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Greenhouse Gas Emissions

Monitoring and Reporting

I have been curious about when and how companies will be required to monitor and control their greenhouse gas emissions. I am convinced that within a year, larger companies will be asked to report on some categories of emissions and that soon thereafter, a mandatory cap and trade system will be in use that will facilitate the sale of credits between companies.

Carbon trading is already active in The London financial market where carbon dioxide emissions trading was valued at $60B in 2007. The Chicago Climate Exchange (CCX) and NYMEX are likely to house carbon trading markets in the US.

The Northeast Region’s initiative for measuring greenhouse gas emissions is called The Climate Registry and is based in part on the Western States regional tool called The Climate Action Registry Reporting Online Tool. The Northeast Regions reporting tool is called the Climate Registry Information System (CRIS) and seems likely to become the national reporting tool. You can view a demo at the Climate Registry web site in the tools section of www.theclimateregistry.org. . You can also view company public reports at http://www.climateregistry.org/CARROT/public/Reports.aspx. The City of Syracuse recently announced that it has joined The Climate Registry as a Founding reporter.

What will be required?

The required measurement of so called Scope 1 and Scope 2 emissions seems likely. These are the emissions from power generation and the emissions from the consumption of purchasing electricity, steam, heating or cooling.

Scope 1 Emissions include for example
a) Stationary Combustion - emissions from combustion used to generate electricity, heat, steam or power – like an onsite generator
b) Mobile Combustion – emissions from owned and operated motor vehicles

Scope 2 Emissions include for example
c) Indirect Emissions from Electricity Use
d) Indirect Emissions from imported steam, cooling and electricity from a CHP plant, one that you do not own.

Other emissions that seem less likely to be mandated for reporting include things like emissions from the transport of purchased materials, employee business travel, employee commuting, and emissions from waste disposal; so called Scope 3 emissions.

Various industry specific reporting will likely be required, like companies that transport natural gas, burn biomass or process lumber; any business process that generate greenhouse gases like carbon dioxide, methane or CFC’s.

Using the reporting tools, a company enters all the relevant usage which is converted to emission volumes. Then the information is submitted for review by a certifying agent. This is an interesting part of the process. Standards and training for certification agents are being developed now. Thus I would expect that this will emerge as a new service from various energy related businesses; energy services companies, brokers, consultants, energy efficiency experts, accounting firms and engineering companies.

Also notable is the EPA’s Climate Leaders program. This is a government-industry partnership to develop comprehensive climate change strategies. Partner companies are recognized for their participation and goals in the program. For example, Lockheed Martin, Alcoa, Anheuser-Busch, Bank of America, HSBC, International Paper, and Novelis contribute to this program.

Several sources occurred to me as potentially helpful in anticipating where emissions reporting is headed: the more mature European Union system, the Regional Greenhouse Gas Initiative, the recent senate bill “America’s Climate Security Act of 2007” , the President’s Climate Commitment for colleges and universities (which has been signed by Syracuse University, Cornell University and SUNY ESF among others.), and The Climate Registry. The Greenhouse Gas Protocol Initiative; a widely used accounting tools for understanding emissions is a useful resource for industry specific protocols.

Other Considerations?

It seems possible that expectations about mandatory emissions caps might cause a company to postpone action in case they would be penalized in the future. In other words, knowing that I need to reduce emissions in 2010 might cause me to postpone reductions that I can make in 2009. The Climate Registry does note that beginning to report on emissions now can be a hedge against this risk, as this information “has previously received recognition from mandatory GHG programs”. In other words, a company may receive credit for previous emission reductions if they report them along the way.

If, when a cap and trade system is proposed, emission credits are sold to companies instead of given to them, this will represent a sales tax on every part of the supply chain; a tax that will be reflected in the costs of the goods produced. The tax will be paid by consumers of domestic goods, and the tax money will flow to the companies that are able to reduce their emissions and sell their credits. If emission credits are given to companies at their current levels, this tax will be avoided. And companies will still be rewarded for reducing their emissions.

As a regulation, this is certainly going to be an “unfunded mandate”. Without considering the costs of acquiring emission credits, there will be a fee to report a company’s annual usage, and a fee for the report to be verified. Of course these are small costs if emission credits are auctioned instead of given to companies.

On a personal note, I used online tools to estimate that I have a carbon footprint of 20 tons of CO2 annually. This is about the national average and about twice the European average. Thus if I were to buy emission permits for my own usage, it would cost me about $200 on top of the cost of the energy that I buy now.

If you have questions or comments, please contact John Lawyer (jlawyer@macny.org)