climate change Archives

Approach to Climate Change Makes British Columbia a Gold Medal Contender

Posted on March 7, 2010 by John Shideler

Winter Olympic Games in British Columbia focused the attention of the world recently on Canada’s Pacific Coast province. The gold, silver and bronze medals earned by athletes from around the world celebrated achievement in demanding individual and team competitions and showcased the province’s world class communities and sporting event venues.

British Columbia also stands out in ways not related to the Olympic Games. It is a North American leader in its commitment to addressing climate change. Through acts of parliament and regulation, British Columbia has directed the provincial government and public sector organizations to reduce greenhouse gas emissions, directed consideration of environmentally sustainable planning and development at the local level, begun preparations to adapt to climate change, and implemented mandatory greenhouse gas (GHG) reporting for regulated industry.

As a member of the Western Climate Initiative, British Columbia, along with the provinces of Ontario, Quebec, and Manitoba and six western US states, is preparing to implement a regional cap-and-trade program to reduce GHG emissions. Cap-and-trade will take effect in British Columbia (BC) on January 1, 2012, the same date that market-based mechanisms are scheduled to start in California and the other WCI member states.

Legislation passed in 2007 set ambitious goals for reducing BC’s greenhouse gas emissions: 33% fewer in 2020 compared to 2007 levels, and a target of 80% reductions by 2050. The law also requires that public sector organizations in British Columbia be “carbon neutral” for the 2010 calendar year and for each subsequent year thereafter. The law specifically targets GHG emissions related to public officials traveling on public business. Carbon neutrality under the law can be met both by GHG emission reductions and by application of emission offsets.

In 2008, British Columbia enacted a “Green Communities” statute. This law strengthened the ability of local governments and Regional Districts to reduce GHG emissions through Community Action Plans and other mechanisms. New and existing authorities allow municipal governments to achieve GHG emission reductions from energy efficiency, more sustainable use of water (moving water requires the use of energy), restrictions on development, promotion of alternative forms of transportation, zoning and building code changes, economic incentives for construction of small residential units, and consideration of land-use planning and environmental impacts when approving development.

Recognizing that the effects of climate change will be felt for decades, even as emission reduction actions are implemented within the province now and for years to come, British Columbia has identified a number of climate change impacts that require adaptation strategies. The impacts include more long-term warming, more extreme weather, changes to precipitation patterns, and rising sea levels. Ministry of Environment public information cites adverse impacts that have already been felt, such as the mountain pine beetle infestation, triggered by warmer winters, seasonal droughts of above-average magnitude in 2003 and 2009, and intense wildfire seasons in the same years. Strategies to prepare for climate change impacts include development of improved knowledge and tools to address climate change, makinge adaptation a part of BC’s planning and decision-making processes, and assessing risks and implementing priority actions in key climate sensitive sectors.

The strategies identified by British Columbia to address climate change are more akin to Olympic team events than to feats of individual performance. The objective is transformational in scope and collaborative in nature. Through its public actions, BC is showing that responding to climate change is a challenge that promises dividends to generations of current and future residents for decades to come.

High Quality Carbon Offset Credits Available Now At Bargain Prices—Is Now the Time to Buy?

Posted on February 21, 2010 by John Shideler

Prices for voluntary carbon offset credits issued in the United States have declined considerably since the beginning of 2010. Diminishing prospects for the passage of climate change legislation in the US Senate is most often cited as the major reason for the price of Climate Reserve Tonnes (CRTs) dropping to around $6 per ton from approximately $10 at the beginning of the year. CRTs are issued by the Climate Action Reserve for carbon offset projects undertaken mainly in the United States and are viewed as “compliance grade” offsets under a future US federal cap-and-trade program.

Meanwhile California and other states and Canadian provinces continue to plan for the introduction of a regional cap-and-trade system within their jurisdictions by the start of 2012—now less than two years away. And in the United States the Environmental Protection Agency continues to develop an approach to regulating greenhouse gas emissions under existing authority granted to it by the Clean Air Act.

The consensus view among many climate change experts is that it is only a matter of time before real constraints are placed upon the emission in the United States of carbon dioxide and other greenhouse gases, and that some form of market mechanism will be used to help ease the transition to a low-carbon future. The success of the 1990s Acid Rain program in reducing emissions of sulfur dioxide is too compelling, market advocates say, for significant reductions in greenhouse gas emissions to be achieved across broad segments of the economy without taking advantage of emissions trading. Trading, they contend, provides needed price signals concerning the value of future carbon emission reductions and helps companies implement the most efficient abatement strategies.

Six dollars per ton is cheap compared with the cost of driving down emissions in America’s power plants, factories, and transportation networks. This can only mean that the price reflects skepticism about the political will of leaders in either the nation’s capital or in state capitals to cap greenhouse gas emissions. However, few voices among the many speakers at the Electric Utility Environmental Conference (EUEC) held in Phoenix earlier this month thought that no action was likely, if for no other reason than the industries most affected by greenhouse gas regulation would prefer the more flexible cap-and-trade mechanism to the blunt instrument that a command-and-control approach would take under existing provisions of the Clean Air Act.

Many speakers at the EUEC speculated that a billion tons of carbon offset credits will be needed to make a cap-and-trade program work at the federal level in the United States. This amount of voluntary emission reductions is enormous compared to the Climate Action Reserve’s current output in millions. In the face of political uncertainty about the timing of climate change legislation, the price of CRTs appears to be supported at current low levels by electric utilities—and others—hedging future carbon risks by taking “pre-compliance” positions in CRTs. It is estimated that such buying may have motivated as much as three quarters of the market in 2009.

At present prices, CRTs are trading at approximately one third the cost of Certified Emission Reductions (CERs) issued by the Clean Development Mechanism (CDM) under the Kyoto Protocol. Companies whose greenhouse gas emissions are currently capped under the European Union Emissions Trading System (EU ETS) are able to use CERs interchangeably with Assigned Amount Units when meeting their compliance obligations. CRTs trade at a discount to CERs because CRTs are not currently priced for use under a mandatory cap-and-trade system, though it is virtually certain that they will play a role similar to CERs under the Western Climate Initiative’s cap-and-trade program that begins in 2012.

Now is the time for companies with exposure to climate change risks to consider adding voluntary emission reductions to their investment portfolios. Since not all voluntary emission reductions are created equal, the present time provides an excellent opportunity to learn how to perform due diligence when conducting trades or financing emission reduction projects. Carbon traders may well look back to 2010 as the time when forward-thinking companies got a head start on their competition by building positions when CRTs were cheap.

SEC Approval of Interpretive Guidance on Climate Change Disclosure Reinforces Importance of Greenhouse Gas Emission Reporting

Posted on January 31, 2010 by John Shideler

The US Securities and Exchange Commission (SEC) on January 27, 2010, approved interpretive guidance on climate change reporting for publicly traded companies. The new guidance is intended to clarify the circumstances in which existing SEC regulations require companies to disclose climate change–related information that could have “material” financial impacts. The text of the guidance will be published soon in the Federal Register.

According to an SEC press release, the new interpretative guidance highlights the following areas where climate change may trigger disclosure:
• Impact of legislation and regulation
• Impact of international accords
• Indirect consequences of regulation or business trends
• Physical impacts of climate change.

Investors and environmental advocates in 2007 had urged the SEC to issue guidance on disclosure of climate-related impacts. Petitioners included pension funds, state treasurers, investor advocates and environmental groups, among others.

SEC chairman Mary Shapiro made clear in remarks at the hearing that adopted the new interpretative guidance that the SEC is not changing regulations related to disclosure of material information to investors. Rather, the new guidance will help companies interpret existing disclosure rules with respect to climate change–related financial impacts.

The SEC’s action should prompt more companies to collect, analyze and report on climate change information. Companies that do not do so face added risks of litigation or regulatory action if future developments show that management failed to disclose material financial impacts linked to climate change. Actions against companies have already occurred. In 2008, the New York state attorney general set a precedent when he negotiated an agreement with Xcel Energy to disclose climate change information after subpoenaing the firm for information related to the construction of a new coal-fired power plant.

In October 2009 the US Environmental Protection Agency issued a new regulation requiring approximately 10,000 US facilities to report their emissions of greenhouse gases, starting in January 2010. For affected companies that had not previously counted GHG emissions, the US EPA regulation imposes the requirement to do so. The facility-based regulation, however, does not require corporatewide accounting, and not every public company is covered by the regulation. Moreover, companies will have to analyze the data they collect in order to calculate potential financial impacts.

Companies that do not currently report GHG emissions information at the corporate level have several options with respect to standards. The most widely used corporate reporting standard in North America is the GHG Protocol, published by the World Business Council on Sustainable Development/World Resources Institute. The GHG Protocol formed the basis for the General Reporting Protocol of The Climate Registry, a non-profit organization that accepts voluntary GHG reports from organizations based in the USA and Canada. The Carbon Disclosure Project is another venue for companies to report GHG information. Finally, ISO 14064:2006 Part 1 offers a concise set of requirements for quantification and reporting of greenhouse gas emissions at the organizational level.

The SEC announcement puts into question the fate of an ASTM International standard that was developed to provide guidance on the same topic. According to Gayle Koch of The Brattle Group, technical contact for the recently balloted standard, if the proposed ASTM Guide for Financial Disclosure Attributed to Climate Change has been incorporated in the SEC document, there may be less reason to publish it. On the other hand, if the ASTM document adds significant value after taking into account the SEC interpretive guidance, ASTM is more likely to publish it and include in it a reference to the SEC guidance. The text of the SEC guidance is closely held, and not expected to be known until its publication in the Federal Register.

Climate change can have material financial impacts on companies. Where their magnitude can be estimated, they should be disclosed by companies regulated by the SEC. Privately held companies should also quantify these impacts for strategic planning purposes. Moreover, companies should consider information they may release voluntarily to greenhouse gas registries or to mechanisms such as the Carbon Disclosure Project when they are preparing regulatory filings to the SEC.

Companies that quantify their GHG emissions in accordance with one or more reporting protocols or standards should consider, as a matter of quality assurance/quality control, hiring a third party to verify their inventory reports. This is equally true whether the company is required to report its emissions to a state or federal regulatory body, or whether the company gathers the information for strategic planning and potential disclosure under applicable SEC regulations. Futurepast can perform this service as an internal audit or recommend qualified and accredited third-party verification bodies.
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Copenhagen COP-15 Side Events Highlight ISO Greenhouse Gas Standards for Managing Responses to Climate Change

Posted on December 13, 2009March 14, 2010 by John Shideler

Negotiators at the fifteenth “Conference of the Parties” to the Kyoto Protocol, meeting in Copenhagen, enter their final week with eyes focused on the text of an agreement to reach a new international agreement to reduce greenhouse gas emissions. Heads of state are gathering during the coming days to commit their countries to concrete actions to curb climate change.

At the meeting developing countries are pressing developed ones to lead the way in abating concentrations of atmospheric greenhouse gases that have risen steadily since the beginning of industrialization in the eighteenth century. Developed countries, the developing ones say, have benefitted disproportionately from the industry and trade that are associated with the rise from approximately 250 parts per million of atmospheric CO2 in 1750 to the 385 parts per million that now are accumulated in the troposphere. This rationale explains the “common but differentiated responsibilities” that underlie the 1992 United Nations Framework Convention on Climate Change.

One thing is sure. Reaching agreement will be difficult, as developed countries seek global participation in “nationally appropriate mitigation actions” (NAMAs) from all signatories to the UNFCCC and emission reductions that are “monitored, reported and verified.”

While the daily to and fro of high-level negotiations grab most media attention, discussions of myriad details related to climate science, sectoral emission reduction approaches, and institutional mechanisms take place on the sidelines. Two “side events” at the COP-15 involved ISO, the International Organization for Standardization. More than 160 countries are members of ISO which is based in Geneva. Since 1947, ISO has developed more than 17,000 standards in support of international trade.

One of these side events, co-sponsored by the UNFCCC, offered delegates a perspective on how a proposed international greenhouse gas management system standard might support the implementation of NAMAs at both national governmental and local levels. Another side event, sponsored by the International Emissions Trading Association, highlighted existing ISO greenhouse gas standards and their role in promoting governance, trust and integrity in emissions markets.

I had the privilege of representing ISO Technical Committee 207 Subcommittee 7 as a standards expert in these two side events. In both sessions I explained the purpose and role of published standards on greenhouse gas quantification and reporting at the organizational and project levels (ISO 14064:2006 Parts 1 and 2). I also described published standards on greenhouse gas verification (ISO 14064:2006 Part 3) and requirements for greenhouse gas validation and verification bodies (ISO 14065:2007). Our technical committee has forthcoming standards on the competence of greenhouse gas validation teams and verification teams, the carbon footprint of products, and guidance for the establishment of greenhouse gas inventories.

ISO standards facilitate capacity building by providing benchmarks for training, certification of personnel, and accreditation of the bodies that oversee these activities. They play an important role in helping organizations achieve the objectives they set for themselves—or that are set for them by local ordinance, national law or international agreement.

ISO standards define the rules by which independent verification bodies can audit the “greenhouse gas assertions” made by organizations at the entity, facility or project level. ISO greenhouse gas standards currently support emissions trading in both voluntary and regulatory markets. Future standards will offer organizations a means to identify the carbon footprint of products and thereby influence greenhouse gas emissions intensity within a supply chain.

Voluntary, consensus-based ISO standards stand ready to underpin the negotiated agreements reached by countries under the United Nations Framework Convention on Climate Change.

John Shideler at ISO Side Event in Copenhagen