
Cap-and-trade systems are operational or under development in Europe, North America, Australia, and other parts of the world. Linking these various cap-and-trade systems could contribute to a global carbon market.

A larger carbon market with an increased number of participants helps to increase liquidity in the market. There are more actors able to achieve lower-cost emissions reductions and more willing to pay a premium for spare carbon credits. Greater liquidity can lead to an improved allocation of resources and more cost effective and rapid emissions reductions overall.

With a larger carbon market, there is less burden-shifting, that is, a lower likelihood of CO2 emissions leaking to countries that lack a strong regulatory framework.

There are, however, challenges to linking the European and US cap-and-trade systems. In particular, how would Europe react to more flexible standards that could cause the price of carbon in the EU to plummet? How readily would the US give up the flexibility required to achieve cost-effective emissions reductions across a large and diverse economy spanning multiple climactic and time zones? And how will both systems accomodate the need to purchase external carbon credits from developing countries that require financial help achieving reductions?

While challenges abound, a broader carbon market can help to accelerate the transition to a low-carbon economy. Without a clear price for carbon, we risk a major misallocation of our resources and threaten to pass on the costs of climate change to future generations.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.

Friday, 19 December 2008

John Holdren to be Obama Science Advisor

The Boston Globe (and lots of other newspapers) reports that Prof. John Holdren has been appointed science advisor to the incoming Obama Administration.

Holdren, a physicist by training, is a professor of environmental policy at Harvard University, director of the Kennedy School's Program on Science, Technology, and Public Policy, and director of the Woods Hole Research Center. He is also a past-president of the American Association for the Advancement of Science.

John was the head of the University of California at Berkeley's Energy and Resources Group, back when I was a grad student there. He taught ER100, the very first energy analysis course I ever took (among many others), and I was honoured to have him as a mentor.

John's appointment is good news in the ongoing effort to tackle climate change. He takes a clear-headed, evidence-based view to understanding environmental and energy challenges, and it's encouraging to know that he'll be at the heart of science policy in the new American administration.

Thursday, 18 December 2008

Yesterday's Technology

Yesterday's Financal Times included a story about increased pressure to develop and build clean electric vehicles. These cars emit no pollutants from the tailpipe (in fact, there is no tailpipe), and have a potentially important role to play as we transition to a low-carbon future.

Most people think of electric cars as either boring, tiny golf carts or racy space-age vehicles like the Tesla pictured here. But the most interesting point in the FT article was the observation that this technology is nothing new.

The first electric carriage was invented between 1832 and 1839, and electric vehicles were widely used in Europe and the U.S. in the late 1800s and early 1900s. In fact, they held many land speed records during this period, and the wives of Thomas Edison and Henry Ford drove electric vehicles. Here's a photo of Thomas Edison with an electric car in 1913:

Sixty-seven years later, an electric car built in 1980 could travel up to 70 miles per hour for 70 miles without recharging. A widespread switch to electric vehicles could drastically reduce our dependence on petroleum, and lead to a huge reduction in greenhouse gas emissions. And there's no technical reason we can't achieve this goal. As one of the people interviewed in the FT story notes, "They could make these yesterday. They could stamp them out if they had to."

The same goes for many other low-carbon solutions. Reducing emissions is not rocket science. At Carbon Clear we're committed to helping companies identify proven, practical emissions reduction approaches, and then rolling them out in a cost-effective way.

Tuesday, 16 December 2008

The Outsourced Carbon Footprint

The full version of this article appeared in the March 2008 (No. 55) issue of The Environmentalist.

In our last article, we discussed how ISO 14064 provides useful guidance when choosing the boundaries for a corporation’s or organisation’s carbon footprint. In particular, while ISO 14064 only requires that companies include their direct emissions and their emissions from purchased energy, we argued that a more thoroughly prepared footprint will also look at the indirect emissions from the supply chain.

In this article, we explore how supply chain decisions can affect the company carbon footprint. We also look at how outsourcing production to other countries, while justifiable on cost or quality grounds, can have a significant effect on emissions – both negative and positive.

The “Low-Carbon” Service Sector
The UK economy has steadily shifted away from manufacturing and mining to a service economy underpinned by financial and retail-related services. Services, which are responsible for approximately 74% of national output, tend to be less energy intensive than agriculture, mining and manufacturing.

Defra reports that direct UK greenhouse gas emissions have fallen 12.6 percent since 1990, largely as a result of more efficient energy use, a switch away from coal-fired electricity, and the shift to a service-based economy.

However, the total volume of manufactured goods consumed in the UK has not decreased. In most cases, manufacturers have shifted to outsourced production. In the process they have transferred their – and the country’s – emissions to the international supply chain. For large retailers, the supply chain may generate thirty times the company's own emissions. A similar effect may hold at the national level.

Outsourced Emissions
There are three ways that including the outsourced supply chain can increase a company’s carbon footprint:

  1. an activity that had been excluded from direct emissions once outsourcing began must now be reincorporated into the emissions total;
  2. transport between the point of manufacture and UK distribution and retail points results in additional emissions that must be included;
  3. many countries that have become a hub for outsourced manufacturing emit more carbon per unit of electricity than the United Kingdom.

The last point bears further exploration. According to the International Energy Agency, the average kilowatt-hour (kWh) of electricity in the UK resulted in 472 grams of CO2 emissions in 2004. In the United States, one kWh resulted in 576 grams of CO2. However, in China, each kilowatt- hour resulted in 851 grams of CO2 emissions, and in India the figure was 942 grams. All else being equal, then, outsourced manufacturing can lead to a significantly higher corporate carbon footprint.

On the other hand, all else may not be equal. Lower labour costs in developing countries mean that companies may use less energy-intensive manufacturing techniques, leading to a net reduction in CO2 emissions. In the end, every company and production process requires its own analysis to determine how outsourcing affects the carbon impact of the supply chain.

Measuring Embodied Carbon
The British Standards Institute, working in collaboration with the Carbon Trust and other stakeholders, has developed a draft standard for measuring supply chain emissions. The draft standard is PAS 2050 - Specification for the measurement of the embodied greenhouse gas emissions in products and services.

In order to ensure that different products and services are evaluated consistently, PAS 2050 takes a comprehensive approach to measuring emissions, including, in the words of the document author, “all emissions (or portion of emissions) that are released as part of all processes involved in creating modifying, transporting, sorting, disposing of and/or recycling the product.”

This comprehensive approach requires companies to address their supply chains. For example, a producer of chocolate candy bars would have to include emissions from growing cocoa overseas – including irrigation and fertilisers, transporting the raw cocoa beans to the mill, producing the milk, blending the chocolate, producing the packaging, warehousing and distribution. With major retailers like Tesco pledging to include carbon labelling on all their products, we predict that more and more companies will be working with their supply chain to understand their carbon exposure.

Outsourced Emission Reductions
Outsourcing is not merely an added source of greenhouse gas emissions that companies must add to their corporate carbon footprint. Outsourcing is also a widely accepted way for companies to achieve substantial emission reductions.

Under the EU Emission Trading Scheme (ETS), companies that are not able to meet their binding greenhouse gas emission targets must purchase external reductions in the form of carbon credits – typically classified as European Union Allowances (EUAs) or Certified Emission Reductions (CERs).

Companies that have voluntarily committed to reducing their corporate emissions or making a product or service “carbon neutral” have access to a wider range of external reduction options to accompany their internal reduction measures. In addition to CERs and – less commonly in the voluntary market – EUAs, companies may choose balance out their unavoidable emissions with so-called voluntary emission reductions (VERs). A number of standards have been developed to increase transparency in the voluntary market and ensure that outsourced emission reductions are as environmentally effective as internal reductions.

Companies choose to outsource business processes for a wide variety of reasons: proximity to markets, raw material prices, labour costs, a desire to encourage job creation in poorer countries, access to technical expertise, regulatory and tax regimes, and others. In this article, we have argued that carbon impacts should be an important consideration when managers decide whether and how much to outsource.

Because outsourcing can lower as well as increase a company’s carbon footprint, and because the results can be counter-intuitive, managers may need to undertake a detailed analysis of their supply chain when weighing the carbon cost of outsourcing.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.

Carbon Clear Among Most Recognised Offset Suppliers

A recent report ranks Carbon Clear as one of the top ten most recognised carbon credit suppliers, in a poll of large and multinational companies.

As the report authors note: "The market is clearly becoming better regulated, at least in part through project developers and carbon retailers' efforts to create best practise procedures and also though the UK governments' long awaited best practise guidelines for carbon offset providers. Demand for different types of offsets shift based on factors ranging from availability to price to public perception, and as a result business customers of the voluntary offset markets play a major role in shaping the future of carbon trading."

The poll, commissioned by credit wholesaler EcoSecurities, not surprisingly ranks that company highest. Still, we're pretty pleased to be in the top ten - our experience, reputation and project quality help us stand out from the crowd.
(Carbon Clear homepage)

Monday, 15 December 2008

Whose Footprint Is It, Anyway?

A longer version of this article first appeared in the December 2007 issue (No. 53) of The Environmentalist.

Public awareness of climate change is at an all-time high, and companies and individuals are under pressure to measure and reduce their carbon footprints. However, we buy goods and services from one supplier and often pass items, whether finished products or waste, on to other people. So how do we know where one footprint ends and another begins? Establishing relevant boundaries around your carbon-emitting activities is a crucial step in calculating your true emissions. Define your activities too narrowly and you offload your rightful carbon responsibilities onto your customers or suppliers. But broaden the boundaries too much and you risk taking responsibility for emissions over which you have little or no control. What is a sensible approach?

A good starting point is the ISO 14064 -1:2006 standard Greenhouse gases- Part I: specification with guidance at the organizational level for quantification and reporting of greenhouse gas emissions and removals. This standard includes formal definitions to help organisations determine where their responsibility begins and ends. Another carbon management standard, PAS 2050 - Specification for the measurement of the embodied greenhouse gas emissions in products and services- can also help an organisation determine where its boundaries begin and end. But before taking a closer look at boundaries, let’s take a step back and think about the overall purpose of carbon footprinting.

Given the recent hype, one might be forgiven for thinking carbon footprinting is simply more corporate “greenwashing”. In reality, developing a reliable and consistent method for measuring greenhouse gas (GHG) emissions helps companies benchmark their performance and identify opportunities to make real reductions in emissions through changes and improvements in business practices and processes. The Carbon Trust outlines the main benefits of carbon management for companies including cost savings, operational efficiency, mitigation of regulatory impacts, capability building, new business opportunities, and enhanced corporate reputation.

In addition, a consistent approach among companies allows customers and other interested parties to make relevant comparisons and use GHG emissions as selection criteria for procurement and purchasing decisions. It also helps companies to evaluate alternative processes for managing GHG emissions and to address corporate environmental targets.

Describing a “Fit for Purpose” Carbon Footprint Report
A credible carbon footprint report is analogous to a credible corporate financial report in that it should give a fair and accurate view of the organisation’s performance and serve as a useful decision making tool for management and other stakeholders. The following principles reflect the thinking that goes into preparing a “fit for purpose” carbon audit report:

a) Relevance - includes emissions sources appropriate to the needs of the intended user
b) Completeness - includes all relevant GHG emissions and removals
c) Consistency - enables meaningful comparisons in GHG-related information
d) Accuracy - reduce bias and uncertainties as far as is practical
e) Transparency - disclose sufficient and appropriate GHG-related information to allow the intended user to make decisions with confidence

When Carbon Clear conducts a carbon audit, the carbon management team applies a 6-step methodology:

1. Identify management’s motivation for measuring the company carbon footprint, and specify key stakeholders
2. Identify organisational boundaries
3. Determine key activities within those boundaries that drive the company’s carbon emissions
4. Measure those activities and apply relevant emissions coefficients to determine the total footprint
5. Identify top-level and detailed recommendations for cost-effective emissions reductions
6. Ensure that carbon footprint results are reported accurately

Without clearly defined, relevant boundaries for GHG emissions, an organisation cannot begin to take meaningful action to measure or reduce their emissions. For example, an office or service-based organisation, which decides to exclude indirect emissions (associated with services and products in its supply chain) might underestimate its footprint by a large factor. For large retailers, the supply chain may generate thirty times the company's own emissions.

ISO 14064 defines four categories of GHG emissions based on management’s control or influence over business activities. These categories are labelled direct emissions, energy indirect emissions, and other indirect emissions.

Direct GHG emissions, as the name suggests, result from activities undertaken directly by the organisation and its staff. These include the operation of company-owned vehicles and on-site power generation, as well as the management of lands and property owned by the organisation.

Energy indirect GHG emissions are the GHG emissions from the generation of imported electricity, heat or steam. The organisation is the direct end-user of the energy, even though the emissions may have occurred at a power station hundreds of miles away.

Other indirect GHG emissions arise as a consequence of the organisation’s procurement activities and other decisions, but arise from sources that are owned or controlled by another organisation. The category of indirect greenhouse gas emissions is potentially huge, and is the most common source of confusion when the organisation attempts to set boundaries for its carbon footprint.

Boundary setting: the ins and outs
A carbon audit is often the initial step in a company’s emissions reduction programme. However, the carbon audit report is also a communications tool, and company representatives may be tempted to set their emissions boundaries as tight as possible in order to produce a smaller footprint. After all, with major institutions basing procurement decisions in part on the bidders’ relative carbon footprints, no one wants to be the biggest polluter.

We argue that this may be a false saving. Many organisations will use their initial carbon footprint as a baseline against which to measure future performance. Exclude too many activities from the baseline and you may lock out a range of cost-effective emissions reduction options throughout the supply chain.

There is a further reason to consider broadening the boundaries of a corporate carbon audit. Much of the pressure to measure carbon footprints comes from investors, customers, and regulators, and they expect this information to be made publicly available. An unreasonably narrow boundary may attract criticism from outside reviewers concerned about potential corporate “greenwash”. In such a case, it is critical that a company clearly states the assumptions and rationales behind its boundary decisions.

Establishing appropriate boundaries for a corporate carbon audit is critical if the corporate world is to do its part to help reduce the severity of climate change. Going beyond direct emissions to encompass indirect emissions can give a company insight into its key emissions sources, and identify a broader range of carbon reduction options. Even better, establishing these broader boundaries can increase the credibility of the carbon audit report itself, and open up new opportunities for engagement with customers and clients.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.

I'm back...

Apologies for the light posting...busy. To make up for it, I'll be supplementing our regular blog posts with some articles that I've written for the IEMA journal The Environmentalist over the past year with colleague Suzy Hodgson.