Are you missing the next wave of Innovation?
This publication was developed in partnership with Richard
Sandor, CEO of the Chicago Climate Exchange (CCX) and
Neil Eckert, CEO of the European Climate Exchange (ECX)
by Karlson ‘Charlie’ Hargroves and Michael H. Smith of
The Natural Edge Project (TNEP) under contract and
supervision by L. Hunter Lovins and Christopher Juniper of
Natural Capitalism Solutions (NCS). The lead developers
were supported by Robbie Noiles, Scott Leach, Andrew
Essreg, Stephen Self and Nancy Johnston of NCS and Nick
Palousis, Cheryl Paten and David Marsden-Ballard of
TNEP. This report is complemented by a series of training
materials and best practice case studies. These case
studies demonstrate the concepts briefly described in the following report. An
accompanying training unit provides instructional materials to build capacity in
reducing GHG’s and earning and trading CFI’s.
Structure of Report
1. Executive Summary for Business
2. Management Report
3. Operations Report
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TABLE OF CONTENTS
Executive Summary for Business ...................................................... 8
Management Report: Operating in a Carbon Constrained World ..... 12
Section One: The New World of Carbon Trading: How Emissions Reductions
Make Sense and Make Money ................................................................. 13
Section Two: GHG reductions that achieve CFI’s – best practices ................ 17
On-site Direct Emissions (ODE) ..................................................................... 17
Opportunities to reduce fossil fuel combustion ............................... 17
Non CO2 GHGs .......................................................................... 20
Efficient use of electricity ............................................................ 23
Onsite sequestration .................................................................. 24
Off-site emissions, offsets and demand management ...................................... 25
Mobile combustion ..................................................................... 25
Offset projects........................................................................... 25
Exchange Methane Offsets (XMOs) ...................................................... 25
Exchange Forestry Offsets (XFOs) ....................................................... 26
Exchange Soil Offsets (XSOs) ............................................................. 26
Demand Management .................................................................................. 27
Section Three: Whole system design capturing multiple benefits ................. 28
Section Four: The Business Case for GHG Emissions Reduction Strategies .... 31
Cost Reductions ..........................................................................................
Sector Performance of Companies Reducing GHGs ..........................................
First Mover Advantage .................................................................................
Good Corporate Governance .........................................................................
Reputation Management ..............................................................................
Insurance Access and Costs ..........................................................................
Legal Compliance ........................................................................................
Concerns Regarding Fiduciary Duty ...............................................................
Shareholder Activism ...................................................................................
Access to Capital .........................................................................................
Reduce Risks of Exposure to Higher Carbon Prices ...........................................
31
34
36
38
39
40
41
44
44
45
45
Conclusion ........................................................................................... 46
Operations Report: Overview.......................................................... 48
Part 1: CFI Opportunities from reducing CO2 Emissions from Energy
Production and Use .................................................................. 49
Reducing CO2 Emissions from Electric Power and Steam Generation............ 49
Reducing CO2 Emissions from Stationary Combustion: The Benefits of CoGeneration to Business, Universities and Municipalities .............................. 52
The Benefits of Energy Efficiency for Energy Utilities ........................................ 53
Benefits of Fuel Switching ............................................................................ 62
An Historic Shift in the Energy Sector: Small is Profitable ................................. 69
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Part 2: Reducing Process Emissions (including non-CO2 emissions) in
High GHG Emitting Sectors ....................................................... 74
Iron and Steel Production ....................................................................... 74
The Aluminum Sector ............................................................................ 78
Energy Efficiency......................................................................................... 80
Greenhouse Gases Reduction in the form of Perfluorocarbons (PFCs) ................. 80
Improvements in Greenhouse Gas Emission Reductions from Recycling ............. 81
Waste Management ............................................................................... 82
Contributions of the Manufacturing Sector to Greenhouse Gases .......................
International Examples of Best Practice in Greenhouse Gas Reductions ..............
1. Small Manufacturer - Harbec Plastics Inc., U.S. ...........................................
2. Large Manufacturer: DuPont .....................................................................
3. Large Manufacturer: Intel Corporation .......................................................
84
86
86
87
88
Semi-conductor Wafer Production (PFC emissions) .................................... 89
Cement Production ................................................................................ 93
Case Study: CEMEX - leading global producer and marketer of quality cement
and ready-mix concrete products. ............................................................... 96
Ammonia Production.............................................................................. 98
Organic Recycling: Case Study of the Multiple Benefits of Greenhouse Gas
Reduction Strategies .................................................................................. 100
True Landfill Costs ...................................................................................... 101
Packaging for Community Profit ................................................................... 102
Ensuring Carbon: Nitrogen Balance .............................................................. 103
HFC-23 Emissions from the Production of HCFC-22 and Conversion to CO2
Equivalence ........................................................................................ 105
N2O from Adipic Acid and Nitric Acid Production ...................................... 105
Electrical Transmission Equipment (SF6 emissions) ................................. 107
Part 3: Transport Sector - Mobile Combustion .............................. 110
Universities and Municipalities .............................................................. 112
Feebates: Municipalities ....................................................................... 112
Part 4 - Offsets ............................................................................. 114
Capturing Methane from Coal Mines ...................................................... 114
Forestry Offsets Project........................................................................ 115
Soil Offsets ......................................................................................... 116
Farming Offsets .................................................................................. 117
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TABLE OF FIGURES
Figure 1: STMicroelectronics commitment to Carbon Neutrality ........................... 9
Figure 1: CCX Trading Interface .................................................................... 13
Figure 2: CCX CFI Vintage 2005 - Volume & Price ........................................... 14
Figure 3: Forward Pricing Curve .................................................................... 15
Figure 4: The Million Solar Roofs Initiative, San Francisco ................................ 18
Figure 5: Global GHG emissions for DuPont (1990 – 2002) ............................... 23
Figure 6: Onsite Sequestration ..................................................................... 24
Figure 7: ZERI Pavilion in Manizales, Columbia. .............................................. 26
Figure 8: Percentage change in total return of environmental leaders vs. laggards
in the forest and paper products sector 1999-2003. .......................................... 34
Figure 9: Percentage change in total return of environmental leaders vs laggards in
the oil and gas sector 1999-2003. .................................................................. 35
Figure 10: Percentage change in total return of environmental leaders vs laggards
in the EU electric utilities sector 2000-2003 ..................................................... 35
Figure 11: Percentage change in total return of environmental leaders vs laggards
in the USA electric utilities sector 2000-2003 ................................................... 36
Figure 12: A critical mass of enabling technologies and methods to achieve end use
efficiency is creating a new wave of innovation in the energy sector. .................. 37
Figure 13: Economic insured and uninsured losses with trends. ........................ 41
Figure 14: Combined heat and power systems................................................ 51
Figure 15: Electricity Generation Comparison ................................................. 52
Figure 16: Wes Birdsall ................................................................................ 56
Figure 17 Transmission losses from electricity plants.(Source: RMI.) ................. 61
Figure 18: US Wind Resources. (Source US Department of Energy, National
Renewable Energy Laboratory). ..................................................................... 64
Figure 19: Farmers can plant crops right to the base of the turbines. (Source:
Warren Gretz, National Renewable Energy Laboratory) ..................................... 65
Figure 20: Rancho Seco, Sacramento ............................................................ 67
Figure 21: Sacramento Municipal Utility District (SMUD) installing domestic solar
water heating systems. ................................................................................. 68
Figure 22: Maximum and average sizes of new generation units (fossil-fuelled
steam utilities, 5-year rolling average) by year of entry into service. .................. 70
Figure 23: Critical mass of innovations meeting real market needs creates new
waves of innovations. ................................................................................... 71
Figure 24: A new wave of innovation in the energy sector................................ 72
Figure 25: Smelting for Iron ......................................................................... 74
Figure 26: EU steel industry energy consumption per tone of finished steel vs. EU
steel industry CO2 emissions per ton of finished steel. ...................................... 75
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Figure 27: Aluminum Ingots ......................................................................... 78
Figure 28: Carbon dioxide emissions from EU manufacturing sector and gross value
added. ........................................................................................................ 85
Figure 29: Harbec Plastics wind turbine ......................................................... 87
Figure 30: IBM Circuit Board ........................................................................ 90
Figure 31: Business as usual PFC emissions vs. actual PFC emissions due to GHG
emission reductions. ..................................................................................... 91
Figure 32: Wafer Chip, Motorola ................................................................... 92
Figure 33: Cement Industry Greenhouse Gas Emissions .................................. 93
Figure 34: Energy Consumption in U.S. cement production by fuel, 1970 to 199794
Figure 35: Carbon emissions from the U.S. cement industry by clinker production
process ....................................................................................................... 95
Figure 36: The Ammonia Manufacturing Process ............................................. 98
Figure 37: CO2 separation and capture at an ammonia plant. ........................... 99
Figure 38: Map of soil degradation globally ...................................................100
Figure 39: Vertical Composting Units ............................................................102
Figure 40: CSIRO Effluent plantation project, Wagga Wagga, Australia .............104
Figure 41: SF6 emission reduction partnership emission rate trend, 1999 – 2003
.................................................................................................................107
Figure 42: Cross-Sectional View of Cold Dielectric Design of High-Temperature
Superconducting .........................................................................................109
Figure 43: Ford Escape Hybrid .....................................................................111
Figure 44: Capturing methane from coal mines .............................................114
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TABLE OF TABLES
Table 0: IPCC has identified the 6 major GHGs ............................................... 21
Table 1: Reducing GHGs and Gaining CFI’s in Electric Power and Steam Generation
Source: Cogeneration Technologies ................................................................ 50
Table 2: Stationary Combustion: Onsite Energy Generation other than from Electric
Power and Steam Generation ......................................................................... 53
Table 3: Reduce CO2 Emissions from Stationary Combustion through End Use
Efficiency .................................................................................................... 61
Table 4: Trends in energy use, by source, 1995-2001 ...................................... 62
Table 5: Heat and gas recovery options ......................................................... 77
Table 6: Components of net emissions for various municipal solid waste
management strategies. ............................................................................... 83
Table 7: Carbon Dioxide Emissions from Manufacturing by Industry Group, 1998 84
Table 8: Electronic gas applications and climate impact ................................... 89
Table 9: Energy efficient practices and technologies in cement production .......... 97
Table 10: Abatement technologies ...............................................................106
Table 11: The greenest vehicles of 2005 .......................................................111
Table 12: Key forestry offset project types and their effect on GHGs ................115
Table 13: US EPA on Representative Carbon Sequestration Rates and Saturation
Periods for Key Agricultural & Forestry Practices ..............................................118
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Executive Summary for Business
CEOs surveyed by the World Economic Forum in Davos in 2000, stated that for
them, “The greatest challenge facing the world at the beginning of the 21st Century
– and the issue where business could most effectively adopt a leadership role - is
climate change.”1 The 2005 Forum agreed. The BBC reported, “On day one of the
forum, some 700 top business people and political leaders held a "town hall
meeting" to decide what the world's most burning issues are. Their verdict: What
worries us most are not taxes, overregulation and low-cost competition, but
poverty, equitable globalisation and climate change.2 In February of 2005 the world
agreed. Despite the fact that Australia and the United States yet still refuse to ratify
it, the Kyoto Protocol to reduce the emissions of greenhouse gasses (GHG’s) came
into force, signed by essentially all of the world’s industrial nations.1 Fortunately,
enormous opportunities exist to enable businesses to address global climate change
in ways that are profitable.2 Executives who embrace these opportunities will not
only gain an advantage in the future “carbon-constrained” world, but will strengthen
every aspect of their business.
In 2000, as part of its re-branding as “Beyond Petroleum”, British Petroleum (BP)
announced a corporate commitment to reduce its emissions of greenhouse gasses
to 10% below its 1990 levels by 2010. This was seen as an impossibly bold move
for a company entirely dependent on carbon-based fuels. In fact, BP achieved the
cuts in only two years, and in the process saved itself US$650 million. While returns
on traditional investments average 40-50%, investments in increasing energy
efficiency often return more than 300%. Indeed, Rodney Chase, a senior executive
at BP, subsequently reflected that even if the program had cost BP money, it would
have been worth doing because it made them the kind of company that the best
talent wants to work for.3
BP’s achievement is actually one of the less impressive corporate accomplishments
in the field of reducing carbon. DuPont has committed itself to reducing GHG’s by
65% over the same time frame. The company proposed to raise revenues 6 percent
per year during the ten years with no increase in energy use, and by 2010 source
10 percent of its energy and 25 percent of its feed stocks from renewable energy.
Did DuPont join Greenpeace?! The company made this announcement in the name
of increasing shareholder value. And indeed they are: Since 1990, DuPont has kept
energy use the same and increased production by 30 percent. Globally, DuPont’s
emissions of GHGs are down 67 percent. Global energy use is 9 percent below 1990
levels, and the company is on track with its renewable energy targets. It estimates
that by the time it is done it will have saved about $2 billion. In one example four
engineers at DuPont recently figured out how to spend a little (less than $100,000)
and save a lot (more than $5 million per year in energy costs).4
141 countries have ratified the Kyoto Protocol, Seven including the U.S., Australia and Indonesia signed it but
have so far refused to ratify the treaty.
2
For non-profit organizations and governments, the opportunities can be called “cost-effective”.
1
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And even this is not the cutting edge. STMicroelectronics (ST) pledged to have zero
net CO2 emissions by 2010 with a 40-fold increase in production over its 1990
levels. It set a 2010 goal of 15 percent renewable energy, 55 percent from
cogeneration and 30 percent from conventional sources. By the time ST is climate
neutral, it will have saved US$900 million. Perhaps more important, ST’s
commitment to this goal has driven the company’s innovation, taking the company
from being the number 12 chipmaker in the world to being the number 6.
Figure 1: STMicroelectronics commitment to Carbon Neutrality
(Source: STMicroelectronics Sustainable Development Report 2003)
None of these companies were required to do this. Their leaders simply felt that it
was the responsible thing to do. Companies that embark on this exciting journey
find that not only does a commitment to behave in more sustainable ways cut their
costs, but it can also increase worker productivity. A survey of a dozen energy
savings programs that installed better lighting showed increases in labor
productivity of 6 to 16 percent.5 As the business case for energy efficient strategies
has improved, so has the imperative to act. The struggle to understand the science
of complex carbon cycles has afforded business leaders and politicians the luxury of
waiting. For better or for worse, that time has passed.3 It is gone for two reasons.
The first reason, science has revealed deeper trouble and shorter timelines for
solving global warming problems than had previously been thought. In January,
2005, Dr. Rajendra Pachauri, the chairman of the Intergovernmental Panel on
Climate Change (IPCC), the international scientific body charged with establishing
the science of climate change, told an international conference in Mauritius attended
by 114 governments that global warming has already hit the danger point that
international attempts to curb it are designed to avoid. Pachauri, picked by the Bush
Administration to head the IPCC, stated that he personally believes that the world
The Kyoto Protocol was put forth by the United Nations Intergovernmental Panel on Climate Change, and entered
force on 16 Feb. 2005
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has "already reached the level of dangerous concentrations of carbon dioxide in the
atmosphere," and called for immediate and "very deep" cuts in emissions. He cited
a multi-year study by 300 scientists showing that the Arctic was warming twice as
fast as the rest of the world, and that its ice cap had shrunk by up to 20 per cent in
the past three decades. Remaining ice is 40 per cent thinner than it was in the
1970s and is expected to disappear altogether by 2070. In January 2005, as he
spoke, arctic temperatures were eight to nine degrees centigrade higher than
normal.
People have changed the carbon dioxide content of the atmosphere (one main
cause of global warming) by 20 percent in the last four decades, and today add
three times more annually than in 1960.6 The levels of carbon dioxide have leapt
abruptly over the past two years, suggesting that climate change may be
accelerating out of control. Pachauri stated that because of inertia built into the
Earth's natural systems, the world is now only experiencing the result of pollution
emitted in the 1960s, and much greater effects would occur as the increased
pollution of later decades worked its way through. Carbon released into the
atmosphere today will still be insulating the earth for decades. Pachauri concluded:
"We are risking the ability of the human race to survive."7 Recent scientific research
concludes that abrupt climate change could occur far faster than the models have
predicted.4 This would increase the urgency of corporate and societal action.
The second reason: to adopt an aggressive climate strategy is equally important for
business. As the examples above demonstrate, competent greenhouse gas
management is becoming a proxy for competent corporate governance. Leaders
already capturing the sustainability advantage often start because they realize that
acting now is actually a “no regrets” strategy: if climate change turns out to be real,
they will already be in a leadership position in dealing responsibly with it: but even
if the scientists are wrong and there is no threat to the climate, these are actions
that they want to take anyway, because doing so is profitable. In a world that
overwhelmingly recognizes climate change as a serious threat, behavior that
ignores it is coming to be seen as irresponsible. In 2003 the Columbia Journal of
Environmental Law published an article demonstrating the legal feasibility of
lawsuits holding companies accountable for climate change. The effects of such
litigation on companies' market value and shareowner value remains to be seen. 8
The first such suits have already been filed.5
In 2003, the Wall Street Journal reported that “With all the talk of potential
shareholder lawsuits against industrial emitters of greenhouse gases, the second
Tim Barrnett’s Scripps work, From November 28 to December 9, 2005 approximately 10,000 scientists,
environmentalists and politicians from 180 countries will meet in Montreal to begin a debate that will, in time,
possibly lead to even stronger commitments to reduce carbon emissions by 2050. These discussions will form the
basis for development of a Post Kyoto Framework.
5
FoE, in conjunction with Greenpeace and several western cities, filed one of the first climate change lawsuits last
year. The suit charges two U.S. government agencies with failing to comply with National Environmental Policy Act
(NEPA) requirements to assess the environmental impact of projects they financed over the past decade. The states
of Connecticut, Massachusetts, and Maine have also filed a climate change lawsuit against another U.S. government
bureau, the Environmental Protection Agency, for failing to regulate carbon dioxide emissions under the Clean Air
Act.
4
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largest re-insurance firm, Swiss Re, has announced that it is considering denying
coverage, starting with directors and officers liability policies, to companies it
decides aren’t doing enough to reduce their output of greenhouse gases.”9 In the
United States, the new Sarbanes-Oxley Act10 makes it a criminal offense for a
company board of directors to fail to disclosure environmental liabilities (including
greenhouse gas emissions) that could alter a reasonable investor’s view of the
organization. In France, The Netherlands, Germany6 and Norway, companies are
required by law to publicly report their greenhouse gas emissions.
In January 2005 an independent commission of businesspeople, politicians and
scientists released a report to the G-8 meeting, urging all G-8 countries to cut
carbon emissions, double their research spending on green technology and work
with India and China to build on the Kyoto Protocol. The report recommended that
the major countries agree to generate a quarter of their electricity from renewable
sources by 2025 and to shift agricultural subsidies from food crops to biofuels. The
report further recommended wider international use of emission trading schemes,
which are already in use in the European Union, under which unused carbon dioxide
quotas are sold. The profit motive, stated the report, is expected to drive
investment in new technology to cut emissions further.11
Fortunately, it is now easier than ever for a company to reduce its emissions of
greenhouse gases technically, socially and economically. The advent of carbon
trading mechanisms such as the Chicago Climate Exchange (CCX) and European
Climate Exchange (EUX) provides organizations emitting greenhouse gases both the
opportunity to sell reductions in emissions, together with the ability to participate in
a proven risk-management system of futures contracts and financial derivatives.7
When combined with appropriately aggressive reductions in greenhouse gas
emissions, this is the path to both short-term and long-term success. Making sense
of climate change is synonymous with making money.12
This Management Report, and its accompanying Operations Report and Training
Modules, are offered by the Chicago and European Climate Exchanges to business,
non-profit organizations and government departments to present a profitable
mechanism to prosper in the new carbon-constrained world. The materials provide
additional resources for decision-makers, including leading-edge company and
government case stories; summaries of climate change science and expected
human impacts; emissions trading and regulation systems; the economics and
public policy of climate change; and management frameworks for getting started.
In Germany, only “heavy” industry is required to report greenhouse gas emissions.
On December 12, 2003 the Chicago Climate Exchange commenced trading. Since then, major international
developments have included the opening of the EU Emissions Trading Scheme (EU-ETS) on Jan 1, 2005 and the
entering into international law of the Kyoto Protocol. Approximately 29 percent of the 500 largest companies in the
world (the FT500) are located in countries that are included in the European Union Emissions Trading Scheme. Of
those companies, approximately 32 percent have facilities covered by the EU-ETS. In the US, over 20 states have
already either passed or proposed legislation on CO2 emissions, or have developed carbon registries. Clearly the
carbon market is growing rapidly.
6
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Management Report: Operating in a Carbon
Constrained World
This Management Report demonstrates to managers of companies, communities
and such organizations as universities and religious organizations that there are
cost-effective and profitable methods to reduce emissions of greenhouse gasses
(GHGs). This report describes the opportunities to enter the market now being
created to create and trade carbon financial instruments, and how companies are
already committing to and achieving deep cuts in greenhouse emissions as a new
path to competitive advantage It discusses how in many industrial sectors,
environmental leaders are outperforming laggards, and how committing to carbon
responsible behavior is coming to be seen as a proxy for good governance. It
discusses the social political and regulatory forces that round out the business case,
describing why climate management strategy is today’s risk management strategy.
The Report has three sections:

Section one presents the opportunity to become a participant in the cutting
edge greenhouse gas trading regimes now operating in North America and
Europe. It succinctly describes the array of Climate Financial Instruments
(CFI’s).

Section two describes how various GHG reductions enable a member of a
Climate Exchange to achieve CFI’s. It presents case studies of best practices
in emissions reductions. It discusses the cost effective ways to reduce both
carbon and non-carbon emissions of greenhouse gasses. It provides case
examples of best practice in profitable ways to cut each of these emissions.

Section three sets forth the business case for climate impact management. It
documents the claims made in the Executive Summary, describing how
approaching climate management wisely will improve your bottom line. It
shows how organizations that take a systemic approach to incorporating
strategies to reduce GHG emissions throughout the organization increase
shareholder value, and better serve community stakeholders and taxpayers.
It presents evidence that companies that implement climate management
programs can achieve high rates of return, outperform others in their sector,
reduce their risks and capture multiple benefits for the organization. It
demonstrates that there is an overwhelming case for undertaking a climate
management strategy
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Section One: The New World of Carbon Trading: How Emissions
Reductions Make Sense and Make Money
Aidan Murphy, vice president at Shell International, stated in 2000: “The Kyoto
treaty has prompted us to shift some of its [Shell’s] focus away from petroleum
toward alternative fuel sources. While the move has helped the company make
early strides toward its goal of surpassing treaty requirements and reducing
emissions to 10 percent less than 1990 levels, Shell is being driven largely by the
lure of future profits… We are now involved in major energy projects involving wind
and biomass, but I can assure you this has nothing to do with altruism… We see
this as a whole new field in which to develop a thriving business for many years to
come. Capital is not the problem, it’s the lack of ideas and imagination.”13
Into this gap stepped Richard Sandor, the creator of the Chicago Climate Exchange.
The failure of the United States Senate to ratify Kyoto did not deter him. Sandor
remarked “Wait a minute, governments don’t make markets, traders do. I’m a
trader, let’s make a market.” And on December 12, 2003, the Chicago Climate
Exchange® (CCX®) opened for trading and by July 1, 2004, had traded over 1
million tons14 of Carbon Dioxide.8 CCX is a greenhouse gas emission reduction and
trading program for emission sources in the United States and offset projects in the
United States, Canada, Mexico and Brazil. It is a self-regulatory, rules-based
exchange designed and governed by CCX members.
Figure 1: CCX Trading Interface
Carbon dioxide (CO2) is a long-lived gas that is considered a 'greenhouse gas' as it retains solar energy in the
atmosphere. CO2 is released as a result of combustion of fossil fuels, industrial processes and land-use changes.
Carbon dioxide is the largest anthropogenic contributor to the enhanced global greenhouse effect.
8
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The members have made a voluntary, legally binding commitment to reduce their
emissions of greenhouse gases by four percent below the average of their 19982001 baselines by 2006, the last year of the pilot program.
Figure 2: CCX CFI Vintage 2005 - Volume & Price
(Source: Chicago Climate Exchange)
CCX seeks to build institutions and skills needed to cost-effectively manage GHG
emissions, and inform the debate on appropriate actions for managing the risk of
global climate change. The U.S. does not yet have a mandated climate market, but
over 20 states have already either passed or proposed legislation on CO2 emissions,
or have developed carbon registries.
On January 1, 2005, the E.U. Emissions Trading Scheme (EU-ETS), the official
mandated trading regime of the European Union, came into being. This was closely
followed by the creation of the European Climate Exchange® (ECX®), a whollyowned subsidiary of the CCX. The European Climate Exchange Carbon Financial
Instruments (ECX CFI) listed on the International Petroleum Exchange are
advanced, low-cost and financially guaranteed tools for trading in the EU ETS. ECX
CFI contracts include both spot contracts (for prompt delivery) and futures
contracts that allow users to lock-in prices for instruments delivered at set dates in
the future. ECX CFI products help business succeed in the new carbon-constrained
environment of the EU.
Approximately 29 percent of the 500 largest companies in the world (the FT500)
are located in countries that are included in the EU-ETS. Of those companies,
approximately 32 percent have facilities covered by the EU-ETS. Clearly the carbon
market is growing rapidly. Carbon trading makes activities to reduce GHG even
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more profitable, and futures markets allow a mechanism to manage the risk of price
fluctuations.
Figure 3: Forward Pricing Curve
(Source: European Climate Exchange)
Carbon trading is similar to the common practice of banks selling home mortgages
to other financial institutions: a financial instrument connected to an asset (in this
case, the certified saved carbon units) can be sold to the highest bidder in a
controlled and secure marketplace. The exchange requires a certification system for
the asset. It provides a user-friendly interface for making the trade (keeping
transaction costs low). Organizations that are efficient at developing credits (i.e.,
reduce emissions at least cost) can effectively sell these reductions in the form of a
financial instrument to others. In addition, the creation of carbon-credit futures
markets by both the CCX and EUX provides new risk management tools for
managing exposure to price volatility in the emissions allowances market. The
establishment of such carbon-trading systems and carbon financial instruments has
created diverse opportunities for sector leaders to become carbon-credit producers
and profit from supplying the sector’s laggards.
A member of the Exchanges can earn Carbon Financial Instruments by reducing:
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1. On-site direct emissions (ODE):

stationary combustion: through fuel switching, including renewable energy
generation;9

energy-efficiency: improvements in operational efficiency and design that reduce
purchases of electricity and hence reduce the requirement for combustion;

process emissions: reductions though industrial process changes, additional
treatment of waste gases, and design innovation resulting in new processes to
produce products with less or no emissions; and

sequestration and GHG capture activities (onsite).
2. Off-site emissions, offsets and demand management:

mobile combustion: reducing vehicle emissions through efficient use and fuel
switching (fossil fuels used in vehicles, trucks, rail, and airplanes);

offset projects: investment in activities such as forestry, soils, and methane
offset projects;10 and

demand management: electric utility customer energy-efficiency and peak load
shaving.
Most carbon-trading schemes primarily reward the reduction of direct emissions of
GHGs on-site. CCX is no exception. However, companies, municipalities, schools,
and churches can also save a great deal of money and indirect carbon emissions
through electricity efficiency measures. Organizations that do not have direct onsite
emissions still can apply to the exchange to obtain credits for the reduced use of
electricity.11 This report will show that there is so much money to be saved through
wise end-use efficiency that it is worth doing anyway, even if end-use efficiency is a
relatively minor part of generating CFI’s through the CCX.
Note that CO2 emissions associated with the combustion of renewable fuels shall be excluded from Emissions
Baselines as recognized by the Chicago Climate Exchange (CCX).
10
As recognized by the Chicago Climate Exchange (CCX), refer to Chapter 9 of the Chicago Climate Exchange
Rulebook July 2003.
11
Refer to the Chicago Climate Exchange Rulebook July 2003 for further information.
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Section Two: GHG reductions that achieve CFI’s – best practices
On-site Direct Emissions (ODE)
A growing number of companies have proved that setting GHG reduction targets
drives corporate innovation, uncovers waste (unsaleable production) throughout the
company, and confers competitive advantage. The Operations Report more fully
develops these best practices, but the examples below provide an indication of what
is possible.
Opportunities to reduce fossil fuel combustion
There are numerous ways that companies and other organizations can reduce their
onsite GHG emissions, while improving services and cutting costs. Technologies
such as co-generation, fluidized-bed combustion, integrated gas and gasification
combined cycles, and supercritical steam cycle can help power stations achieve
higher conversion efficiency.15 Combined-cycle generation units produce electricity
and capture the waste heat energy, using it to generate more electricity or for
process heat at a nearby facility. Such co-generation applications increase energy
efficiency, uses less fuel, and thus produce fewer emissions per unit of service
delivered. Natural gas fired combined cycle generation units can be up to 60 - 90
percent energy efficient, whereas coal and oil generation units are typically only 30
to 35 percent efficient.16
A strong case now exists for companies to invest in fuel switching away from carbon
intensive fuels. The steel industry has shown the way by shifting from coal to
electric-arc furnace technology, which uses only about 13 percent of the energy of
the traditional process. Throughout industry, if all of the latest technological
innovations are applied, 70 percent efficiency gains are technically possible17.
Energy utility and power companies have been switching from oil and coal to
natural gas. A strong case now exists to increase the use of renewable energy.
Costs are falling for renewable such energy sources as wind, solar, mini-hydro,
biomass, geo-thermal, and tidal. Wind power in areas of high average wind speed is
already more cost effective (often at 3¢ per kilowatt hour) than existing coal-fired
electricity.18 Around the world wind is now the fastest growing energy supply,
increasing at over 30 percent per year19, and now adding more new megawatts of
capacity than nuclear power did at its height (over 5 GW per year). The next fastest
growing form of supply is solar photovoltaics. Significant innovations are also
occurring in harnessing energy from ocean waves12 and ocean currents13. The World
Energy Council estimates that "the global market for renewable energy could be
$625 billion by 2010 and $1,900 billion by 2020. Non-hydro renewables are
Wavegen Ltd, UK are a world leader in wave energy. They have developed and operate the world’s first
commercial-scale wave-energy device that generates power for the grid.
13
Marine Current Turbines Ltd’s technology represents a novel method for generating electricity from a huge
energy resource in the sea. Although the relentless energy of marine currents has been obvious from the earliest
days of seafaring, it is only now that the development of modern offshore engineering capabilities coinciding with
the need to find large new renewable energy resources makes this a technically feasible and economically viable
possibility.
12
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expected to grow faster than any other primary energy source to 2030, by an
average of 6% per annum. Europe is being most aggressive. It aims to generate
50% of its energy needs from renewables by 2050, corresponding to some $90$135 billion."20
Renewable energy sources, long considered future technologies, can be a cost
effective supply right now, even if the up front costs appear higher than continuing
to use conventional fossil fuels. The book Small is Profitable, voted #1 book for
2002 by The Economist magazine, showed that there are dozens of benefits of such
distributed energy systems.21 For instance, CCX member Green Mountain Power
now provides the 39 percent of its energy to customers through renewable
energy.22
In 1989, the Sacramento Municipal Utility District (SMUD) California shut down its
1,000 megawatt nuclear power plant. Rather than invest in any conventional
centralized fossil fuel plant, SMUD invested $59 million locally on energy efficiency
measures to meet its citizens’ needs along with programs for renewable supply
technologies as wind, solar, biofuels, and distributed technologies like cogeneration, fuel cells, etc. A recent econometric study showed that the program
has increased the regional economic health by over $124 million achieving an
economic multiplier of 2.11, compared to just running the existing nuclear plant.
SMUD avoided spending $45 million to purchase power from other regions and
added $22 million to the area’s wage-earning households, and created about 880
direct-effect jobs, 250 of which were SMUD jobs. 23 The utility paid off all of its debt
and was able to hold rates level for a decade, retaining 2,000 job in factories that
would have been lost under the 80% increase in rates that just operating the power
plant would have caused.24 Recently the utility, under new management, has begin
construction of a gas-fired plant.25 Ed Smeloff, Sacramento’s former manager, is
now running the solar roofs program for the City of San Francisco.14
Figure 4: The Million Solar Roofs Initiative, San Francisco26
The Million Solar Roofs Initiative is a unique public-private partnership, aimed at overcoming barriers to market
entry for selected solar technologies. The goal of the Initiative is practical and market-driven: to facilitate the sale
and installation of one million "solar roofs" by 2010. (http://www.millionsolarroofs.org/index.html)
14
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In 1997, British Petroleum (BP) became one of the first major companies, and the
first oil company, to commit to significant reductions of its emissions of CO2. 27 In
2000 the company announced that it would reduce its emissions 10 percent below
1990 levels by 2010. This commitment proved to be a remarkable strategy for
unleashing creativity in the workplace. At the time BP committed to the 10 percent
reduction target the company only knew how to achieve 5 percent of the cut and
assumed it would take ten years to achieve a further 5 percent. BP created an
internal emissions trading scheme, to provide a clear incentive to the divisions of
the company to act. By sending this signal to staff, the company unleashed
innovation within the company and achieved its target of 10 percent in only two
years. BP’s staff are encouraged to come forward with great ideas of how to be
more efficient. The companies GHG reduction program is saving the company $650
million, just on energy efficiency alone, and also underpins the company’s rebranding as “Beyond Petroleum.” Senior officials now state that even if their carbon
abatement program cost them money, it would be worthwhile because it makes
them the kind of company that the best talent wants to work for. The ability of a
company to attract and retain the best talent is one of the most significant business
reasons for a corporate commitment to behaving in more sustainable ways. BP has
shifted its investments from coal and heavy oils, formerly about 80 percent of BP’s
hydrocarbon capacity was in that end of the spectrum, and about 20 percent in gas.
BP now has about 50 percent gas and 50 percent hydrocarbons,15 and it is also now
the world’s second largest manufacturer of solar cells28.
STMicroelectronics (ST), a Swiss-based US$8.7 billion semiconductor company, set
a goal of zero net GHG emissions by 2010 while increasing production 40-fold.29
The main sources of ST’s GHG emissions are ~45 percent energy use, ~35 percent
PFC and SF6 emissions and ~ 15 percent transportation. Its strategy is to reduce
on-site emissions by investing in co-generation (efficient combined heat and
electricity production16) and fuel cells (efficient electricity production). By 2010
cogeneration sources should supply 65 percent of ST’s electricity with another 5
percent coming from fuel switching to renewable energy sources. The rest of the
reductions ST is seeking are through improved energy efficiency (hence reducing
the need for energy supply) and reforestation projects (to sequester carbon17). ST’s
commitment has driven corporate innovation and improved profitability. During the
A major study performed by the Environmental Protection Agency (EPA) and the Gas Research Institute (GRI) in
1997 sought to discover whether the reduction in carbon dioxide emissions from increased natural gas use would
be offset by a possible increased level of methane emissions. The study concluded that the reduction in emissions
from increased natural gas use strongly outweighs the detrimental effects of increased methane emissions. Thus
the increased use of natural gas in the place of other, dirtier fossil fuels can serve to lessen the emission of
greenhouse gases in the United States
16
Conventional power stations that burn fossil fuels give off a lot of heat, wasting as much as 70% of the energy
they consume.
17
In theory, a carbon-emitting activity, such as a plane flight, can be “neutralized” by planting an appropriate
number of trees to absorb the CO2. By the time they’re done, they reckon they predict that they will have saved
almost $1 billion
15
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1990s its energy efficiency projects averaged a two-year payback (a nearly 71%
after-tax rate of return). 18
Non CO2 GHGs
Most of the examples above focused on reducing carbon emissions. But, as the ST
example above shows, there are other non-CO2 gas emissions that may be even
more important to reduce as well. Again, there is a strong business case for doing
this. There are five classes of greenhouse gases, other than CO2, recognized by the
Kyoto Protocol as causing global warming. Though allowances for these substances
are not regulated by the European Union Emissions Trading Scheme until 2008,
reductions of these emissions will earn CFIs from the CCX. These gases have
significantly higher global warming potential than CO2. For instance, sulfur
hexafluoride (SF6) has a global-warming potential 23,900 times higher than that of
CO2. This means that one SF6 molecule has the same effect on warming the planet
as 23,900 CO2 molecules.
STMicroelectronics Environmental Report, 2001.
(http://www.st.com/stonline/company/environm/report01/index.htm) Accessed February 2007. It further reported
that no energy efficiency project undertaken incurred more than a three year payback. The source of the
correlation of years payback to real after-tax rate of return is Hawken, Lovins, and Lovins, Natural Capitalism,
p.267.
18
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Table 0: IPCC has identified the 6 major GHGs
Symbol
CO2
CH4
N2O
HFC's
PFC's
SF6
Atmospher
ic
Lifetime
(years)*
Global
Warmin
g
Potentia
l
Percentag
e of USA
Emissions
1
79.9
Name
Common Sources
Carbon Dioxide
Fossil
fuel
combustion,
forest
clearing,
cement
production, etc.
Methane
Landfills, production
and distribution of
natural
gas
and
petroleum,
fermentation from the
digestive system of
livestock,
rice
cultivation, fossil fuel
combustion, etc.
12
21X
9.5
Nitrous Oxide
Fossil
fuel
combustion,
fertilizers,
nylon
production, manure,
etc.
150
310X
5.8
Hydrofluorocarbons
Refrigeration
gases,
aluminum
smelting,
semiconductor
manufacturing, etc.
264
Up to
11,700X
Perfluorocarbons
Aluminum production,
semiconductor
industry, etc.
10,000
Up to
9200X
Sulfur Hexafluoride
Electrical transmission
and
distribution
systems,
circuit
breakers, magnesium
production, etc.
50-200
1.8
3,200
Up to
23,900X
*Standard Industry Classification
(Sources: Energy Information Administration, Form EIA-846, “Manufacturing Energy
Consumption Survey,” and Form EIA-810, “Monthly Refinery Report” (1998);
Intergovernmental Panel on Climate Change, ‘Climate Change 2001 The Scientific
Basis’, Cambridge University Press, 2001.)
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There are a growing number of new processes that reduce emissions of non- CO2
greenhouse gases. Emissions of Nitrous Oxide (N2O) from the production of adipic
acid and nitric acid can be reduced through the use of catalytic destruction, thermal
destruction, or various N2O recycling/utilization technologies. Currently, the three
largest adipic acid producing plants in the U.S. voluntarily control N2O emissions.
Sixty three percent of production employs catalytic destruction and 34 percent uses
thermal destruction. Only 3 percent of production has no N2O abatement measures.
Currently, the nitric acid industry controls for NOx using non-selective catalytic
reduction (NSCR), a very effective way of controlling N2O emissions.
It is now recognized that under normal operating conditions, anywhere from 10 to
80 percent of the PFC gases that pass through semiconductor-wafer manufacturing
tool chambers unreacted and are released into the air.19 In April 1999, the World
Semiconductor Council (WSC) announced its intention to reduce PFC emissions by
at least 10 percent below the industry's 1995 baseline level by year-end 2010. The
semiconductor industry’s aggressive goal setting assures governments, industry
suppliers, and the public of their commitment to protect the environment.30
An example of leadership in reducing such emissions is the case of DuPont. In the
1990s DuPont set itself the goal of reducing its GHGs by 65 percent by 2010. It
achieved this goal in 2002, while reducing total global energy use in the company to
6 percent below 1990 levels. This saved DuPont over US$1.5 billion, compared to
what it would have paid had energy use increased in proportion to increases in
production.31 Setting this target encouraged the company to look for new and
creative ways to reduce GHG emissions. As Charles O. Holliday Jr., chairman, CEO
and chief safety, health and environment officer, DuPont stated:
“Our goal for the 21st century is to become a sustainable growth company – one
that creates shareholder and societal value while decreasing our environmental
footprint along the value chains in which we operate. As part of our transformation
we have worked hard on reducing our environmental impacts and have set
aggressive targets to be attained by 2010 in the areas of energy use, greenhouse
gas reductions and the use of renewable energy and feedstocks.”32
Current semiconductor manufacturing processes require the use of high Greehouse Warming Potential fluorinated
compounds including perfluorocarbons (e.g., CF4, C2F6, C3F8), trifluoromethane (CHF3), nitrogen trifluoride (NF3),
and sulfur hexafluoride (SF6), collectively termed perfluorocompounds (PFCs)
19
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Figure 5: Global GHG emissions for DuPont (1990 – 2002)
(Source: DuPont)
DuPont was able to achieve such significant, yet profitable, reductions in GHG
emissions largely by reducing and replacing the non CO2 GHG; that is, largely
through reducing the emissions of HFCs, PFCs, N2O (by 80 percent) and CH4 (Figure
3).
Numerous other companies have demonstrated such reductions as well. IBM
achieved a 10 percent reduction in onsite non-CO2 PFC emissions between 2000 and
200533, while also saving US$791 million, through a 65 percent reduction in CO2
emissions (1990-2002).34 The magnesium industry is in the process of phasing out
SF6 by 2010 through a voluntary partnership with the US EPA and the International
Magnesium Association.35 Nike is well on the way to phasing out all SF6 from its
manufacturing facilities.36
Efficient use of electricity
Many companies, throughout a range of industries, are increasing the efficiency
with which they use electricity.37 For example, there is a potential to achieve large
energy efficiency improvements in heating, ventilating and air conditioning systems
(HVAC) control systems by optimizing the operation of equipment throughout the
year. There has also been a considerable increase in the efficiency of boilers and
furnaces. By combining control systems with higher efficiency motors and variable
speed equipment, the efficiency of building ventilation systems can be improved by
over 70 per cent.38 Industry examples of energy efficiency initiatives include:
1. Department of Energy's (DOE’s) solid state lighting research may produce
dramatic changes in lighting technology that will fundamentally alter the way we
view artificial light. Lighting currently accounts for about 20 percent of U.S.
electricity consumption. The most widely used sources of artificial light are
incandescent and fluorescent lamps. Solid-state lighting is a new technology that
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has the potential to be 10 times more energy efficient than incandescent
lighting. Accordingly, this technology could revolutionize the illumination of
homes, offices, and public spaces.39
2. Use of dry-process cement production, which requires significantly less energy
than the wet process, is growing. In addition, new cements such as the
magnesium based cement offer even greater reductions by reducing furnace
temperatures in production by 40-50 percent.40
3. In aluminum production, old Soderberg-type smelters, which use 18 or 19
megawatt hours of electricity per tone of aluminum, are being replaced by more
efficient smelters that use 14 megawatt hours per tone. Further innovations
could achieve even greater electricity savings.41
4. In the pulp and paper industry there has been a shift to mechanical pulping from
chemical pulping - a process which uses about 20 percent less energy.
Onsite sequestration
An alternative to reducing the emissions of GHGs is trapping the emissions and
“sequestering” them so that they do not enter the atmosphere. It is possible to
embody carbon in trees, in soil, and perhaps underground. There are significant
R&D projects underway in many countries to investigate this process. For instance,
the FutureGen Project in the USA is an effort to advance carbon capture and storage
technology as a way to reduce GHG emissions. The project is a US$1 billion publicprivate effort to construct the world's first fossil fuel, low-pollution climate neutral
power plant. Geological carbon sequestration is being demonstrated in a six year
project at the Sleipner Field in the Norwegian North Sea (see Figure 5) where
approximately 1 million tons of CO2 has been injected into the oilfields each year
over the last 5 years.
Figure 6: Onsite Sequestration
(Source: Australian Petroleum Cooperative Research Centre42)
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An especially interesting opportunity involves “reforming” natural gas at the
wellhead, separating the hydrogen from the carbon, and re-injecting the CO2 to
increase the pressure in the fields to increase natural gas extraction, recovering
enough additional natural gas to pay for the re-injection. A large plant would strip
the hydrogen for shipment to wholesale markets via new or existing pipelines.
Professor Robert Williams, of Princeton University, points out that the gas field can
typically hold about twice as much carbon in the form of CO2 as it originally held in
the form of natural gas. The abundant resources of natural gas (at least two
centuries worth) could thus be cleanly and efficiently used in fuel-cell vehicles, and
in fuel-cell powered buildings and factories, without harming the earth’s climate.
The hydrogen provider would be paid three times: for the shipped hydrogen, for the
enhanced recovery of natural gas, and a third time, under future Kyoto Protocol
trading, for sequestering the carbon.43
Off-site emissions, offsets and demand management
Mobile combustion
Fleet management strategies offer opportunities to reduce cost and GHG emissions.
The U.S. City of Denver, Colorado has already purchased 52 hybrid automobiles
that average 45 miles per gallon during in-city driving. It also conducted a pilot
project with biodiesel fuels in 2004 that achieved an estimated 78 percent lifecycle
CO2 emission savings over petroleum-based diesel. The environmental benefits of
the Denver pilot program of 50,000 bio-diesel gallons were projected to be 80 tons
of CO2, 711 lbs of carbon monoxide, and small reductions of minor diesel
pollutants.44
In 2001, Interface Inc., the world’s largest manufacturer of commercial flooring,
developed a ‘green fleet program’ for company vehicles that rewards use of vehicles
that have lower CO2 emissions rates.45 The company is dedicated to “resourceefficient transportation to achieve carbon neutrality by eliminating or off-setting
greenhouse gas generated in moving people and products from point A to point
B.”46 In addition, Interface created the Transportation Working Group, a monitoring
program designed to share its best transportation practices with business units
around the globe.47
Offset projects20
Exchange Methane Offsets (XMOs)
The global warming impact of methane gas is 21 times that of carbon dioxide,
therefore burning methane for energy can reduce GHG emissions significantly.
The Chicago Climate Exchange currently recognizes Offset Projects in the U.S, Canada, Mexico and Brazil
however projects that meet the CCX eligibility criteria located in other regions may be registered with CCX and the
allowed use of offsets will be determined by the CCX Committee on Trading and Market Operations. (See Section 9
of the CCX Rulebook)
20
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XMO’s can be generated by systems that measurably collect and burn landfill and
agricultural methane that would otherwise be emitted into the atmosphere. The city
of Toronto, Canada, has cut its greenhouse emissions 42 percent since 1990, of
which 20 has come through harnessing the natural gas from landfills. The City of
Toronto has earned $20-30 million in cumulative revenue through this project.48
Exchange Forestry Offsets (XFOs)
A range of forestry and agriculture projects qualify as carbon-offset projects if they
increase carbon embodied in forests or soil and avoid deforestation. One exiting
industrial application is NEC’s use of kenaf to reinforce polylactic acid and produce a
superior plastic. Kenaf is an extremely fast growing plant that absorbs more CO2
than almost any other crop. The resulting bioplastic is biodegradable. Its superior
strength and heat resistance will allow its use in electronic products. NEC expects to
use the new material in 2005-2006. Kenaf can also be made into paper.49
Bamboo absorbs over 40 times as much CO2 as plantation forests while growing to
maturity three times faster than any other harvestable timber. Treated
appropriately, bamboo can last for over 500 years. The Costa Rican Government is
committed to building over 3,000 bamboo homes every year as the material is
excels at coping with and surviving earthquakes, and can produce extremely cost
effective homes. Architects and engineers are showing increasing interest in
adopting these modern applications of bamboo as used, for example, in Balinese
resorts. Bamboo is also being used in such products as flooring, wallboards and
furniture.50
Figure 7: ZERI Pavilion in Manizales, Columbia51.
(Source: Zero Emissions Research and Initiatives (ZERI))
Exchange Soil Offsets (XSOs)
Emissions from soil disturbance can be reduced by a number of approaches such as
reduced tillage, erosion control and irrigation management, changes in rotations
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and crop cover. The IPCC estimates that improved productivity and conservation
tillage can allow increases in soil carbon at an initial rate of around 0.3 tons of
Carbon per hectare per year.52 The potential of carbon sequestration on a global
scale is about 0.7-billion tons, 0.6-billion to 1-billion tons per year.53
Demand Management
A profitable way for the energy supply sector to reduce on-site GHGs is to
encourage the end-use efficiency of its clients. Some state governments have
created innovative incentives to encourage utilities to increase their customers’
efficiency. The best such regulatory reform allows the utilities to retain, as
increased profit, a percentage of any savings created for their clients and
customers. In the late 1980’s being allowed to keep 15 percent of the savings
inspired Pacific Gas and Electric (PG&E), the US's largest private utility, to meet all
of its increased needs for capacity from efficiency and independent power
production. For example, in the early 1990s PG&E announced that it would never
need to build any new conventional power plants. In 1992, PG&E invested over
$170 million to help customers save electricity more cheaply than the utility could
make it. That investment created $300–400 million worth of savings. Customers
received 85 percent of those savings as lower bills, while the utility's shareholders
received the rest—over $40 million—as extra profits: the perfect win-win option for
the energy supply sector.54 This market based mechanism is made possible by
effectively decoupling utilities' profits from the actual quantity of kilowatt hours
produced and sold, ensuring that the energy utility is no longer rewarded for selling
more energy nor penalized for selling less.55
Another successful approach is for the utility regulatory body to allow all ways to
reduce demand or supply new capacity to compete on the same footing. In such
auctions, the utility would accept fixed firm bids to make or reduce the use of
electricity for 1¢ per kilowatt-hour, then 2¢, then 3¢, etc. A utility will typically
meet all of its needs at around 3¢ through efficiency and perhaps a portion of
renewable supply. This method could allow utilities to ramp-down its fossil plants,
building “efficiency power plants” instead.56
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Section Three: Whole system design capturing multiple benefits
Most people assume that to achieve large reductions to our negative environmental
impacts will cost significantly more than smaller incremental reductions. This is not
necessarily true. It is possible to look at how a whole system works, and thereby
find ways to improve the overall efficiency that can allow for far greater savings
than if one looked only at the pieces of the system one at a time. Whole system
design approaches for buildings, cars, cities, industrial plants, motors, farming and
agriculture and lighting systems are the most cost effective ways to reduce GHGs.
Taking this approach, the OECD states that it is relatively easy to identify technical
and organizational changes that can achieve 75 percent reductions in resource use
or environmental impact.
The inventor Edwin Land once remarked "People who seem to have had a new idea
have often just stopped having an old idea." The world’s leading interiors company,
Interface Inc., experienced what Land called "a sudden cessation of stupidity" when
one of its engineers, Jan Schilham undertook to redesign a standard industrial
pumping loop for installation in a new Shanghai factory. The original, supposedly
optimized, design needed 70.8 kW for pumping. Schilham, made two simple design
changes that reduced the energy load to only 5.3 kW: a 92 percent reduction. The
redesigned system cost less to build, and worked better in all respects. It required
no new technology (though using better pumps could save even more energy and
money). The changes involved no rocket science, but merely traditional wisdom of
century-old holistic engineering.
Engineering rules of thumb would limit measures to increase energy efficiency to
the point at which the cost of the efficiency measure equals the energy savings that
they can elicit. Sounds sensible until you consider that even greater efficiency can
save not only energy but the balance of the system that delivers the energy. Often
this can be smaller or non-existent. In Schilham’s case, he increased the size of the
pipes through which the fluid was to be pumped far beyond the “cost effective
point, because this reduced friction allowed him to significantly downsize the
pumps. The savings from the lower cost of pumps paid for the fatter pipe. The
second measure he took was to lay out the pipes first, so that they could be short
and straight, then locate the equipment that the pipes connected – not the other
way around, as is conventional practice. Typically the equipment is sited, and the
pipefitters called in to connect point A to point B. The pipes go round corners,
through numerous bends, and over great distances, all increasing friction and
requiring every larger pumps, and attendant energy use.
Why does this matter? Pumping is the biggest user of electricity worldwide. Electric
motors use 3/5ths of all electricity. Each unit of friction saved in the pipe saves
about ten units of fuel, cost, pollution, and climate change at the power station.
More important, though, the thought process of whole-systems thinking, of
optimizing for multiple benefits (not just energy savings but smaller pumps and
therefore lower overall cost), applies to almost every technical system that uses
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energy and resources. Optimizing a whole pumping system, a whole building, a
whole factory or a whole economy, can typically yield resource savings of 3 to 10fold more than conventional practice, yet cost less to build. Company facilities
typically use fossil fuels directly for heating and cooling, and indirectly for
electricity. By adopting a whole-system approach to energy efficiency that involves
pumping, building design, heating/cooling, lighting, and office machines,
remarkable emissions reductions can be achieved in existing or new facilities.57
For example, at Toyota's Torrance office complex, completed in 2003, a
combination of energy-efficiency strategies such as roof color, photovoltaic solar
electricity, and ‘little things’ including an advanced building automation system, a
utilities metering system, natural-gas-fired absorption chillers for the HVAC system,
an Energy Star cool roof system, and thermally insulated, double-paned glazing
resulted in the 600,000+ square foot (s.f.) campus exceeding California's stringent
energy-efficiency requirements by 24 percent at no additional cost than a
conventional office building.58 At the US Army's Fort Detrick, an energy performance
contract will save 33,000 tons of CO2 and $2.9 million annually.59
Many participants in the voluntary US EPA performance-challenge programs (such
as 33/5060 and Green Lights61) reported that re-examining their decision-making
methods enabled them to capture multiple benefits. For example, Sony Electronics’
US and Mexican facilities voluntarily installed energy-efficient lighting where it was
cost-effective and did not interfere with the quality of light. By the end of 1994, the
organization had upgraded approximately 6.1 million square feet of floor space with
new lighting fixtures, reduced its operating expenses by more than $915,000 per
year, and lowered energy demand by almost 12 million kilowatt hours annually. In
addition, these lighting changes indirectly prevented more than 7,300 tons of air
pollution from being emitted by local utility companies.62 Sony found its
participation in the EPA's Green Lights program to be very advantageous. Lighting
retrofits often improve visual performance so significantly that they can lead to
significant increases in labor productivity and reductions in error rates. The financial
benefits from this far outweigh the value of the energy savings. For example,
Boeing implemented a lighting system retrofit in its design and manufacturing
areas. The program cut lighting energy costs by 90 percent with a less than 2-year
payback, but because workers could see better they avoided rework – the error rate
decreased 30 percent – increased on-time delivery, and enhanced customer
satisfaction..63
In another example, Lockheed commissioned a new headquarters building for its
Sunnyvale facility. The architects successfully argued that the “literium” that
provided day-lighting throughout the structure was not merely an amenity, but was
essential to the performance of the building. They were right: the lighting system
resulted in a 75 percent reduction in lighting energy usage. This contributed to
enabling the building to use half the energy of a comparable standard building. The
different design added US$2 million to the cost of the building, the reason the
“value engineers” sought to eliminate it from the design. However, it is saving
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Lockheed $500,000 per year worth of energy, or a 4-year payback. More
importantly though, because workers enjoyed the space absenteeism dropped
by15%, and productivity increased 15%. The gains from this won Lockheed a very
competitive contract, the profits from which paid-off the entire costs of the
building.64
Such energy savings programs can lead to increases in worker productivity as well
as energy savings. It appears that people simply perform better in well designed
spaces. In 1987 the NMB Bank in The Netherlands completed a new the 538,000
square foot headquarters. The bank’s management, desiring to improve the
somewhat stodgy image of the company, commissioned the creation of a “green
headquarters.” The building uses 10 percent of the energy of a similar building
constructed at the same time. The annual energy savings of $2.9 million requiring
only $700,000 additional building cost - a three month payback on energy costs
alone. Employees report being more comfortable and absenteeism is down 15
percent, dramatically increasing project return on investment. The new
headquarters achieved its goal: it dramatically improved the image of the bank
which became the number two bank in the Netherlands, renamed itself ING and
subsequently bought Barings.65
Small office buildings can achieve similar savings. A 2,800 square foot law office
remodeling in Louisiana improved employee productivity with energy systems that
save over $6,000 and 50 tons of CO2 emissions per year.66 A study by Pacific Gas
and Electric showed that in good “green design” buildings, daylighting can enable
students to achieve 20 to 26 percent higher test scores, and retail stores to have up
to 40 percent higher sales than conventional stores.67
Whole system design can also assist companies to develop new products and
achieve real product differentiation in the market. The Toyota Prius hybrid car, now
in its second generation, achieves 63 percent more miles per gallon than other cars
of its size. In the United States, the Prius has been backordered since its debut in
late 2003 and has dramatically exceeded Toyota’s sales projections.
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Section Four: The Business Case for GHG Emissions Reduction
Strategies
Companies that address GHG emissions, especially in the context of a broader
whole-system corporate sustainability strategy, will achieve multiple benefits for
shareholders beyond reducing their contribution to global climate change.
Governments that take a similar course of action will accrue similar benefits to their
citizen stakeholders.68 These include:
1. Energy and materials cost savings in:
-
industrial processes;
-
facilities design and management;
-
fleet management; and
-
government operations.
2. Enhanced core business value:
-
sector performance leadership;
-
first mover advantage;
-
improved corporate governance;
-
enhanced reputation and brand development;
-
insurance access and costs;
-
legal compliance;
-
exposure to increased carbon regulations;
-
reduced shareholder activism;
-
access to capital;
-
reduced risks of exposure to higher carbon prices; and
increased employee productivity, retention, improved communication,
creativity, and morale in the workplace.
-
Cost Reductions
Even businesses that do not, as yet, see climate change or the control of GHG
emissions as a threat can reduce their costs and increase their competitive
advantage through GHG reduction measures. Energy-efficiency initiatives that
renovate outdated processes can create simultaneous improvements in resource
productivity and economic performance. Research on energy decision making has
indicated that decisions to run or retire a facility are often based on the inaccurate
assumptions that equipment should be used until fully depreciated, instead of being
replaced when more competitive energy-efficient processes are available. This is
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simply bad economics. A policy that leads firms to re-examine the assumptions
underlying inefficient manufacturing processes will lead firms to discover
opportunities for simultaneously reducing costs and GHG emissions.69 3M is an
organization world-renowned for its innovation. What is less well known is that 3M
achieved a 50 percent reduction in worldwide GHG emissions between 1990 and
2004, and has saved $200 million since 1973 from their environmental strategies. 70
Since 1995, 65 percent of this 50 percent reduction was achieved through
implementing energy efficiency solutions and 35 percent came from improvements
in process and products.
Much can be done to reduce GHGs profitably with the equipment and technologies
now on the market and thousands of companies globally are doing so. A vast body
of experience exists, both through government-funded programs and worldwide
business practice, demonstrating the multiple cost-savings benefits and reduced
risks for businesses pursuing GHG emissions reductions.21 Leading corporations
such as Dow Europe, Mitsubishi Electric, Panasonic, Sony, Matsushita, and
aerospace company Pratt and Whitney are committing to 50-75 percent more
reductions in material and energy carbon intensity, otherwise known as “Factor 2”
and “Factor 4” reductions respectively. They see such commitments as a powerful
strategy to gain a competitive advantage.71 The Center for Energy & Climate
Solutions (Arlington, VA) points out that such leading businesses are earning the
equivalent of 40 to 50 percent returns on energy-saving investments.72
STMicroelectronics averaged a 300 percent return on investment (ROI) in efficiency
projects throughout the 1990s. An energy efficiency project at a 30-year old
DuPont ethylene plant has produced extraordinary results. In 2003, re-engineering
turned a capital investment of less than $75,000 into annual energy savings of $6.8
million per year. The following year two more projects have saved another $9.5
million per year with internal rates of return exceeding 100 percent.22 Heavy
industry is also achieving remarkable savings. For instance, in the aluminum sector,
Alcan (UK) has achieved a 65 percent reduction in GHG emissions.
Similar results are emerging in other sectors. Universities are demonstrating that
significant financial savings are possible through wise GHG reduction strategies,
which is a good thing as universities can be significant emitters. A recent Yale
University study reports that the school emits more GHGs than 32 developing
countries. Some 84 percent of Yale's emissions come from on-campus power plants.
The report Green Investment and Green Return73 showed that a large University
could, in principle, save up to $17 million annually if it implemented best practice in
GHG reduction strategies.
www.coolcompanies.org is a project of the non-profit Center for Energy & Climate Solutions. The Center was
founded in 1999 by Dr. Joe Romm – former Under Secretary for Energy Efficiency and Renewables at the US
Department of Energy – to promote clean and efficient energy technologies as a money-saving tool for reducing
greenhouse gas emissions and other pollutants. The Center helps businesses, government, and environmental
organizations develop technological, strategic, financial, and regulatory tools to foster the adoption of clean
solutions
22
Dawn Rittenhouse, DuPont Director of Sustainable Development, correspondence of 14 March, 2005. For more
information, see the DuPont Case Story of this Report.
21
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The report cites the following leading examples:
The State University of New York-Buffalo saved over $9 million with a clever
mix of wise energy-saving strategies. This allowed the university to prevent 63.4
million pounds of emissions of carbon dioxide, 140,000 pounds of sulfur dioxide,
and 214,000 pounds of nitrous oxide.
-
Cornell University worked with local public transport companies to greatly
increase patronage by students and faculty to delay the need to build another
vertical car park. "Getting students out of the car" saved them over $3 million and
also indirectly saved 417,000 gallons of gas, preventing GHG emissions of 6.7
million pounds of carbon dioxide.
-
Brevard Community College saved more than $2 million through energyefficiency strategies and has been dubbed "the energy miracle" by its local utility
company, Florida Power & Light.
-
Municipal and local governments are also reducing GHG and saving money.
Communities are achieving from 5 to 50 percent reductions in GHG emissions, for example:
Toronto, Canada, will achieve a 20 percent GHG emission reduction by 2005
over 1990 levels simply by capturing methane emissions from the city’s landfills and
using them for energy production. This has earned the city between $20 to 30
million (Canadian dollars) in cumulative revenue.74 Strategies like building retrofits
and efficient street lighting are enabling Toronto to achieve a 42 percent reduction
in carbon dioxide emissions by 2005 over 1990 levels. These strategies have saved
the city an additional $17.5 million (Canadian).75
-
Heidelberg, Germany, achieved a 30 percent reduction in energy usage
through retrofitting buildings and achieved a $1.5 million reduction on municipal
fuel bill.76
-
Woking Borough Council, England, has used a variety of programs to achieve
a 43.8 percent reduction in energy consumption over 1990 levels. They used a wide
range of onsite, offsite and offset GHG reduction strategies. Woking even introduced
a carbon-offset charge for the use of car parks. Their program for reducing CO2
emissions from council-owned vehicles and facilities has achieved an amazing
reduction of 96,588 tons of CO2.77
-
Globally, over 300 cities are achieving significant GHG savings as part of the
International Council for Local Environmental Initiatives (ICLEI) Cities for Climate
Protection program. Five hundred local governments are participating in the
campaign, representing 8 percent of global GHG emissions.78 Institutions such as
churches are also reducing their costs through energy efficiency. Co-founders of the
Episcopal Power and Light (IPL) program,79 Rev Sally Bingham, Steve MacAusland,
and others are mobilizing religious communities to promote renewable energy,
energy-efficiency and conservation. Episcopal Power and Light assists churches to
implement energy-efficiency strategies and to purchase their electrical power from
companies that generate it from renewable sources. In the Diocese of California, 50
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percent of Episcopal churches are now more energy-efficient and are buying green
energy. In 2001, Bingham and MacAusland co-founded California Interfaith Power
and Light (CIP&L),80 which helps people of faith in California to organize and
promote positive environmental change around energy and global warming. They
are now working to establish Interfaith Power and Light programs81 in every state.
Sector Performance of Companies Reducing GHGs
Companies with good corporate environmental governance and proactive stances on
GHG reductions generally out-perform the rest of their sector, according to data
across numerous sectors.82 These studies show the average share price movement
of firms with strong climate change responses (or an “above average carbon
rating”). Such companies outperform the lagging companies in that sector (those
with “below average carbon rating”). In the forest and paper products sector, the
performance difference was 43 percent over a four-year period.83 (see Figure 7.)
Figure 8: Percentage change in total return of environmental leaders vs. laggards
in the forest and paper products sector 1999-2003.
(Source: Innovest Group84)
The same is true in the oil and gas industry, where companies with a pro-active
climate/carbon management strategy (plotted in light green) outperformed their
peers (plotted in light blue) by 11.8 percent over a 3-year period.85 (See Figure 8.)
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Figure 9: Percentage change in total return of environmental leaders vs laggards in
the oil and gas sector 1999-2003.
(Source: Innovest Group86)
Sectors such as pulp and paper and oil and gas both have significant GHG
emissions, but the energy-supply sector (electric utilities) is the largest single
source of global GHGs. In this sector, in 3 of the last 4 years for which there are
figures, the percentage change in total return to environmentally leading electric
utilities was 39 percent above that of environmentally below average energy utility
performers. (See Figure 9.)
Figure 10: Percentage change in total return of environmental leaders vs laggards
in the EU electric utilities sector 2000-2003
(Source: Innovest Group87)
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Electric utilities in the U.S. exhibited the same pattern. (See Figure 10.)
Figure 11: Percentage change in total return of environmental leaders vs laggards
in the USA electric utilities sector 2000-2003
(Source: Innovest Group88)
First Mover Advantage
Investing in innovative technologies and/or new emerging markets is often
perceived as risky. That is why wise companies strategically position themselves for
market opportunities from real changes in demographics, consumer trends or
government policy that will underpin the creation of new markets. History has
shown that, for instance, the Montreal Protocol significantly helped DuPont to
improve global market share as it had already innovated new non-ozone destroying
chemicals.89
Similarly those companies that have strategically positioned
themselves to be ready for the new carbon-constrained world can expect to do well
given that the Kyoto Protocol has been ratified. The Kyoto Protocol coming into
effect on February 16, 2005, will ensure that there is a growing market for
technologies that help reduce GHG emissions.
The World Energy Council estimates that the global market for renewable energy
could be $625 billion by 2010 and $1,900 billion by 2020. Non-hydro renewables
are expected to grow faster than any other primary energy source to 2030, by an
average of 6 percent per annum. Europe is being most aggressive with its aim of
generating 50 percent of its energy needs from renewables by 2050, equating to
some $90-$135 billion.90 In 1998, the Royal Dutch Shell external relations
newsletter, Shell Venster, stated that “In 2050, a ratio of 50/50 for
fossil/renewables is a probable scenario, so we have to enter this market now!”
Shell’s “Dynamics as Usual” scenario found it plausible that renewables would
supply 20 percent of world energy by 2020, and a third by 2050. Their more
aggressive scenario, “Spirit of the Coming Age,” found a transition to a hydrogen
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Prospering in a Carbon-Constrained World
economy plausible by 2050, driven in part by a Chinese conversion to hydrogen.91
In 1995, London’s Delphi Group began advising its institutional investment clients
that alternative energy industries offer “greater growth prospects than the carbonfuel industry.”92
Leading companies, communities, universities, and churches are finding that
making a serious commitment of management attention to reducing their emissions
of GHGs is leading them into new markets, introducing them to new ways to solve
problems, and is thus driving their innovation as an organization. The growing
number of technologies and climate solutions internationally are forming a new
wave of innovation. Since the first industrial revolution, technologies have driven
innovation and created the basis of economic activity and prosperity. Building on
from the IT revolution, the group of technologies that might collectively be called
“green technologies” offer an enormous opportunity for existing and new
enterprises to increase competitive advantage, enhance shareholder value, satisfy
stakeholder concerns, improve delivery of services, and operate facilities
affordably.93
Figure 12: A critical mass of enabling technologies and methods to achieve end use
efficiency is creating a new wave of innovation in the energy sector.
(Source: Adapted from Hargroves, K and Smith M (2005)94)
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Even such traditionalist commentators as Michael Porter have forecasted that there
can be a significant first mover advantage for companies that take advantage of
such opportunities.
“Our central message is that the environment-competitiveness debate has been
framed incorrectly. The notion of inevitable struggle between ecology and the
economy grows out of a static view of environment regulation, in which technology,
products, processes, and customer needs are all fixed. In this static world, where
firms have already made their cost-minimizing choices, environmental regulation
inevitably raises costs and will tend to reduce the market share of domestic
companies on global markets. Managers must start to recognize environmental
improvement as an economic and competitive opportunity, not as an annoying cost
or an inevitable threat. Environmental progress demands that companies innovate
to raise resource productivity - precisely the new challenge of global competition. It
is time to build on the underlying economic logic that links the environment,
resource productivity, innovation, and competitiveness.”95
Good Corporate Governance
The challenges posed by climate change warrant a serious commitment of
management attention. Responses to the climate change issue have significant
short-term and long-term implications for competitive advantage, shareholder
value, satisfaction of stakeholder concerns, delivery of services, and ability to
operation facilities affordably.96 CEOs and management who do not seriously
address their GHG emissions face significant risks. Conversely, there are also
remarkable opportunities for improved profitability and image enhancement for
those that implement the best practices to reduce emissions. There are numerous
reasons why it is now vital for companies respond to the challenge of global
warming. One of the most significant is that a company’s proactive strategy to
address climate change is coming to be seen as an indicator to shareholders, the
investment community, banks, and the broader community of good governance.
Numerous companies already recognize this and have addressed this at board
level.97 Innovest Strategic Value Advisors have found that 85 percent of studies
show a positive correlation between environmental governance and financial
performance.98 “How companies perform on environmental, social, and strategic
governance issues is having a rapidly-growing impact on their competitiveness,
profitability, and share price performance,” said Dr. Matthew Kiernan, founder and
CEO of Innovest Strategic Value Advisors.99
Leading companies are beginning to build real accountability into their top-level
structures. Alcoa, for instance, formally linked environmental accountability with
performance expectations and compensation in 2000. Its Primary Metals Group has
linked compensation to reductions in perfluorocarbon (PFC) emissions and has hired
third parties to verify its emissions baseline and annual inventory of GHGs. DuPont
started a senior management level environmental leadership council in the early
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1990s. In 2002, International Paper launched a senior-level climate change task
force. Ford Motor Company has a strategy and business governance committee,
comprised of senior managers, that submits annual GHG emissions data to the
board of directors for review.
Reputation Management
In an internet-empowered world, corporations and organizations can have their
activities broadcast to an audience of millions, and risk losing their reputation
overnight. A 2004 survey of some of the world’s leading CEOs, undertaken by the
World Economic Forum at Davos, found that the responding leaders felt that
corporate reputation is now a more important measure of success than stockmarket
performance, profitability, and return on investment. Only the quality of products
and services edged out reputation as the leading measure of corporate success.
Fifty-nine percent of the respondents estimated that corporate brand or reputation
represents more than 40 percent of a company’s market capitalization.100 A
February, 2005, Los Angeles Times article reported, “Aided by the internet, activists
can swiftly spread the word about alleged corporate misdeeds and enlist help from
like-minded people in other countries. They have become more adept at
fundraising; some organizations that once ran on a shoestring [now] have large and
global staffs, replete with lawyers, researchers, and webmasters. Many have
expanded their use of financial tools - buying company shares and pressing for
shareholder resolutions, for example - honed during the fight against companies
doing business in apartheid-era South Africa in the 1970s and '80s.”101
The 2004 Carbon Disclosure Report stated that Exxon Mobil is at significant brand
risk due to its stance on climate change. Companies like Shell have learned from
controversies in the mid 1990s not to put their brand at such a risk, and were
among the first to leave the Global Climate Coalition in 1998 (the corporate
financed organization that sought to convince the public that climate change was a
myth, that action to mitigate it would be financially ruinous, and that Kyoto should
be rejected). Shell has since invested strongly in renewable energy, energy
efficiency, and in such projects as Iceland’s national hydrogen project.102 The World
Business Council for Sustainable Development warns, "There are many examples of
corporations that have seen dramatic impacts on their market valuation when being
accused of child labor, human rights abuses or environmental damage."103
Companies must face the fact that “nongovernmental organizations, as citizen
activist groups are often called, rank as the most trusted institutions in the United
States, Europe, Latin America, and much of Asia, according to the Edelman Trust
Barometer, a survey of 1,500 global opinion leaders by public relations firm
Edelman. The biggest jump was in the U.S., where the "trust ratings" of NGOs
soared to 55 percent in 2005 from 36 percent in 2001. At the same time, public
regard for corporate executives and government officials has fallen, according to the
survey, which was released at this year's World Economic Forum. Tarred by
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corporate scandals, chief executives and financial officers are viewed as credible
sources by only 3 of 10 opinion leaders in the U.S., Europe, and Japan.”104
NGO’s, investors and regulators are increasingly targeting climate mitigation as a
minimum requirement for a company to retain its franchise to operate. "Retention
of top talent is a top priority.” In early 2004, PricewaterhouseCoopers' "Trendsetter
Barometer" interviewed CEOs of 387 privately held product and service companies
identified in the media as the fastest growing US businesses over the last five
years. Asked the top factors critical for success over the next 12 months, an
overwhelming 78 percent of "Trendsetter" CEOs pointed to retention of key
workers."105
Insurance Access and Costs
Climate-change strategies are gradually becoming vital for companies that wish to
avoid difficulties in obtaining appropriate business insurance. Swiss Re has publicly
stated that they may start to review their willingness to provide CEOs with
professional indemnity insurance based on their efforts to reduce GHG emissions.
“Emissions reductions are going to be required. It’s pretty clear,” Christopher
Walker, managing director for a unit of Swiss Re recently told the Wall Street
Journal. “So companies that are not looking to develop a strategy for that are
potentially exposing themselves and their shareholders.”106
The trends of increasing natural disasters leading to increasing economic and
insurance losses (shown in Figure 8) became dramatically worse in 2004. According
to a survey by global insurance giant Munich Re, economic losses from natural
disasters – including hurricanes, floods, bushfires, quakes, and tsunamis – topped
$184 billion. Insured losses exceeded $56 billion, making it the most expensive
insurance loss year ever. Of particular concern was the level of atmospheric and
weather-related events. More than $50 billion of the insurance losses were
sustained in four hurricanes in the Caribbean and east coast of the U.S., and a
record 10 tropical cyclones that hit Japan. Higher ocean temperatures are more
suitable for hurricane formation (especially major hurricanes), while low
temperatures are associated with less active hurricane seasons.107 Therefore,
Munich Re's head of geo risks research, Professor Peter Hoppe, said that "a
correlation between global warming and the considerable rise in the number of
extreme weather events is becoming increasingly plausible".108
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Figure 13: Economic insured and uninsured losses with trends.
(Source: Munich Re Annual Review, 2002 © Munich Re Group, E&F/Geo 2002)
In 2004, Reuters reported, “The world’s second-largest re-insurer Swiss Re warns
that the costs of global warming threaten to spiral out of control, forcing the human
race into a catastrophe of its own making. In a report revealing how climate change
is rising on the corporate agenda, Swiss Re said the economic costs of global
warming threatened to double to $150 billion a year in 10 years. There is a danger
that human intervention will accelerate and intensify natural climate changes to
such a point that it will become impossible to adapt our socio-economic systems in
time, Swiss Re said in the report. The report comes as a growing number of policy
experts warn that the environment is emerging as the security threat of the 21st
century, eclipsing terrorism.”109
Legal Compliance
A proactive approach to reducing carbon emissions is vital to avoid future lawsuits,
especially in carbon-intensive industries. Eight U.S. states and New York City have
filed a lawsuit against five U.S. power companies for their contribution to global
warming. The states, invoking a long-held “public nuisance” law aimed at protecting
property owners from the actions of their neighbors, have joined together to try to
force the utility companies to reduce their CO2 emissions by at least 3 percent per
year for the next decade. “If we do not act soon, the steps we will need to take to
prevent global warming will be much greater and much harder,” says New York
attorney general Eliot Spitzer.110 Others in the legal community have demonstrated
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the feasibility of tort lawsuits holding companies accountable for climate change,
based on clear global-warming effects, from melted permafrost to statistical models
linking climate change to coastal property damage.111
Table 2: Government targets for GHG reductions.
(Source: Prepared by the Pew Center on Global Climate Change, August 2004.
Entity
Target
Notes and source
United States:
State and Regional
Maine: State-wide
1990
levels
by
2010 LD 845 (HP 622)
10% below 1990 by 2020
Climate
Massachusetts: State- 1990 levels by 2010 10% Massachusetts
Protection Plan of 2004
wide
below 1990 by 2020
Massachusetts:
Electric Utilities
10% below 1997-1999
CO2 target only. 310 CMR
7.29
New
Hampshire: 1990 levels by 2006
Electric Utilities
CO2 target only. HB 284
New
wide
Administrative Order 1998-09
Jersey:
State- 3.5% below 1990 by 2005
New York: State-wide 5% below 1990 by 2010 State Energy Plan of 2002
10% below 1990 by 2020
New
Governors
Eastern
Premiers:
Regional
wide
England 1990 levels by 2010 10% Climate Change Action Plan of
and below
1990
by
2020 2001
Canadian 75-85% below 2000 longterm
economy-
Bush Administration
18% below 2002 intensity Announced
2/14/2002
Target
Pew
Center
Analysis
levels by 2012
(Voluntary)
Proposed
Legislation
Federal
Climate Stewardship 2000 levels by 2010
Act of 2003 (McCainLieberman) SA. 2028
Climate Stewardship 2000
levels
by
Act of 2003 (McCain- 1990 levels by 2016
Lieberman) S. 139
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As
voted
on
Pew Center Analysis
8/2003
2010 As introduced 1/2003
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International:
Australia
8% above 1990 by 2008- Kyoto Target
2012
Canada
6% below 1990 by 2008- Kyoto Target
2012
European Community 8% below 1990 by 2008- Kyoto Target
2012
Japan
6% below 1990 by 2008- Kyoto Target
2012
New Zealand
1990 levels by 2008-2012
United Kingdom
20% below 1990 by 2020 CO2
target
only.
Energy
White
Paper
of
2003
60% below 1990 by 2050
European Community
Kyoto
Bubble Target for 2008-2012
Targets23
Austria
13% below 1990
Belgium
7.5% below 1990
Denmark
21% below 1990
Finland
1990 levels
France
1990 levels 75%by 2050
Germany
21% below 1990
Greece
25% above 1990
Ireland
13% above 1990
Italy
6.5% below 1990
Luxembourg
28% below 1990
Netherlands
6% below 1990
Portugal
27% above 1990
Spain
15% above 1990
Sweden
4% above 1990 60% by
2050
United Kingdom
12.5% below 1990
Kyoto Target
European Community Council
Decision of April 2002
The EU-15 nations have joined a "bubble" which allows the joint fulfillment of emissions commitments and
preserves the collective emissions reduction goal of 8% below 1990 levels by 2008/2012
23
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In a New York Times article in 2002, Christopher Walker, managing director of a
group that assesses the insurance risks of GHG at the New York offices of Swiss Re,
stated: "Our concern is, will there be a shareholder action 5 or 10 years from now?"
In particular, he said, emissions reduction is shaping up as a "clear liability issue"
for corporate managements and boards.112
Concerns Regarding Fiduciary Duty
A growing number of fund and pension plan managers are expressing concern over
the long-term economic implications of the risks of climate change. Recent events
have sensitized Wall Street to the possibility of off balance-sheet risks to the extent
that many fiduciaries now believe that prudence and legal duties compel them to
examine the issue in greater detail. On November 21, 2003, Connecticut State
Treasurer, Denise Nappier and the Coalition for Environmentally Responsible
Economies (CERES) convened the Institutional Investor Summit on Climate Risk at
the United Nations headquarters in New York City. Attendants representing the
investment, financial, and corporate communities concurred that GHGs, global
warming, and climate-change risks are material matters that warrant the attention
of those with fiduciary responsibilities. The summit resulted in the formation of the
Investor Network on Climate Risk (INCR), a coalition of ten state and city
treasurers, comptrollers, and labor pension funds that collectively manage over $1
trillion in assets.
Under Sarbanes-Oxley, the new corporate disclosure law passed in the U.S. in the
wake of the various corporate financial scandals, failure to disclose material liability
from environmental concerns could subject corporate management to criminal
penalties. Trends Report stated: “Companies will put themselves at great risk if
they do not have adequate internal systems in place to make an appropriate
determination of potential environmental costs and liabilities and the need for
disclosure of this information… This will necessarily include reviewing pending or
threatened litigation, current regulatory obligations, emerging trends, and
potentially, new environmental regulations. They will also ensure that senior
corporate managers are involved in the evaluation of all information required to
assess these costs and liabilities, and that these managers are competent to
understand the significance of this information.”113
Shareholder Activism
The Carbon Disclosure Project (CDP) is an example of the now significant
shareholder activism is putting immense pressure on corporations to act. It is a
British Government-sponsored program that requires corporate members to publicly
disclose data on their carbon emissions. The CDP sent its third information request
to the FT 500, the largest companies in the world, on February 1, 2005. This third
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information request was signed by 143 significant institutional investors who
represented assets of $20 trillion. The CDP includes such significant players as State
Street Global Advisors, Credit Suisse, UBS, and Merrill Lynch Investment Managers.
This is reflected in the record number of global warming resolutions that have been
filed by shareholders for the 2005 proxy season.114
Access to Capital
Institutional pension funds now have assets totaling $15.3 trillion. Some of the
largest pension funds, such as the California Public Retirement System (CalPERS),
have chosen to take a very strong stance on issues like GHGs. On February 14,
2005, CalPERS, a $182 billion retirement system, said its investment staff could
evaluate the fund's portfolio companies in terms of any environmental liabilities
they might pose. CalPERS approved a proposal by state treasurer Phil Angelides to
require all companies in the fund's $180 billion portfolio to join the Carbon
Disclosure Project. CalPERS also pledged to use its clout as a major shareholder to
press companies to go beyond the project's obligations by making actual cuts in
those emissions. Under the plan, utility companies, along with car makers, would
come under scrutiny because of greenhouse gas emissions.115
Programs to abate GHG emissions can also help financial institutions gain brand
equity. In December 2004, HSBC, one of the world’s largest banks announced its
commitment to be the first major bank to go “carbon neutral” in a program that
may cost up to $7 million in the first year. A report on the move stated, “HSBC's
commitment to carbon neutrality - which involves reducing energy use, buying
green electricity, and then offsetting the remaining carbon dioxide (CO2) emissions
by investing in carbon credit or allowance projects - is part of a package of
environmental measures announced by the bank to help tackle climate change.”
The package also includes a three-year, £650,000 partnership with Newcastle
University and the University of East Anglia (UEA) to research climate change,
society's awareness of the issues, and to develop technologies to overcome some of
the problems identified. Steve Howard, chief executive of The Climate Group, said:
“HSBC's decision sets a new benchmark for the financial sector. They will gain a
deeper insight into the emerging low carbon economy and be exceptionally well
placed to understand the needs of, and opportunities for, their clients.”116
Reduce Risks of Exposure to Higher Carbon Prices
Companies that do all they can to reduce their GHG emissions are reducing the risk
of higher energy and carbon allowance or credit prices in the future, and are
protecting shareholder value. Innovest’s research suggests that even a 5 percent
shift in energy prices could impact per share earnings by as much as 15 percent in
energy intensive industries.117 Two-thirds of EU utilities expect wholesale electricity
prices to rise by up to 20 percent. According to Innovest’s research, higher
Prospering in a Carbon-Constrained World
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electricity prices across the E.U. could mean additional costs of almost $720 million
per year for the European steel industry, $600 million for the pulp and paper
business, and $350 million for the cement, lime and glass industries. Energy riskmanagement and energy-efficiency initiatives are clearly now important strategic
measures.
Conclusion
Far from being a burden, recent studies in the United Kingdom and Australia show
that deep cuts in carbon emissions are achievable and affordable. Organizations in
the U.S. have also undertaken studies on how to reduce greenhouse emissions
significantly over the next 30-50 years,118 while in the U.K. the Blair Government
has released a detailed plan for how a 60 percent reduction in emissions might be
achieved. There are now over 13 major studies showing how nations could achieve
deep cuts in greenhouse emissions cost-effectively and even profitably.119
In a landmark speech, Tony Blair remarked that: “(The Scientists have) said that by
using known technologies, or those very close to market, the world could reduce
emissions by over 60 percent. This would not involve huge shifts in the economy, or
enormous changes in lifestyles. It would allow developing countries to increase
emissions, in the medium term, on a conventional development path. And it could
be achieved gradually, over a period of years by 2050. There is huge potential from
wind, wave and other renewable technologies. Improving the efficiency with which
we operate our energy processes also offers enormous savings - up to half our
energy use could be saved by the use of known efficiency techniques.”
Prime Minister Blair has indicated that Britain will champion this emerging postKyoto framework through his position as the chair of the next G8 meeting, and
Britain’s position as acting head of the E.U. Even a cautious study by the U.K.’s
Department of Trade and Industry concluded that the economic costs of reducing
emissions in the U.K. would be small, costing approximately six months of GDP
between now and 2050.120 These calculations make no effort to tabulate the
benefits of climate action. The study found that, if phased in over 50 years, the
economic impacts do not impose significant costs on the economy; rather, it can
create more energy-efficient businesses, less congested traffic in our cities, and
new export opportunities for firms and nations that lead. European nations such as
the U.K., Sweden, France, Denmark, and The Netherlands have already made
significant reduction commitments of approximately 60 percent by 2050. For
example, Sweden, having made this commitment, has called for a European-wide
target of 60 percent by 2050. France has also taken a very aggressive position
regarding its longer-term commitment, promising to reduce emissions by 75
percent by 2050. Denmark, meanwhile, has renewed its commitment to a 21
percent reductions target by 2010, with wind already generating 20 percent of its
electricity needs.
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Globally, numerous companies and communities are achieving their GHG reduction
targets ahead of schedule, and are achieving higher than expected returns on
investment. In the U.K., a range of companies, many from the heaviest industrial
sectors, have committed to 12 percent reductions by 2010. The U.K. Government
signed 10-year Climate Certification Agreements (CCA) in 2000 with 44 industry
sectors, representing more than 5,000 companies. They include the U.K.'s most
energy-intensive industries: steel, aluminum, cement, chemicals, paper, and food
and drink. Of 12,000 individual sites covered by CCAs, 88 percent met their targets
and have had their reductions renewed.
The most successful climate-change companies, from energy-intensive DuPont and
BP to consumer products companies like Nike and Interface, are using climate
mitigation strategies to conduct profitable transformations in their businesses.
With the advent of carbon dioxide trading through the Kyoto Protocol and the
European Union Emissions Trading Scheme, and the capabilities of the CCX and ECX
to mitigate risks through futures markets and derivatives, business and government
organization managers have the opportunity to explore the business case for
systematic approaches to climate change. Such strategies make sense, and make
money.
Far from being a burden, strategically addressing GHGs can be a catalyst for
dramatic improvements for business performance, facilities management, and
brand enhancement. In effect, a strategy to identify opportunities to reduce
emissions will lead to the discovery of opportunities to achieve multiple benefits
throughout the organization.
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Operations Report: Overview
A wide array of opportunities exists to enable companies, communities, colleges,
churches, and other organizations to reduce emissions of greenhouse gases (GHG)
and save energy and in ways that reduce cost and confer substantial competitive
advantage to companies that embrace them. However, few few corporate
executives, government officers or non-profit administrators are aware that such
opportunities exist; let alone how to capture them. The mainstream media and U.S.
Administration persist in repeating the erroneous assertion that reducing
greenhouse gas emissions can only be done at ruinous cost. This belief is inhibiting
the eagerness of companies to join the Chicago Climate Exchange (CCX) and the
European Climate Exchange (ECX), which is one of the easier ways to initiate a
program to capture these opportunities. This Opportunities for Greenhouse Gas
Reduction Report provides evidence to refute this limiting belief, demonstrating that
deep cuts in GHG reductions can be achieved not at a cost, but at a profit.
The Opportunities for Greenhouse Gas Reduction Report highlights the tangible
benefits of reducing GHG emissions, both internally and through the development
of offset projects, and proves that such emissions can be mitigated in ways that
strengthen an organization. The accompanying Management Report shows how
early participation in such a program like the Climate Exchanges shows how early
participation in such a program confers a real first mover advantage, and
demonstrates that companies can combine enhanced environmental performance
with competitive advantage. The report is complimented by case studies of
companies that are achieving a natural competitive advantage, and thus being
profiled in a growing range of international publications, journals and keynote
presentations.The accompanying Management Report introduced the concept that
there are several ways to reduce GHG emissions. There are, in fact, many options
available. In this Operations Report, a more complete range of reduction strategies
will be presented. Whilst there are many ways to order and structure the following
information on greenhouse gas emission reduction strategies, the structure of this
report follows the material presented in chapters 7, 8 and 9 of the CCX rulebook, to
allow easy cross-referencing. The CCX rulebook outlines how emissions can be
monitored, measured and then counted for carbon financial instruments (CFI’s)
covering numerous sectors. The methods prescribed in it follow WRI/WBCSD
protocols. Specific guides and automated workshops based on these protocols can
all be downloaded24 for many sectors. This Operations Report gives an overview of
what leaders in a range of sectors are doing to achieve marked reductions in GHG
emissions. It describes the exciting opportunities to reduce GHG emissions, and
feature some of the best practices of CCX and ECX members and other leading
companies in each sector. It answers such questions as “what is best practice?”,
and “which reports and networks already exist to assist my organization?” while
illustrating the points with success stories.
24
Chicago Climate Exchange n.d. CCX Rulebook, http://www.chicagoclimatex.com/info/rulebook.html (accessed
December 2006).
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Prospering in a Carbon-Constrained World
Part 1: CFI Opportunities from reducing CO2
Emissions from Energy Production and Use
Reducing CO2 Emissions from Electric Power and Steam
Generation
One of the biggest on site emitters of GHGs is the electric power generation sector,
producing an estimated 40% of such emissions in the U.S.25 This sector is the
single largest on site emitter of greenhouse gas emissions in the USA and in most
other countries as well. Hence we consider this sector first. Many utilities are taking
steps to address their GHG emissions driven by the market factors described in the
Management Report: government regulatory changes, operations savings and
shareholder activity pressures. And, as described in that Report, companies
undertaking such programs are outperforming their sector.
Utility GHG emission reduction strategies utilize such new technologies as co- and
tri -generation, fluidized bed boilers, and integrated gas and gasification combined
cycles. These technologies help coal fired power stations achieve higher conversion
efficiency and simultaneously reduce NOx and SOx emissions.26 Fluidized beds,
which can produce the same amount of electricity using a 1/3 less coal, while
greatly reducing NOx and SOx emissions, have been commercialized since the
1970s; hundreds are already in use in the U.S. alone.27
Recently utilities have worked with such organizations as the International Energy
Authority (IEA), which promotes greenhouse gas reducing technologies (see Table
1) through 40 international co-operation and collaboration agreements28. For
instance, the IEA29 Implementing Agreement for Cooperation in the Field of
Fluidized Bed Conversion (FBC) of Fuels Applied to Clean Energy Production
provides a framework for international collaboration on energy technology
development and deployment. Eleven countries are now active in this including
Austria, Canada, France, Finland, Italy, Japan, Korea, Portugal, Spain, Sweden, and
the United Kingdom are now active in this.
25
26
27
28
29
King, M. Sarria, P. Moss, D. and Neil, J. (2004) Actions to Address Climate Change: Case Studies of Five Industry
Sectors, Sustainable Energy Institute, Washington D.C., www.s-e-i.org (accessed November 2006) and Numark
Associates, Inc.
Coal Industry Advisory Board, International Energy Agency (IEA), and the Organisation for Economic Co-operation and
Development (OECD) (1996), Factors affecting the take up of clean coal technologies, Overview Report
http://www.iea.org/textbase/nppdf/free/1990/ciab1996.pdf (accessed December 2006).
Additional information at Cogeneration TechnologiesTM n.d. Fluidized Bed Boilers,
www.cogeneration.net/FluidizedBedBoilers.htm (accessed November 2006).
International Energy Agency (IEA) n.d. Technology Agreements web page www.iea.org/textbase/techno/index.asp
(accessed November 2006).
International Energy Agency (IEA) n.d. Fluidized Bed Conversion (FBC) of Fuels Applied to Clean Energy Production
program, www.iea.org/textbase/techno/iaresults.asp?Ia=Fluidized%20Bed%20Conversion (accessed November
2006).
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Reducing GHGs and Gaining CFI’s in Electric Power and Steam Generation
Pressurized
Fluidized
Bed Boilers
A more efficient way to burn coal is through the use of a
"pressurized fluidized bed boiler." Using this system, future boilers
will be able to generate 50% more electricity from coal than a
regular power plant from the same amount of coal. A "pressurized
fluidized bed boiler" will reduce the amount of the greenhouse gas
carbon dioxide (CO2) released from coal-burning power plants, as it
uses less fuel to produce the same amount of power. Older coal
boilers operate at temperatures around 3000 degrees F, while
Fluidized Beds burn "cooler,” which is only about 1400 degrees F.30
Waste Heat
Recovery
Industrial process heating operations use waste heat recovery
methods that intercept the waste gases before they leave the
process, extract some of the heat they contain, and recycle that
heat back to the process. Common methods of recovering heat
include:
direct
heat
recovery
to
the
process;
recuperators/regenerators; and waste heat boilers.31
Cogeneration
Co-generation is an efficient, clean, and reliable approach to
generating power and thermal energy from a single fuel source. It
is also known as combined heat and power (CHP), and total energy.
Co-generation produces thermal energy by using heat that is
otherwise discarded from conventional power generation, and
achieves typical effective electric efficiencies of 50%  70% by
recycling this waste heat. This is a vast improvement on the
average 33% efficiency of conventional fossil-fueled power plants.
Now almost 10% of our nation's electricity is produced by cogeneration, saving customers up to 40% on their energy expenses,
and providing even greater savings to our environment.
Trigeneration
A tri-generation plant can be described as a co-generation plant
that has added absorption chillers. Absorption chillers take the
"waste heat" a cogeneration plant would have "wasted," and
converts this "free energy", into chilled water.
Integrated
Gasification
Combined
Cycle
Integrated Gasification Combined Cycle (IGCC) is rapidly emerging
as one of the most promising technologies in power generation. It
utilizes low-quality solid and liquid fuels and is able to meet the
most stringent emissions requirements. IGCC systems are
extremely clean, and are much more efficient than traditional coalfired systems. They use a combined cycle format with a gas turbine
driven by the combusted syngas from the gasifier, while the
exhaust gases are heat exchanged with water/steam to generate
superheated steam to drive a steam turbine.32
Table 1: Reducing GHGs and Gaining CFI’s in Electric Power and Steam Generation
Source: Cogeneration Technologies33
U.S. Department of Energy n.d. Cleaning Up Coal: A "Bed" for Burning Coal?
http://www.fossil.energy.gov/education/energylessons/coal/coal_cct4.html (accessed February 2007).
31
Co-Generation Technologies n.d Waste Heat Recovery TM and Recycled Energy TM
http://www.cogeneration.net/RecycledEnergy.htm (accessed Feb 2007)
32
Co-Generation Technologies n.d Integrated Gasification Combined Cycle
http://www.cogeneration.net/IntegratedGasificationCombinedCycle.htm (accessed February 2007)
33
Cogeneration Technologies (http://www.cogeneration.net/) (accessed February 2007)
30
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Prospering in a Carbon-Constrained World
The benefits of combined heat and power (CHP) systems, otherwise known as cogeneration, are clear. Figure 1 shows that 189 units of fuel is required for a
separate heat and power system to produce the same amount of energy as 100
units of fuel from a CHP system.
Figure 14: Combined heat and power systems
Source: American Council for an Energy Efficient Economy, 1999 34
The U.S. Department of Energy (DOE) and the U.S. Environmental Protection
Agency (EPA) support and encourage the use of co-generation technologies through
their Combined Heat and Power Program.35 Tri-generation now offers the possibility
of even higher conversion efficiencies, potentially in excess of 80%.36
34
35
36
Elliott, R. Spurr, M. (1999) Combined Heat and Power: Capturing Wasted Energy US Department of Energy, The
American Council for an Energy Efficient Economy n.d. http://www.aceee.org/pubs/ie983.htm. (accessed, February,
2007)
U.S. Department of Energy n.d. Combined Heat and Power Program
www.eere.energy.gov/de/technologies/euii_chp_tech_basics.shtml (accessed November 2006).
Goldstein, L. Hedman, B. Knowles, D. Freedman, S. I. Woods, R. Schweizer, T (2003) n.d. Gas-Fired Distributed Energy
Resource Technology Characterizations A joint project of the Gas Research Institute (GRI) and the National Renewable
Energy Laboratory. Sponsored by the US Department of Energy
http://www.energystorm.us/Gas_fired_Distributed_Energy_Resource_Technology_Characterizations-r72552.html
(accessed February 2006).
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Figure 15: Electricity Generation Comparison
Source: The Co-generation & Tri-generation Experts,37
Reducing CO2 Emissions from Stationary Combustion: The
Benefits of Co-Generation to Business, Universities and
Municipalities
Co- and tri-generation, that makes use of waste heat, is not just of benefit to coal
fired power stations. They can be used by any industry that has medium to high
temperature processes to significantly reduce energy bills and the emissions of
greenhouse gases.38 There are now a variety of co- and tri-generation technologies
that can assist almost any business.39 For instance, when planning an extension to
Chicago’s McCormick Place Exhibition and Convention Center that would double its
size, management were faced with a potential cost of $27 million40 for the new
heating and cooling system alone. However, through an energy outsource
agreement, a tri-generation system was installed. The system not only provides the
center with heating, cooling, and electricity, but does so with a 93% overall
efficiency rating. The benefits have been substantial, not only saving the $27 million
capital cost of a conventional system, but also delivering annual savings in energy
and operating expenses of in excess of $1 million. The GHG emissions savings have
also been significant, with the tri-generation system producing approximately half
37
38
39
40
Cogeneration Technologies n.d. Cooler, Cleaner, Greener Power & Energy Solutions,
http://www.cogeneration.net (accessed November 2006).
U.S. CHP Association (1999) Combined Heat and Power: A Vision for the Future of CHP in the U.S. in 2020
www.nemw.org/uschpa (accessed November 2006).
Elliott, R. N., and Spurr, M. (1999) Combined Heat and Power: Capturing Wasted Energy, American Council for
an Energy-Efficient Economy, Washington DC. Executive summary available online, along with other reference
materials, at www.aceee.org/chp (accessed November 2006).
All dollars are U.S. dollars unless otherwise marked.
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Prospering in a Carbon-Constrained World
the CO2 of a traditional system.41 Co- and tri-generation can assist energy utilities,
businesses, universities and municipalities to reduce their greenhouse gas emissions
and thereby obtain CFI credits such as shown in Table 2.
Stationary Combustion: Onsite Energy Generation other
Cogeneration:
Combined
Heat and
Power
Integrated systems for cooling, heating and power (CHP) for
buildings incorporate multiple technologies for providing
energy services to a single building or to a campus of
buildings. Electricity to such buildings is provided by on-site
or near-site power generators using one or more of the
many
options:
internal
combustion
(IC)
engines,
combustion turbines, mini-turbines or micro-turbines, and
fuel cells. In CHP systems, waste heat from power
generation equipment is recovered for operating equipment
for cooling, heating, or controlling humidity in buildings, by
using absorption chillers, desiccant dehumidifiers, or heat
recovery equipment for producing steam or hot water.
These integrated systems are known by a variety of
acronyms: CHP, CHPB (Cooling, Heating and Power for
Buildings), CCHP (Combined Cooling Heating and Power),
BCHP (Buildings Cooling, Heating and Power), tri-generation
and IES (Integrated Energy Systems).42
Tri-generation
systems for
businesses
Coors Brewing Company has a 90% efficient tri-generation
system at its plant in Golden, Colorado, the largest single
brewing site in the world. The tri-generation system saves
250,000 tons of CO2 annually, along with 125 tons of NOx
and 900 tons of SO2.
Co-generation
from
Industrial
Processes.
Any industrial process that involves high temperatures can
reduce GHG emissions through the use of co/tri-generation.
Table 2: Stationary Combustion: Onsite Energy Generation other than from Electric
Power and Steam Generation
Source: Cogeneration Technologies43
The Benefits of Energy Efficiency for Energy Utilities
More efficient energy usage has been the biggest source of new energy growth for
several decades.44 After the 1979 oil shock, the increased efficiency of energy usage
enabled the US to reduce oil consumption by 15% within six years, whilst the
41
42
43
44
All businesses in these sectors that implement such strategies as McCormick Place did/can qualify for CFI’s under
the CCX/CFI stationary combustion criteria. Additional information at: Chicago Climate Exchange n.d. CCX
Rulebook, http://www.chicagoclimatex.com/info/rulebook.html (accessed December 2006). Chapter 7.
Brown, L. R. (2003) Wind Power Set to Become World's Leading Energy Source, Earth Policy Institute, June 25,
2003-4.
Cogeneration Technologies (http://www.cogeneration.net/) (accessed February 2007)
Lovins, L.H. King, W. (2003) ‘Energy Efficiency: Spoiler or Enabler The relationship between energy efficiency
and renewable energy’, invited paper, AAAS Annual Meeting, February 16, 2003.
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economy grew 16%. These efficiencies were achieved by more productive use of
energy: better-insulated houses; better-designed lights and electric motors; and
cars that are safer, cleaner and more powerful yet more fuel-efficient. By 2000, the
energy service provided by increased efficiency was 73% greater than total U.S. oil
consumption; five times domestic oil production; three times all oil imports; and 13
times Persian Gulf oil imports. Since 1996, saved energy has been the nation’s
fastest-growing major “source” of energy.45In nearly every case, energy efficiency
costs far less than the fuel or electricity it saves. For instance, it only costs about 2
cents per kilowatt-hour to save energy. (Once the easy savings are made up this
will be higher than 2 cents but about half the current electricity use could be saved
at this price.) Almost no form of new supply can compete with this. End use energy
efficiency can help energy utilities reduce onsite greenhouse gas emissions in two
ways. It can reduce demand allowing energy utilities to shut down older and more
expensive to run generation plants and it can help delay the need to build any new
greenhouse gas emitting electricity generation infrastructure. However in the past
“Electric utility experts have recognised for a long time that under traditional
regulatory structures (eg: traditional rate-of-return regulation, rate caps etc)
utilities do not have an economic incentive to provide programs to help their
customers be more energy-efficient. In fact, they typically have a dis-incentive
because reduced energy sales reduce utility revenues and earnings. The financial
incentives are very much tilted in favour of increased electricity sales and
expanding supply side systems.”46 A new report, Aligning Utility Interests with
Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and
Performance Incentive47 has investigated how to re-align incentives and regulations
to ensure that electric utilities and customers are both significantly rewarded for
pursuing energy efficiency opportunities.
Their report overviews in detail how over 25 states in the USA now have serious
utility ratepayer-funded energy efficiency programs in operation all with very
positive results. The report overviews how already over 25 states in the USA have
addressed this traditional disincentives, by having approved some type of cost
recovery mechanism for these energy efficiency programs for the electric utility (eg:
a public benefits charge plus the ability to recover additional energy efficiency costs
in rates). Broadly speaking these mechanisms fall into two categories:
(1) Decoupling of utility revenues and profits through legislation to reward utilities
for selling less energy. Generally in these new regulatory frameworks customers
received 85% of those savings as lower bills, while the utility's shareholders
received the rest—as extra profits, not to mention the direct savings in
infrastructure from the reduced peak load generation requirement: the perfect winwin option for the energy supply sector.
Lovins, L.H. (2004) ‘Making it last,’ YES! Magazine, with cover story, ‘Can We Live Without Oil?’, September
2004, http://www.futurenet.org/article.asp?ID=1018 (accessed November 2006).
46
Kushler, M (2006) Aligning Utility Interests with Energy Efficiency Objectives: A Recent Review of Efforts at
Decoupling and Performance Incentives. P5 Available at:
(http://aceee.org/pubs/u061.pdf?CFID=1902973&CFTOKEN=31285910)
47
ibid
45
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Prospering in a Carbon-Constrained World
(2) Providing shareholder “performance incentives” for achieving energy efficiency
program objectives. These can take several forms such as ‘providing utilities with a
specific reward for meeting certain targets, allowing utilities to earn a rate of return
on energy efficiency investments equal to supply side and other capital investments
or providing utilities with an increased rate of return either on the energy efficiency
investment specifically or overall.’
The fact that some state utilities and power companies are working with state
governments to create innovative incentives to encourage energy efficiency was
briefly mentioned in the Management Report. As stated above, such regulatory
reform also typically allows the utilities to retain, as increased profit, a percentage
of any savings created for their clients and customers. For example, retaining 15%
of the savings inspired Pacific Gas and Electric (PG&E), the U.S.'s largest private
utility, to put a halt to building or planning any new conventional power plants. For
any new power generation projects PG&E proposed instead to invest in renewables.
This market based mechanism was made possible by disconnecting the utilities'
profits from the amount of kilowatt hours produced and sold; in other words,
ensuring that the energy utility is no longer rewarded for selling more energy nor
penalized for selling less. This sensible program was mothballed when the
“deregulation” mania swept California, and set the state down the path to exporting
billions of dollars to Enron and other Texas energy companies. But in the wake of
the 2001 California Energy Crisis, it is coming back in to fashion. Today, PG&E now
runs an extensive Customer Energy Management Program that provides customers
with access to energy efficiency experts in order to address demand-side energy
efficiency and conservation. During 2002, this program prevented 206,980 tons of
CO2 emissions, 119 tons of NOx, and 73 tons of SOx from entering the atmosphere.
In those states that do not yet have explicitly regulated incentives, many utilities
are showing that there are many hidden economic benefits anyway for energy
utilities to encourage their customers to be more efficient. Leading energy utilities
have found that the reduced revenue that results from improving the efficiency of
its customers is less than the cost savings achieved by eliminating the need to
generate the additional energy.
Enbridge Gas Distribution48 (Ontario) was able to reduce GHG emissions by 25%,
compared to 1990 levels, through encouraging the energy efficiency of its clients in
the same way as PG&E. This not only helped saved its clients $700 million, but also
avoided 2.5 million tons of CO2 emissions from its plant. For these efforts Enbridge
Gas Distribution was awarded the Environmental Practice of the Year award at the
2001 Financial Times Global Energy Awards in New York. The awards recognize the
most outstanding accomplishments of the international energy industry.49
48
49
Enbridge Gas Distribution n.d. Climate Change Action Plan,
http://www.enbridge.com/csrReport2005/environmentalPerformance/climateChange.php (accessed November
2006).
Pleckaitis, A. (2004), ‘Enbridge Climate Change Action Plan’, presentation, Conference of the Reducers, Toronto,
May 10, 2004. http://www.cgc.enbridge.com/G/G05-03-01_climate-change.asp (accessed November 2006).
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Figure 16: Wes Birdsall
Source: Smart Communities Network, n.d. 50
In 1974 Wes Birdsall, manager of the Osage Municipal Utilities Department (OMU)
did the same thing in response both to rising oil prices in 1973 and growing
demands for energy. He “stepped across the meter” to help his customers get more
energy efficient. "One of the most effective things we did was to take an infrared
scanner into many local buildings," says Birdsall. "When we showed people on the
scanner how much energy they were losing, they usually were on the phone to a
contractor before we could get out the door." In doing so, the OMU’s Demand-Side
Management Program51, saved its customers in this small rural town $1.2 million
annually, which is almost US$200 a year in energy bills per household. "I don't see
any difference between a dollar brought in by a new business and a dollar that's
saved due to energy conservation," says Birdsall. Osage Municipal Utilities has been
able reduce electricity rates by 19% during the last eight years and natural gas
rates by 5% during the last five years.52 In addition the program reduced
unemployment to half that of the national average and with the lower utility bills
more factories and companies came to town, whilst reducing the emissions and
costs of the utility itself.53
50
51
52
53
Smart Communities Network, n.d. Green Buildings Success Stories,
http://www.smartcommunities.ncat.org/success/osage_muni.shtml (accessed December 2006).
Osage's ground breaking efforts as detailed on the PBS program, Race to Save the Planet, have earned it the
title, "the energy conservation capital of America."
Osage Municipal Utilities Demand-Side Management, Dennis M. Fannin, +1 (515) 732-3731. Case study by:
Smart Communities Network, n.d. Green Buildings Success Stories,
http://www.smartcommunities.ncat.org/success/osage_muni.shtml (accessed December 2006).
National Renewable Energy Laboratory (1996) The Jobs Connection: Energy Use and Local Economic
Development, produced for the U.S. Department of Energy (DOE). The document was produced by the Technical
Information Program, under the DOE Office of Energy Efficiency and Renewable Energy,
http://www.flasolar.com/pdf/energy_jobs.pdf (accessed November 2006).
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Prospering in a Carbon-Constrained World
End Use Energy Efficiency Opportunities
There are significant energy efficiency opportunities in the economy that energy
utilities can encourage and assist their customers to identify and implement. The
building sector is an area rich with opportunities for improved energy efficiency.
Buildings consume approximately 68% of the electricity produced annually in the
US, according to the U.S. Department of Energy. Even simple energy management
practices and energy-efficient equipment can reduce a buildings energy costs by at
least 20%—a net savings opportunity worth more than US$11 billion by 2010 for
the U.S.54 And more aggressive measures can nearly eliminate the fossil energy
used in buildings. For example, the SC Johnson headquarters building in Racine,
Wisconsin, was designed for energy efficiency. The gross annual energy
consumption is approximately 73,000 BTUs per square foot—about 50% less than
the average for similar buildings. This reduced energy consumption will save SC
Johnson nearly $100,000 per year, compared to average new construction in
Wisconsin. Using commercially available equipment and technologies, the efficiency
measures achieved a 50 percent reduction in energy use as compared to a
conventional office building The 23,234-square-foot structure provides offices,
laboratories, meeting, and dining rooms. The building is extensively daylit, with task
lighting if needed. It uses a raised access floor for wiring and air distribution.
Instead of conventional air-conditioning, an underfloor air space delivers cool air,
which displaces warm stale air out vents at the ceiling. This improves indoor air
quality, and indoor comfort provides more even temperatures, eliminates drafts and
uses substantially less energy than conventional mechanical systems. Despite
better performance, the building was built at market average cost for Class A
offices.55
Toyota's Torrance office complex completed in 2003, combined such energyefficiency strategies as lighter roof color, photovoltaic solar electricity, and ‘little
things’ including an advanced building automation system, a utilities metering
system, natural-gas-fired absorption chillers for the HVAC system, an Energy Star
cool roof system, and thermally insulated, double-paned glazing to achieve a
600,000+ square foot campus exceeding California's stringent energy-efficiency
requirements by 24 percent at no additional cost than a conventional office
building.56 In 1992, Pacific Gas and Electric utility teamed with energy experts from
Lawrence Berkeley to design a typical single-family home that used 75 percent less
energy to keep it comfortable year around, even in California’s Central valley. The
PG&E ACT2 House in Davis, California, is entirely passively heated and cooled,
enabling it to remain comfortable without air conditioning during a week of over
54
55
56
GreenBiz.com n.d. Greener Buildings, www.greenerbuildings.com (accessed November 2006); GreenBiz.com n,d.
Energy Use Backgrounder,
www.greenbiz.com/sites/greenerbuildings/backgrounders_detail.cfm?UseKeyword=Energy%20Use (accessed
November 2006).
Rocky Mountain Institute (2005) Why Build Green, http://www.rmi.org/images/other/GDS/D0214_WhyBuildGreen.pdf (accessed November 2006).
Flynn, L. (2003) ‘Driven to be Green’, sourced from Building Design and Construction Magazine, November
2003. http://www.bdcmag.com/magazine/articles/BDC0311kToyota.asp (accessed November 2006).
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45°C. by combining an array of energy efficiency measures, the builders could
eliminate the costs for such major mechanicals as a furnace or air-conditioner and
ductwork. This was a test house, but had it been built as a mature-market building
it would have cost $1800 less than standard tract construction for substantially
superior performance, Present-valued maintenance costs saved $1600. The design
energy savings were ~82% below California Title 24 standard.57
Similar performance can be achieved even in very large office buildings at market
average construction cost. Four Times Square, the flagship Durst/ Conde-Nast
Building in New York is a 47-story office tower designed and marketed around
energy efficiency, indoor air quality, and non-toxic, low-embodied-energy materials
selection. It uses half the energy of a conventional building of its type and much of
that is generated on site. Much of what looks like exterior window glass on the
south and west facades is really solar photovoltaics, integrated into the building’s
spandrel glass. This produces peak power on hot summer afternoons, significantly
reducing the building’s load on the local grid. In the basement are hydrogenpowered fuel cells for electricity generation. The 1.6-million-square-foot building
was part of an experiment by the builder, Eley & Associates on energy-related
performance-based compensation. The design team paid is in part from the energy
savings from having produced a more efficient building. 85 percent of the spaces in
the building were either pre-leased or pre-sold even before construction was
completed. Space is let at a premium because, with the ultra-reliable energy
generation on site, tenants can never be blacked out. In the 2004 Northeast
blackout, people came to Four Times Square from blocks around to camp out under
the building – it was about the only location in New York with light.58
Providing better lighting in buildings can save money and carbon emissions and
dramatically improve worker productivity. Sony Electronics’ US and Mexican
facilities voluntarily installed energy-efficient lighting where it was cost-effective
and did not interfere with the quality of light. By the end of 1994, the organization
had upgraded approximately 6.1 million square feet of floor space with new lighting
fixtures, reduced its operating expenses by more than $915,000 per year and
lowering energy demand by almost 12 million kilowatt hours annually. In addition,
these lighting changes indirectly prevented more than 7,300 tons of air pollution
from being emitted by local utility companies.59 Sony found its participation in the
EPA's Green Lights program60 very advantageous. Lighting retrofits often so
improve visual performance that they can lead to significant increases in labor
57
58
59
60
Wilson, A. Seal, J.L. McManigal, L.A. Lovins, L.H. Cureton, M. and Browning, W.D. (1998) Green Development:
Integrating Real Estate and Ecology, John Wiley & Sons, New York.
Rocky Mountain Institute (2005) Why Build Green, http://www.rmi.org/images/other/GDS/D0214_WhyBuildGreen.pdf (accessed November 2006).
Sony Electronics Inc. is not only committed to being the best at bringing advanced technology together with the
needs of the end-user, it is also dedicated to protecting and improving the environment in all areas of the
company's operations. Information available at: Sony n.d. Environmental Affairs,
http://news.sel.sony.com/en/corporate_information/environmental (accessed November 2006).
DeCanio, S. (1998) ‘The Efficiency Paradox: Bureaucratic and Organizational Barriers to Profitable Energy-Saving
Investments’, Energy Policy, vol 26, no 5, pp441–454; DeCanio, S. and Watkins, W. (1998) ‘Investment in
Energy Efficiency: do the Characteristics of Firms Matter?’, Review of Economics and Statistics, February, pp95–
107.
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productivity and reductions in error rates. The financial benefits from this far
outweigh the value of the energy savings. For example, Boeing implemented a
lighting system retrofit in its design and manufacturing areas. The program cut
lighting energy costs by 90 percent with a less than 2-year payback, but because
workers could see better they avoided rework – the error rate decreased 30 percent
– increased on-time delivery and enhanced customer satisfaction.61
Lockheed commissioned a new headquarters building for its Sunnyvale facility. The
architects successfully argued that the “literium” that provided daylighting
throughout the structure was not merely an amenity, but was essential to the
performance of the building. They were right: The lighting system resulted in a 75
percent reduction in lighting energy. This contributed to enabling the building to use
half the energy of a comparable standard building. The different design added $2
million to the cost of the building, the reason the “value engineers sought to
eliminate it from the design. However it is saving Lockheed $500k/year worth of
energy, or a 4-year payback. But more important, because workers enjoyed the
space more absenteeism dropped 15%, and productivity increased 15%. The gains
from this won Lockheed a very competitive contract, the profits from which paid off
the entire costs of the building.62
High performance buildings are simply a better way to do business. The national
market for high performance green building products and services in 2003 was
estimated to be $5.8 billion, up 34% from 2002. Using LEED (U.S. Green Building
Council's Leadership in Energy and Environmental Design standards) recommended
practices and materials during design and construction can save nearly $50 per
square foot over a 20 year period, even considering any minimal increase in
construction costs. That's a net savings of over $1.2 million for a 25,000 square
foot building. The savings can pay for employee salaries, increased spending in
classrooms, or deferred maintenance. Nationwide, over 1800 LEED registered
buildings and 20,000 LEED Accredited Professionals exist. Major federal agencies
including General Services Administration, Department of State, U.S. Air Force,
Army and Navy, as well as over 12 states and 40 municipalities now require LEED
standards or use LEED as an incentive. High performance green buildings have been
shown to help boost productivity through reducing running costs, absenteeism and
boosting employee productivity.63
61
62
63
Romm, J. and Browning, W. (1998) Greening the Building and the Bottom Line, Rocky Mountain Institute, Old
Snowmass, http://www.rmi.org/images/other/GDS/D94-27_GBBL.pdf (accessed December 2006).
Ibid.
Romm, J. and Browning, W. (1995) Greening the Building and the Bottom Line: Increasing Productivity Through
Energy-Efficient Design. http://www.rmi.org/images/other/GDS/D94-27_GBBL.pdf (accessed February 2007)
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Reduce CO2 Emissions from Stationary Combustion through End Use
Efficiency
Up to 90%
Whole
System
Design
Big energy and resource savings often cost less
than small savings. Sound impossible? Engineers
are showing time and again that through good
engineering resource efficiency (i.e., whole
system design), savings of up to an order of
magnitude are possible, often for less cost than
incremental improvements.64
Through a whole
system (re) design approach large energy
efficiency savings can be made to a pumping
system, a car, or a building and many other
engineered systems.65
Electric
Motors
Selecting the right motor results in large and cost Up to ~60%
effective savings.66 Whole system design and
through
management can achieve even greater savings.67
whole
The use of variable speed drive (VSD) (up to
system
50%),68 high efficiency motors (28-50%)69 and
design.
improved system management (48-55% for
pumping systems,70 and 30-57% for ventilation
systems) are expected to deliver an average
increase in electric motor system efficiency of
85% by 2050.71
Buildings
(the
Shell)
The energy efficiency of a shell of the commercial
building (excluding equipment) can be improved
by 45%, on average, through improvements in
design and construction.72
45% on
average.
Lighting
Using efficient compact fluorescent lights and
70% using
von Weizsäcker, e. Lovins, A.B. and Lovins, L.H. (1997) Factor Four: Doubling Wealth, Halving Resource Use,
Earthscan, London; Hawken, P. Lovins, A.B. and Lovins, L.H. (1999) Natural Capitalism: Creating the Next
Industrial Revolution, Earthscan, London. Chapter 6: Tunnelling Through the Cost Barrier,
http://www.natcap.org/images/other/NCchapter6.pdf (accessed December 2006).
65
Pears, A (2004) Energy Efficiency - Its Potential: Some Perspectives and Experiences. Background paper for
International
Energy
Agency
Energy
Efficiency
Workshop,
Paris
April
2004.
Available
at:
(www.naturaledgeproject.net/Documents/IEAENEFFICbackgroundpaperPearsFinal.pdf)
66
Australian Greenhouse Office (2003) The Motor System Available at:
(www.greenhouse.gov.au/motors/casestudies/cs_system.html
67
ACEEE (2002) Energy-Efficient Motor Systems: A Handbook on Technology, Program, and Policy Opportunities,
2nd Edition Available at: (http://www.aceee.org/motors/
68
Hamilton, C. Turton, H. Saddler, H. and Jinlong, M. (2002) Long Term Greenhouse Gas Scenarios: A Pilot Study
of Australian Can Achieve Deep Cuts in Emissions, Discussion Paper #48, The Australia Institute, Canberra,
2002, p47.
69
CADDET Energy Efficiency Centre (1995) Saving Energy with Electric Motor and Drive,
http://www.caddet.org/reports/index.php?PHPSESSID=ad4a61f4db189db7746c05ae9af5 (accessed December
2006).
70
Benders, R. and Biesiot, W. (1996) ‘Electricity Conservation in OECD Europe’ in Proceedings of International
Conference on Energy Technologies to Reduce CO2, 1996.
71
Hamilton, C. Turton, H. Saddler, H. and Jinlong, M. (2002) Long Term Greenhouse Gas Scenarios: A Pilot Study
of Australian Can Achieve Deep Cuts in Emissions, Discussion Paper #48, The Australia Institute, Canberra,
2002.
72
Tuluca, A. (1996) Energy Efficiency Design and Construction for Commercial Buildings, MaGraw-Hill, New York;
USA Department of Energy (2002) Annual Energy Outlook, US Department of Energy, Washington D.C.
64
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Prospering in a Carbon-Constrained World
Systems
installing movement sensors can improve the
a range of
energy efficiency of lighting.73 In addition, the measures.75
installation of high frequency ballasts instead of
core-coil ballasts and the additions of reflectors
or high efficiency fluorescent light fittings can
greatly reduce energy use.74
Table 3: Reduce CO2 Emissions from Stationary Combustion through End Use
Efficiency
Source: Hargroves & Smith, 200576
End use energy efficiency gains such as those listed in Table 3 can significantly help
reduce greenhouse gas emissions. As Amory Lovins, CEO of the Rocky Mountain
Institute wrote in Natural Capitalism:The Next Industrial Revolution, “From the
power plant to an industrial pipe, inefficiencies along the way whittle the energy
input of the fuel—set at 100 arbitrary units in this example—by more than 90%,
leaving only 9.5 units of energy delivered to the end use. Small increases in enduse efficiency can reverse these compounding losses. For instance, saving one unit
of output energy will cut the needed fuel input by 10 units, slashing cost and
pollution at the power plant.”77
Figure 17 Transmission losses from electricity plants.(Source: RMI78.)
UK Carbon Trust (2007) Energy Efficiency – By Technology – Lighting
(http://www.carbontrust.co.uk/energy/startsaving/tech_lighting_intro.htm) Accessed February 2007
74
Sathaye, J. Moyers, S. (1995) Greenhouse Gas Mitigation Assessment: A Guidebook, Kluwer Academic
Publishers, Norwell, MA.
75
R. G. Watts,. Engineering Response to Global Climate Change, (New York: Lewis Publishers, 1997).
76
Hargroves, K. Smith, M.H. (2005) The Natural Advantage of Nations, Business Opportunities, Innovation and
Governance in the 21st Century, Earthscan, London. Chapter 17: Profitable Greenhouse Solutions, Table 17.2,
p331 citing Denniss, R. Diesendorf, M. and Sadler, H. (2004) A Clean Energy Future for Australia, a report by the
Clean Energy Group of Australia.
77
Hawken, P. et al (1999) Natural Capitalism:The Next Industrial Revolution, Earthscan, London, Chapter 6: Tunnelling Through the
Cost Barrier
78
Lovins, A.B (2005) “More Profit with Less Carbon,” Scientific American, Sept. 2005 (extended bibliography at
www.rmi.org/sitepages/pid173.php#C05-05)
73
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Hence by focusing on end use efficiency it can create a cascade of savings all the
way back to the power plant. Therefore a focus on achieving end use energy
efficiency gains in such engineered systems such as motors, lighting, commercial
buildings, appliances and office equipment (See Table 3) can help reduce
greenhouse gases significantly. This underlies the importance of re-aligning
incentives and regulations to ensure that electric utilities and customers are both
significantly rewarded for pursuing energy efficiency opportunities as outlined in the
2006 report, Aligning Utility Interests with Energy Efficiency Objectives: A Review of
Recent Efforts at Decoupling and Performance Incentive79.
Benefits of Fuel Switching
Leading utilities are also investing in renewable energy. Globally, renewable energy
is by far the fastest growing energy sector. In the USA twenty-two states have
certified/accredited green power products available, and the others have an
electricity standard in place. Tradable Renewable Certificates are available
Nationwide in the USA.80 Of the different forms of renewable energy, the two fastest
growing areas of new renewable energy supply are wind and solar.
Trends in Energy Use
(by source) 1995 - 2001
Energy Source
Annual rate of
growth (%)
Wind power
+ 32.0
Solar photovoltaics
+ 21.0
Geothermal
power*
+ 4.0
Hydroelectric
power
+ 0.7
Oil
+ 1.4
Natural gas
+ 2.6
Nuclear power
+ 0.3
Coal
- 0.3
*Data available through 1999
Table 4: Trends in energy use, by source, 1995-2001
Source: Earth Policy Institute, n.d.81
Kushler, M (2006) Aligning Utility Interests with Energy Efficiency Objectives: A Recent Review of Efforts at
Decoupling and Performance Incentives. P5 Available at:
(http://aceee.org/pubs/u061.pdf?CFID=1902973&CFTOKEN=31285910) Accessed February 2007.
80
The Centre for Resource Solutions n.d. (http://www.green-e.org/about.shtml) Accessed February 2007.
81
Brown, Lester R., 2003, "Restructuring the Energy Economy" (February 2003 release from Earth Policy Institute,
http://www.edcnews.se/Reviews/Brown0302.html (accessed February 2007) The table was compiled from BP,
BP Statistical Review of World Energy 2002 (London: Group Media & Publishing, June 2002), from American
Wind Energy Association (AWEA), Global Wind Energy Market Report (Washington DC: March 2002), from
Worldwatch Institute, Vital Signs 2002 (New York: W.W. Norton & Company, 2002), from Paul Maycock, PV
News, various issues; and from Geothermal Energy Association, “World Geothermal Power Up 50%, New US
Boom Possible,” press release (Washington, DC: 11 April 2002).
79
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Wind Power
Wind power is one of the fastest growing electric supply sectors, delivering over 5
gigawatts of new energy each year. In principle, wind resources in the USA could
produce five times more electricity than the United States currently uses.82 Wind is
one of the cheapest sources of new electricity – competitive with natural gas
turbines – at prices between 3 and 4.5 cents per kilowatt-hour. The cost of
producing wind power has fallen by as much as 90 percent since 1980. Given this
rate of reduction in cost, by 2010, electricity from new wind power projects could be
cheaper than electricity from new conventional power plants, according to the US
Department of Energy.83 It is also much quicker to install than fossil-fuel plants. This
means that wind power is able to rapidly provide an income stream to investors. In
the United States, installed wind turbine capacity grew 28 percent annually from
1999 to 2003. It now provides over 6,740 megawatts of carbon-free power, and
over $5 million in lease fees for landowners. The U.S. Department of Energy's
(DOE) "Wind Powering America" initiative has a stated goal of producing five
percent of USA’s electricity from wind by 2020. This will lead to $60 billion in capital
investment to rural America, $1.2 billion in additional income for farmers and rural
landowners, and 80,000 new jobs by 2020. Renewable portfolio standards, already
in place in 11 states, were adopted by another seven states and the District of
Columbia in 2004. These will increase the adoption of renewable energy. For 2005,
four 200-plus megawatt projects have been announced in New York, Washington,
Wisconsin, and Minnesota; a 600-plus megawatt development is being planned for a
Wyoming ranch.84 Chuck Hassebrook, Executive Director of the Center for Rural
Affairs, writes,
Many areas of the Midwest and Great Plains contain significant wind capacity.
Iowa, Kansas, Nebraska, Minnesota, North Dakota, and South Dakota are
among the states with the largest potential to harness wind for electricity
generation. These states are often referred to as the “Saudi Arabia of wind
generation”. The DOE found that North Dakota has the largest “reserves” of
wind of any state – it alone has the wind capacity to provide 36 percent of
the electricity demand for the 48 contiguous states. The three “windiest”
states—North Dakota, Kansas, and Texas – could provide enough wind power
generation for most of the nation’s electricity needs.85 (See Figure 5)
Iowa Senator Chuck Grassley has lent his considerable support to wind energy,
making the state third in the nation in terms of wind energy developed by 2003.
The Iowa Department of Natural Resources estimates that the state has the
Union of Concerned Scientists (2007) Factsheet:Farming the Wind: Wind Power and Agriculture. N.d
(http://www.ucsusa.org/clean_energy/renewable_energy_basics/farming-the-wind-wind-power-andagriculture.html) Accessed February 2007.
83
Ibid.
84
American Wind Energy Association, “Wind Power Outlook 2004” and “US Wind Energy Continues Expansion of
Clean Domestic Energy Source”, 27 January 2005. See www.awea.org. And personal communication, Dan Leach,
HTH Wind Energy Inc., 4 February 2005
85
Chuck Hassebrook, “Fresh Promises: Highlighting Promising Strategies of the Rural Great Plains and beyond,”
October 2004.
82
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potential to produce nearly five times its own annual electrical needs through wind
power. Iowa already has 472 megawatts (MW) of wind energy installed, and
another 581 MW planned.86
Figure 18: US Wind Resources. (Source US Department of Energy, National
Renewable Energy Laboratory)87.
The Intertribal Council On Utility Policy (COUP) representing Indian tribes in the
Dakotas and Nebraska, is coordinating an alliance between rural and urban areas,
tribes and cities to build 3,000 MW of tribally-owned windpower on two-dozen
Indian reservations across the Great Plains by 2010. The Intertribal COUP
Environmental Justice Wind Project seeks to create good jobs, reduce greenhouse
gas emissions efficiently, and build ecologically sustainable economies based on the
clean generation and efficient use of the world's richest wind energy regime in the
heart of Native American Reservations in the Northern Great Plains.88
87
88
American
Wind
Energy
Association,
Iowa
state
summary
(updated
Nov
12,
2004),
http://www.awea.org/projects/iowa.html.
Union of Concerned Scientists (2007) Factsheet:Farming the Wind: Wind Power and Agriculture. N.d
(http://www.ucsusa.org/clean_energy/renewable_energy_basics/farming-the-wind-wind-power-andagriculture.html) Accessed February 2007.
http://www.honorearth.org/initiatives/energy/independenceday/description.html
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Wind does have its critics. One U.K. turbine neighbor said the noise was like
Chinese water torture. Some upscale U.S. neighborhoods have sued to prevent wind
farms from being erected, but most such lawsuits have been dismissed. Recent
media reports have raised the issue of surprisingly large numbers of bats being
killed by wind generators in Pennsylvania, and bird kills have been a concern. Such
issues are lessened with lower blade speeds and other mitigation technologies. Wind
advocates counter that even with 100 percent of U.S. electricity coming from wind,
turbine-caused bird kills would only be 1/250th of bird kills from other human
causes, and that wind energy displacement of coal electricity will help reduce
climate change that is endangering birds through habitat changes.89 The extensive
ecological studies associated with wind farm siting procedures rarely find significant
ecological effects.
The modern wind industry was developed in the United States, but inept national
policies allowed this industry to migrate to such countries as Denmark, which is now
getting over 20 percent of its energy from wind. An August 2004 survey in the
United Kingdom, which is rapidly developing its own wind resources,90 found that (1)
most people agree wind farms are necessary (72 percent); (2) 61 percent who have
seen wind farms disagree that they’re noisy, and (3) 70 percent would support
development of a wind farm in their area.91 The DOE’s Wind Energy for Rural
Economic Development states, “Wind energy offers rural landowners a new cash
crop. Although leasing arrangements vary widely, royalties are typically around
$2,000 per year for a 750-kilowatt wind turbine or 2-3 percent of the project’s
gross revenues. Given typical wind turbine spacing requirements, a 250-acre farm
could increase annual farm income by $14,000 per year, or more than $55 per acre.
In a good year that same plot of land might yield $90 of corn, $40 of wheat, and $5
worth of beef.”92 These wind turbines have a very small footprint and do not
interfere with ranching and farming operations.
Figure 19: Farmers can plant crops right to the base of the turbines.
(Source: Warren Gretz, National Renewable Energy Laboratory)93
American Wind Energy Association, “Wind Power Outlook 2004.” Cited is a 2002 study of the causes of bird
deaths in the US, finding that wind energy was less than 1 per 10,000.
90
British Wind Energy Association, www.bwea.com
91
Ecotricity, “Champions sign up to Embrace wind campaign as poll confirms strong support,”
http://www.ecotricity.co.uk/code/pr2004/embrace_bwea.html.
92
US DOE, Wind Energy…, p. 4.
93
Union of Concerned Scientists (2007) Factsheet:Farming the Wind: Wind Power and Agriculture. N.d
(http://www.ucsusa.org/clean_energy/renewable_energy_basics/farming-the-wind-wind-power-andagriculture.html) Accessed February 2007.
89
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According to Windustry, a Minnesota-based farmer wind energy network, “The most
common way for a farmer to participate in a wind project is through leasing land,
but there are other options. Wind lease terms vary quite a bit, but general rules of
thumb are: $2,500 to $5,000 per turbine, $3,000 to $4,000 per megawatt of
capacity, or 2-4 percent of gross revenues. Larger turbines should translate to
larger payments. Compensation packages typically are offered as fixed yearly
payments, as percentages of gross revenues, or some combination.”94
Communities are employing wind as a local source of power generation. Sacred
Heart Monastery in Richardton, North Dakota, (pop. 619) was facing rising energy
costs. They turned to wind-generated electricity, installing two 100-kilowatt
turbines at the local Benedictine Monastery. They only plan to keep the turbines in
place for 10 years and then replace them with state-of-the-art technology. The
turbines cost $120,000, but returned a savings of $41,600 in the first three years,
roughly 45 percent of the monastery’s electricity costs.95
In Moorhead, Minnesota, a city of 32,000, the local utility offered a “Capture the
Wind” program that allows customers to obtain wind-generated electricity for
approximately $5 per month. Both of the utility’s wind turbines are fully subscribed,
with over 900 customers in the program.
US Wind Farming Inc. has announced plans to establish small, distributed “Wind
Turbine Agricultural Renewable Energy Cooperatives” with farmers nationwide. The
first publicly-traded U.S. wind company, it says farmers installing its 1.5- to 2.5megawatt turbines can expect up to a $100,000-per-year annuity for 30 years.96 In
June 2004, the Ames, Iowa, city council voted to take the next step towards a
sustainable energy system by joining a partnership with the DOE to install the most
sustainable energy system within our current technological grasp – wind turbines
that will generate hydrogen during their off-peak hours.97
Solar
Solar photovoltaic and other technologies continue to improve and are the best
choice today for remote applications, or where the cost of running lines is high.
Photovoltaics are being installed as roofs or walls in commercial buildings,
supplementing grid power and providing energy security against grid failures and
dramatic price increases. Four Times Square Building in New York City uses solar
panels that look like glass in much of the building’s south façade. The building cost
no more to build than normal, but the developers are able to charge tenants
premium rates because they can never lose power.
Windustry, “What Does a Farmer Need to Know About Wind Energy”, October 2004.
Chuck Hassebrook, “Fresh Promises: Highlighting Promising Strategies of the Rural Great Plains and beyond,”
October 2004.
96
US Windfarming, Inc Press Release, June 28, 2004, http://www.uswindfarming.com.
97
SolarAccess.com, July 20, 2004, http://www.solaraccesss.com/news/story?storyid=7170&p=1
94
95
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Prices have come down significantly over the last few years and are almost
comparable to those of unsubsidized fossil fuels. New advances may bring prices
down to comparable with wind power within five years.98 Such innovations plus
government funded initiatives like the California’s one million roofs program is
driving the rapid development of this market. Sacramento, California is a case in
point. The Sacramento Municipal Utility District (SMUD) had to replace half its
capacity almost overnight, as they were forced to close their unreliable and
unpopular nuclear plant, when the public voted it out of existence. Conventional
wisdom would have dictated building a conventional plant to meet supply. Instead
SMUD invested in first in energy efficiency, spending $59 million locally on
measures to help customers use less of its product through aggressive demand side
management. In 1992, SMUD adopted a policy to obtain as much as 650 megawatts
of equivalent power capacity from its customers by the year 2000, by installing load
management and energy efficiency measures. This, they found, was the lowest cost
way to meet the customer’s needs for energy services. They then invested in a
diversity of small-scale, distributed supply, most of it renewable – wind, solar, cogeneration fuel cells, everything they could lay their hands on - to learn from the
process. Having no experience in using renewable energy, rather than pick any one,
the utility experimented with as many different technologies as it could. SMUD
found that it was more cost effective to install photovoltaics in an alleyway when it
needed additional alley lights, than to hook in to the existing (its own) grid. This
was because the additional demand from those alley lights would require them to
expand part of the grid component (e.g., a sub-station or wiring). They undertook
the economic analysis, asking whether it was cheaper to invest in small distributed
generation or conventional supply. In every instance distributed generation was the
superior economic choice.
Figure 20: Rancho Seco, Sacramento
Source: U.S. Department of Energy, n.d.99
98
99
Personal communication with the investor in one such company in California
U.S. Department of Energy, Energy Efficiency & Renewable Energy Department (n.d.) Solar Energy Technologies
Home Page, http://www1.eere.energy.gov/solar/ (accessed December 2006).
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The results after more than ten years:100
Regional income increased $124 million, achieving an economic multiplier of
2.11.
-
-
The program created 880 direct-effect jobs, 250 of which were SMUD jobs
-
Avoided spending $45 million to purchase power from other regions
-
Added $22 million to the area’s wage-earning households.
In addition, had the plant just kept running, the rates would have increased by
80%, which would have forced a number of factories to relocate. SMUD was able to
keep rates flat for a decade. In the California price spike of 2000 - 2001,
Sacramento’s rates stayed flat. This kept over 2000 jobs in place. The program
eliminated the utility’s debt. The innovative program turned out to be a much better
business for the utility to be in than just building what most utility executives are
more comfortable with: conventional coal or gas power plants.101
Figure 21: Sacramento Municipal Utility District (SMUD) installing domestic solar
water heating systems.
Source: National Renewable Energy Laboratory, 1996102
A commitment to efficiency and renewables is a much more labor intensive, much
less capital-intensive way to deliver energy services than any kind of conventional
option. Advocates of building power plants often justify them for the jobs they,
National Renewable Energy Laboratory (1996) The Jobs Connection: Energy Use and Local Economic
Development, produced for the U.S. Department of Energy (DOE). The document was produced by the Technical
Information Program, under the DOE Office of Energy Efficiency and Renewable Energy.
http://www.flasolar.com/pdf/energy_jobs.pdf (accessed November 2006).
101
Personal communication from Ed Smeloff, General Manager SMUD, Oct, 2000.
102
National Renewable Energy Laboratory (1996) The Jobs Connection: Energy Use and Local Economic
Development, produced for the U.S. Department of Energy (DOE). The document was produced by the Technical
Information Program, under the DOE Office of Energy Efficiency and Renewable Energy,
http://www.flasolar.com/pdf/energy_jobs.pdf (accessed November 2006).
100
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almost any alternative will provide more. Large centralized power plants are far
more capital intensive than almost any other investment in the economy.103
An Historic Shift in the Energy Sector: Small is Profitable
The case stories above exemplify a broader and historic shift in the energy sector.
This is the subject of the recently published, Small is Profitable: the Hidden
Economic Benefits of Making Electrical Resources the Right Size.121 Voted one of the
3 ‘books of the year’ for 2002 by The Economist magazine.122 Small is Profitable
represents the first time that the engineering economics of distributed generation
has been collected in one place. It describes how it is now more cost effective to
make meet electric demand through energy efficiency and small scale generation
like co-generation and renewable production than large, fossil plants. Many utility
engineers believe that economies of scale describes make large thermal plants the
best buy, but Small is Profitable shows that properly counting the economic benefits
of “distributed” (decentralized) and renewable electricity sources raises their value
to a utility system by approximately tenfold. Such sources improve system
planning, utility construction and operation (especially of the grid), and service
quality.
They also avoid societal costs like worsening climate change. In Small is Profitable,
Amory Lovins et al., describe the historic shift this way, “as one industry team
stated in 1992, ‘From the beginning of [the twentieth] century until the early 1970s
demand grew, plants grew, and the vertically integrated utility’s costs declined.
Looking back on the 1990s, it is now obvious that a reversal [in this trend] has
actually occurred. In 1976, the concept of largely ‘distributed’ or decentralized
electricity production was heretical, in the 1990s, it became important, by 2000, it
was the subject of cover stories in such leading publications as the Wall Street
Journal, the Economist, and the New York Times, and by 2002, it was emerging as
the winner in the marketplace.” The book catalogues the economic benefits of the
smaller scale distributed technologies, both the conventional plants described in the
graph above, and the emerging renewable energy options. These changes in the
energy industry sector is exactly the sort of “inflection point” described by Andrew
Grove of Intel in his book, Only the Paranoid Survive: How to Exploit the Crisis
Points That Challenge Every Company and Career.104 Just as the critical mass of
enabling technologies in information technologies led to a remarkable shift in how
we communicate over the last 30 years, so the combination of energy efficiency and
renewable energy, described in the Sacramento, example, above, marks a wave of
innovation in how societies meet their energy needs that will play out over the next
30 years.
103
104
Input output regressions by Professor Bruce Hannon, University of Illinois Urbana-Champaigne
Grove, A. (1996) Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every
Company and Career, Currency, New York.
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Figure 22: Maximum and average sizes of new generation units (fossil-fuelled
steam utilities, 5-year rolling average) by year of entry into service.
Source: Lovins et al, 2002105
Small is Profitable shows that there is now a critical mass of enabling innovations
making integrated approaches to sustainable development in the energy sector
economically viable. It also shows that advances in energy efficiency, demand
management, renewable energy, co-generation, fuel cells, and new fuels like
hydrogen are not simply a list of interesting options but are “a web of innovations
that all reinforce each other.” It states, ‘these developments form not simply a list
of separate items, rather their effect is thus both individually important and
collectively profound.’
105
Lovins, A., Datta, K., Feiler, T., Rábago, K., Swisher, J., Lehmann, A. and Wicker, K. (2002) Small Is
Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size, Rocky Mountain
Institute, Old Snowmass, Context: The Pattern that Connects, p24.
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Figure 23: Critical mass of innovations meeting real market needs creates new
waves of innovations.
Source: Adapted from Hargroves and Smith, 2005106
Small is Profitable describes a range of components that provide a clear business
case in which the size of “electrical sources” (devices that make, save, or store
electricity) affects their economic value. It finds that properly considering the
economic benefits of “distributed” (decentralized) electricity sources typically raises
their value by a large factor, often approximately tenfold, by improving system
planning, utility construction and operation (especially of the grid), service quality,
and by avoiding societal costs.
106
Hargroves, K. and Smith, M.H. (2005) The Natural Advantage of Nations: Business Opportunities,
Innovation and Governance in the 21st Century, Earthscan, London. Chapter 1: The Need for a New Paradigm,
Figure 1.2, p19. The publication’s online companion is available at www.naturaladvantage.info.
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Figure 24: A new wave of innovation in the energy sector.
Source: Adapted from Hargroves and Smith, 2005107
What Lovins et al. are arguing, is that we stand on the cusp of a wave of innovation
in the energy sector. Small is Profitable is only one piece of a growing body reports
making such arguments. Other reports include the 1999 the Union of Concerned
Scientists report Powerful Solutions: Seven Ways to Switch America to Renewable
Electricity108 and their follow-on report, Clean Energy Blueprint, A Smarter National
Energy Policy for Today and the Future109. They show that advances in energy
efficiency, demand management, renewable energy, co-generation, fuel cells, and
new fuels like hydrogen are not simply a list of interesting options but together
represent the path to decarbonizes the energy sector. Increasingly, these economic
benefits are being understood. It is possible for anyone to purchase or supply
renewable energy. Almost any industry can become at least 40% more energy
efficient. Even if you don’t care about greenhouse gases and carbon credits, and
care only about economic growth, the case studies mentioned above show that it
makes sense for energy utilities to invest in energy efficiency and renewables. More
Hargroves, K. and Smith, M.H. (2005) The Natural Advantage of Nations: Business Opportunities,
Innovation and Governance in the 21st Century, Earthscan, London. Chapter 1: The Need for a New Paradigm,
Figure 1.2, p19. The publication’s online companion is available at www.naturaladvantage.info.
108
Nogge, A et al (1999) Powerful Solutions: Seven Ways to Switch America to Renewable Electricity. Union of
Concerned Scientists. (http://www.ucsusa.org/clean_energy/clean_energy_policies/offmen-powerful-solutionscontents.html)
109
Clemmer, S et al (2001) Clean Energy Blueprint, A Smarter National Energy Policy for Today and the Future.
American Council for an Energy Efficient Economy.
107
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and more energy utilities, businesses, and municipalities are investing in energy
efficiency and either building renewable energy sources or purchasing energy from
them. CCX member Interface, an international carpet manufacturer, is building its
own wind farm. Another CCX member, Dupont, has committed to purchasing 10%
of all its energy from renewables by 2010. In many countries it is now possible for
business, universities, and virtually any organization to purchase “green power”
through government accredited systems.
As stated in the Management Report, Episcopal Power and Light are encouraging
churches to implement energy efficiency strategies and to purchase their electrical
power from renewable sources. The Rev. Jim Ball of the Evangelical Environmental
Network, who in 2002 began a "What Would Jesus Drive?" campaign and drove a
hybrid vehicle across the country, said the strongest moral argument he made to
fellow evangelicals was that climate change would have disproportionate effects on
the poorest regions in the world.110
Finally, internationally, regionally and locally there are now a raft of programs,
renewable energy targets, and regulations such as the Kyoto Protocol that will
further drive this wave of innovation.111 The ratification of the Kyoto Protocol, and
rising global demand for greenhouse gas reductions is not just driving a wave of
innovation in the energy sector, it is also driving innovations in how societies meet
their needs in a broader sense. Most industry sectors are now consciously working
to become more efficient and reduce greenhouse gas emissions.
Goodstein, L. (2005) ‘Evangelical Leaders Swing Influence Behind Effort to Combat Global Warming’, New
York Times, March 10, 2005.
111
A sample of some of the emerging European links and databases (in English) that provide significant
resources for CCX and ECX members are: A Global Overview of Renewable Energy Resources (AGORES) n.d.
Renewable Energy Information, www.agores.org/WHOS_WHO/DIRECTORIES/default.htm (accessed November
2006); GreenTIE, n.d. GREENTIE, www.greentie.org (accessed December 2006); and CADDET, n.d. CADDET,
www.caddet.org/search/results.php (accessed November 2006).
110
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Part 2: Reducing Process Emissions (including nonCO2 emissions) in High GHG Emitting Sectors
The order of the industry sectors covered next here in Part 2 follows the order that
these industry sectors are listed in chapters 7 and 8 of the CCX rulebook, to allow
easy cross-referencing. The CCX rulebook outlines how emissions can be monitored,
measured and then counted for carbon financial instruments (CFI’s) covering
numerous sectors. The methods prescribed in it follow WRI/WBCSD protocols.
Specific guides and automated workshops based on these protocols can all be
downloaded112 for many industry sectors covered in the CCX rulebook. Part 2 of the
Operations Report seeks to compliment this by providing an overview of what
leaders in these industry sectors are doing to achieve marked reductions in onsite
GHG emissions through which CCX members can gain CFI credits.
Iron and Steel Production
Figure 25: Smelting for Iron
Source: Myanmar, n.d.113
Steel is produced in the majority of the world's nations, though over 96% of world
steel production in 2000 was centered in 36 countries. The value of steel produced
annually is in excess of US$200 billion. As with the aluminum sector, the peak
international body for the steel sector has also issued a number of significant
reports and commitments recently, including the first ever global Steel
Sustainability Report.114 These reports show that the steel industry has taken
Chicago Climate Exchange n.d. CCX Rulebook, http://www.chicagoclimatex.com/info/rulebook.html
(accessed December 2006).
113
Myanmar, n.d. Mining Enterprises, http://mission.itu.ch/MISSIONS/Myanmar/ecom/MINES/MINES/myanmar.com/Ministry/Mines/mines/No%20(3)%20Mining%20Enterprise.htm (accessed
November 2006).
114
International Iron and Steel and Institute (2004) Sustainability Report 2004: The Measure of Our Sustainability,
Report of the World Steel Industry, www.worldsteel.org/sustainability.php?page=report (accessed November
2006)
112
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encouraging strides over the past decades to reduce its energy consumption and
greenhouse gas emissions. In the recent International Iron and Steel Institute
(IISI) study ‘Energy Use in the Steel Industry’, case histories of four steel product
facilities indicated reductions in energy consumption have been in the order of 25%
since the mid-1970s. In fact, since the end of World War II, the industry has
reduced its energy intensity (energy use per shipped ton) by 60%. Between 1990
and 1998 alone, intensity has dropped from 20 to 18 million Btu (MBtu) per ton.
Figure 26: EU steel industry energy consumption per tone of finished steel vs. EU
steel industry CO2 emissions per ton of finished steel.
Source: European Confederation of Iron and Steel Industries, 2000115
The savings resulted from several key technological innovations which are
projected to reduce emissions to 15 MBtu/ton by 2010. Already there is a significant
list of emerging opportunities that will allow the steel industry to achieve even
further greenhouse gas emission reductions into the coming decades. The IISI
study suggests the future may bring energy consumption figures of 12 GJ/t of steel,
115
European Confederation of Iron and Steel Industries (EUROFER) (2000) The European Steel Industry and
Climate Change Report, EUROFER, Brussels, http://www.eurofer.org/publications/pdf/200010EuropSteelIndClimateChanges.pdf (accessed December 2006).
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a saving of about 60% from current values. This is in accord with the findings of
Hamilton et al.116
Whilst there is not room in this report to give an overview of all the opportunities in
each sector to reduce greenhouse gas emissions, we will do so for the steel sector
in order to give a sense to the reader that with every sector there are a similar
array of opportunities and enabling technologies to be considered. Table 5 details
the main opportunities to reduce greenhouse gas emissions in the steel sector.117
Current Production Technologies
Co-generation
A co-generation system implemented on a
Melbourne, Australia, iron smelting plant is
recovering enough heat to: power 20,000 homes
each year; create a new low-energy technology
for treating waste water on site; produce a
valuable by-product for sale on the international
market; and save AUD$1 million in energy bills.
Advanced and high
efficiency electricity
generation
technology
Combined cycle gas turbine (CCGT) can be used
to self-generate some of the electricity used in
the steel and iron industries.
Coke dry quenching
To recover the heat losses in coke-making to
generate electricity.
Pulverized coal
injection (PCI) in
blast furnaces
Since the late 1980s this technology has become
more and more widely used. It allows the coke to
be directly injected into the blast furnace,
thereby reducing the amount of coal used for
steel production by a ration of 1.4:1. This has
potential to reduce a large percentage of GHG
emissions.
Top gas recovery
turbines (TRT)
To recover the top gas from blast furnaces to
generate electricity.
Basic oxygen furnace
(BOF) gas/ stream
recovery systems.
To recover the gas and steam from BOFs and to
realize a net negative energy use in BOF steel
making processes.
Emerging Enabling Production Technologies
Smelting reduction
iron making
The smelting reduction process no-longer
requires the coke oven or the sinter plant, and
can even run on cheap non-coking coals. These
innovations reduce both the operational and upfront capital costs of iron production.
Hamilton, C. et al. (2002) Long-Term Greenhouse Gas Scenarios A pilot study of how Australia can achieve deep
cuts in emissions, The Australia Institute, Discussion Paper Number 48.
117
Additional information on these emerging methods at: Department of Energy (DOE) (1996), Effects of Energy
Technology on Global CO2 Emissions, Department of Energy, Washington D.C.; DOE (2002) Annual Energy
Outlook 2002, Department of Energy, Washington D.C.; International Iron and Steel Institute (IISI) (1996),
Statistics on Energy in the Steel Industry, IISI, Brussels.; IISI (1998) Energy Use in the Steel Industry, ISSI,
Brussels; Stubbles, J. (2000) Energy Use in the U.S. Steel Industry, U.S. DOE, Washington D.C.,
http://www.getf.org/file/toolmanager/O16F21874.pdf (accessed November 2006).
116
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Direct reduction iron
–making process
Directly reduced iron (DRI) production involves
directly reducing iron ores to metallic iron
without the need for smelting of raw materials in
a blast furnace (which is the most energy
intensive process in iron production). In this
process, reformed natural gas is used to convert
iron ore into partially metallized iron granules.
Thin slab and strip
casting
These forms of casting replace the conventional
hot rolling mill, thereby bypassing the reheating
and roughing steps in normal hot rolling mill
production sequences. This produces a thin slab
at lower cost with maximal use of the thermal
energy of molten iron, while also minimizing
additional fuel and electricity use downstream.
Table 5: Heat and gas recovery options
Source:(Stubbles, 2001. Hamilton et al, 2002)118
The overall energy efficiency of the steel industry could increase by 35% through
adoption of these new technologies,119 with potential overall efficiency
improvements of 70%.120 The increased recycling of steel and iron can offer further
significant efficiency gains as, for example, it takes at least 60% less energy to
produce steel from scrap than it does from iron ore. Furthermore, waste disposal
problems are lessened because used steel can be recycled over and over. Steel
beverage cans may become new steel in a matter of weeks; cars may take 10 to 15
years; and buildings and bridges nearly a century.121 Sooner or later, virtually all
scrap gets back to the steel mill. Steel's established recycling loop and the ease
with which scrap is reclaimed through steel's natural magnetism helps today's
designers make end-of-life recycling a vital part of product planning.
An extensive re-examination of steel production practices is being carried out in
various regional programs around the world. One example is the Ultra Low CO2
Steelmaking (ULCOS) project in Europe. The objective of ULCOS is to formulate new
ways of producing steel with large reductions in green-house gas emissions. This
means that paradigm shifts have to be envisioned and that breakthrough
technologies have to be explored. This has obvious consequences in terms of
development time, complexity, and funding for technology research and
development. The IISI’s CO2 Breakthrough Program, started in 2003, aims to bring
together the various regional programs that are in progress around the world.
Stubbles, J. (2000) Energy Use in the U.S. Steel Industry, U.S. DOE, Washington D.C. Hamilton, C. et al.
(2002) Long-Term Greenhouse Gas Scenarios A pilot study of how Australia can achieve deep cuts in emissions,
The Australia Institute, Discussion Paper Number 48
119
U.S. Department of Energy (DOE) (1998) Annual Energy Outlook 2002, Department of Energy, Washington
D.C.; International Iron and Steel Institute (IISI) (1998), Energy Use in the Steel Industry, IISI, Brussels.
120
Hamilton, C. et al. (2002) Long-Term Greenhouse Gas Scenarios A pilot study of how Australia can achieve deep
cuts in emissions, The Australia Institute, Discussion Paper Number 48.
121
Additional information at: Sustainable Steel n.d. International Iron and Steel Institute,
http://www.sustainablesteel.org (accessed November 2006).
118
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Initially, the program will provide a platform for technical exchange between parallel
and independent programs. In the future, it may bring together large-scale,
common projects to develop the steel-making processes of the future, while sharing
strategy, costs, and acceptance of the new technologies. A wide range of
technologies with a high potential for reducing CO2 and greenhouse gas emissions
will be examined. Some examples include the carbon-lean technologies listed in
Table 5 combined with CO2 capture and sequestration, and innovative use of natural
gas, hydrogen, biomass, and electricity. Together these offer the steel industry the
potential to reduce its GHG footprint by as much as 70%. Therefore, the steel
industry has much to gain by joining the CCX/ECX, as it has significant potential to
achieve CFI’s if it simply maintains its current rates of GHG reduction/ton of steel
produced, from the last 50 years, over the coming decades. The list of emerging
technologies in Table 5 gives every encouragement that this can be achieved.
The Aluminum Sector
Figure 27: Aluminum Ingots
Source: Alcan, n.d122
Hall and Héroul independently discovered the production of aluminum through
electrolysis in 1886. In 1900, annual output of aluminum was one thousand tones;
by the end of the twentieth century annual production had reached 32 million tones,
comprising 24 million tones of primary aluminum and 8 million tones from recycled
metal. This makes aluminum the most recycled metal in the world. In Europe, over
the past 22 years the production of aluminum metal from used products has been
growing by an average of 4% annually. From 1960 to 2000 the ratio of global
recycled metal tonnage to total industry product shipments increased from 17% to
33%, and by 2020 it is projected to increase to around 40%. Even without subsidy
the Industry continues to recycle aluminum, but with the help of appropriate
authorities, local communities and society as a whole, the amount of aluminum
122
More information at: Alcan Australia, n.d. Alcan Australia Homepage,
http://www.alcan.com.au/home/content.asp?PageID=329&pnav=308 (accessed November 2006).
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collected from used products and fabrications processes can be increased even
further. Aluminum is a marvelous metal, light and flexible, But it is also extremely
energy intensive to produce
In 2003, the Future Generations Sustainable Development Program was launched
by the International Aluminum Institute123 (IAI) in partnership with the regional and
national aluminum associations. The program is a voluntary global undertaking by
the members of the IAI, involving 26 CEOs, whose companies represent over 75%
of the world’s aluminum production. "The program unites IAI member companies in
their shared commitment towards sustainable development across the three pillars
of environmental footprint, economic growth and social progress." Travis Engen, the
IAI chairman and CEO of Alcan.
Clearly, most organizations already know what their sector is committed to
regarding greenhouse gas reductions. The International Aluminum Institute’s
commitments are an example of what many sectors are actually doing now. The
IAI’s eight voluntary objectives and twenty-two performance indicators were
designed for the program to encourage a continual improvement in performance by
the industry.124 The following outlines the objectives and indicators that overlap
with the greenhouse gas reduction goals of CCX.
1. Voluntary Objective 1: An 80% reduction in perfluorocarbon (PFC) greenhouse
gas emissions by 2010 versus 1990 for the industry as a whole per ton of
aluminum produced. Between 1990-2003 PFC specific emissions (per ton of
aluminum produced) were reduced by 73%. Thus, since 1990 a reduction
equivalent to around 3 tons of CO2 per ton of aluminum produced has been
achieved.
2. Voluntary Objective 3: A 10% reduction in smelting energy usage by 2010
versus 1990 for the industry as a whole per ton of aluminum produced. Since
1990 the average electric energy used for electrolysis has been cut by 6%.
3. Voluntary Objective 7: A reduction in greenhouse gas (GHG) emissions from
road, rail and sea transport through the industry’s annual monitoring of
aluminum shipments. Also the industry will track aluminum’s contribution
through light-weighting. Between 2002 – 2003 aluminum shipments to the
automotive and light truck industry increased by 5.5%.
To meet these targets the International Aluminum Institute will:
1. Make available a team of consultants, comprising leading technical experts from
the industry, to provide advice and training on good practice from around the
world;
More information at: The International Aluminum Institute 2004 Aluminum For Future Generations:
Sustainability Update 2004, www.world-aluminium.org/iai/publications/documents/update_2004.pdf (accessed
November 2006).
124
International Aluminium Institute, n.d. The Aluminium Industry’s Sustainability Report, http://www.worldaluminium.org/iai/publications/sustainable.html (accessed November 2006)
123
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2. Gather annual global scrap and recycling statistics to help identify the scope for
increased recycling;
3. Publish annual global surveys of the aluminum industry's energy consumption;
4. Publish an annual global survey of the industry's PFC emissions and PFC
reduction performance, backed up by benchmarking graphs and training
seminars to encourage plants to match the best performers.
Energy Efficiency
The IAI publishes an annual Survey of Global Energy Consumption, which has, over
the years, recorded a considerable reduction in energy consumption per ton.
Producers of aluminum have always had a vested interest in minimizing electricity
consumption because energy represents a large part of the costs (approximately
25%) associated with primary aluminum production. In the 1990s, smelters used a
third less electricity per ton than the equivalent plant in the 1950s, and that trend
of improving energy efficiency is continuing. Hamilton et al.,125 in their landmark
Australian study, looked into how industries can achieve deep cuts in greenhouse
emissions. They found that through a wide range of options, such as minimizing
heat losses in digester processes, or replacing rotary kilns with gas suspension
calciners, a 33% improvement in energy efficiency between now and 2050 is both
technically and economically realistic. In most countries at present, the electricity
intensity of electrolysis is twice the absolute theoretical limit of 6.34 MWh/t. A
realistic goal is 10-11 MWh/t, which will require the use of new materials and
improved pot design.126
Greenhouse Gases Reduction in the form of Perfluorocarbons (PFCs)
PFCs are produced when brief upsets in the conditions of electrolysis occur. The
institute carries out annual surveys of perfluorocarbon (PFC) emissions and also
sends out benchmarking reports allowing individual plants to compare their
performance with other de-identified plants using the same technology. A PFC
consultant has been appointed by the industry to hold seminars and carry out
measurement programs in order to encourage the wider adoption of good operating
practices. For the years 1998, 1999 and 2000, the preliminary results of the IAI
surveys for IAI member companies reporting anode effect data showed a continuing
declining trend with PFC emissions - as carbon dioxide equivalents - by 60% per ton
of production since 1990. Between 1990 and 2000, the companies responding to
requests for anode effect data increased the world's primary aluminum production
from 61% to 66%. Worldwide estimates of PFC emissions have been based on an
extrapolation of the IAI survey data using the knowledge of the reduction
125
Hamilton, C. et al. (2002) Long-Term Greenhouse Gas Scenarios: A pilot study of how Australia can achieve
deep cuts in emissions, The Australia Institute, Discussion Paper Number 48.
126
Australian Department of Industry Tourism and Resources (2006) Energy Efficiency Best Practice in the
Australian Aluminum Industry Sector. Available from www.industry.gov.au (accessed November 2006).
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technologies at those facilities that have not reported anode effect data. Those
results show that, while worldwide aluminum production has increased by around
24% since 1990, there has still been an overall reduction in the total annual
emissions of PFCs. These reductions in PFC emissions to the atmosphere are
estimated to amount to over 34 million ton as carbon dioxide equivalents, which
represents approximately a 39% reduction from the 1990 baseline for worldwide
PFC emissions. The surveys also show that smelters in the developing world, which
often use state of the art technology, are performing as well, if not better, than
some plants in Europe or North America.
Alcan is a good example, winning the 2003 Corporate Knights Gold Award for
Sustainability and Ford's 2003 World Environmental Leadership Award. Part of the
award was for reducing PFC emissions for all Alcan smelters by 70% overall,
compared to 1990 levels. Alcan reduced PFC emissions in one smelter in France by
60%, compared with 2001, by replacing two out-of-date pot-line control systems.
This success inspired the company to adopt a systematic company wide emissions
reduction commitment which has resulted in the company achieving significant
results and numerous awards internationally for their efforts.
Improvements in Greenhouse Gas Emission Reductions from Recycling
During the period 1996-1999, world primary aluminum production increased, on
average, by 3.5%.127 Another way of addressing the problem of increased
greenhouse gas emissions resulting from increased aluminum production is through
recycling more secondary aluminum and reducing the amount of primary aluminum
produced. Norgate and Rankin, Australia’s CSIRO experts in this field, have
estimated that recycling aluminum at a rate of 30% (70% primary aluminum, 30%
recycled aluminum) reduces total energy consumption and greenhouse gas
emissions by about 30% over primary aluminum production. However, metal quality
and product recovery issues will affect the number of recycles possible in
practice.128 It is evident the U.S. aluminum industry should join CCX given the
aluminum industry's progress to date in achieving targets that are even more
ambitious than CCX requirements.
International Primary Aluminium Institute (IPAI) web site (www.world-aluminium.org). Cit Norgate, T. E. and
Rankin, W.J. (2001) ‘Greenhouse gas emissions from aluminum production – a life cycle approach’, CSIRO
Minerals, published in Metallurgical Society of the Canadian Institute of Mining Metallurgy and Petroleum (2001)
Proceedings of the International Symposium on Greenhouse Gases in the Metallurgical Industries: Policies,
Abatement and Treatment, August 26-29, Toronto, Ontario, Canada, pp 275-290,
http://www.minerals.csiro.au/sd/CSIRO_Paper_LCA_Al.htm (accessed November 2006).
128
Norgate, T. E. and Rankin, W.J. (2001) ‘Greenhouse gas emissions from aluminum production – a life
cycle approach’, CSIRO Minerals, published in Metallurgical Society of the Canadian Institute of Mining Metallurgy
and Petroleum (2001) Proceedings of the International Symposium on Greenhouse Gases in the Metallurgical
Industries: Policies, Abatement and Treatment, August 26-29, Toronto, Ontario, Canada, pp 275-290,
http://www.minerals.csiro.au/sd/CSIRO_Paper_LCA_Al.htm (accessed November 2006).
127
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Waste Management
Landfill gas (LFG) is created as solid waste decomposes in a landfill. This gas
consists of about 50 percent methane (CH4), the primary component of natural gas,
about 50 percent carbon dioxide (CO2), and a small amount of non-methane
organic compounds. As discussed in the Management Report, methane is a
greenhouse gas with a global warming potential 21 times stronger than CO2.
Municipal solid waste landfills are the most significant source of human-related
methane emissions in the USA, accounting for 25 percent of these emissions in
2004. Landfill gas (LFG) projects capture 60-90% of the methane emitted from the
landfill. The captured methane is burned to produce electricity and produces water
and CO2. Good waste management techniques and practices can reduce
greenhouse gas emissions from landfill waste in numerous ways as summarized in
Table 6.
Municipal
Solid Waste
Management
Strategy
Greenhouse Gas Sources and Sinks
Raw Materials
Acquisition and
Manufacturing
Change in Forest
or Soil Carbon
Storage
Source
Reduction
Decrease in GHG
emissions relative
to the balance of
manufacturing.
Recycling
Decrease in GHG
Increase in forest
emissions due to
carbon storage.
low energy
requirements
(compared to
manufacture from
virgin inputs) and
avoided process
non-energy GHGs.
Waste
Management
Increase in forest No
carbon storage.
emissions/sinks.
Process and
transportation
emissions
associated with
recycling are
counted in the
manufacturing
stage.
Composition No
emissions/sinks.
(food
scraps, yard
trimmings)
Increase in soil
carbon storage.
Compost
machinery
emissions and
transportation
emissions.
Combustion
No change.
No change.
Non-biogenic CO2,
N2O emissions,
avoided utility
emissions, and
transportation
emissions.
Landfilling
No change.
No change.
Electricity from
Methane
emissions, longterm carbon
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storage, avoided
utility emissions,
and transportation
emissions.
Table 6: Components of net emissions for various municipal solid waste
management strategies.
Source: US EPA, n.d.129
The US EPA created the Landfill Methane Outreach Program (LMOP)130 in 1994 to
significantly reduce methane emissions from municipal solid waste (MSW) landfills
by encouraging the use of landfill gas (LFG) for energy. Of the 2,300 or so currently
operating or recently closed MSW landfills in the United States, about 380 have LFG
utilization projects. The US EPA estimates that “approximately 600 more MSW
landfills could turn their gas into energy, producing enough electricity to power over
900,000 homes. Landfill gas emitted from decomposing garbage is a reliable and
renewable fuel option that remains largely untapped at many landfills across the
United States, despite its many benefits. Generating energy from LFG creates a
number of environmental benefits.”131
EPA (1998) Greenhouse Gas Emissions From Management of Selected Materials in Municipal Solid Waste,
http://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/SHSU5BUMGJ/$File/greengas.pdf (accessed
November 2006).
130
US EPA Landfill Methane Outreach Program (http://www.epa.gov/lmop/index.htm) accessed February 2007
131
Ibid
129
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Manufacturing
Contributions of the Manufacturing Sector to Greenhouse Gases
The manufacturing sector accounts for over 80% of energy consumption and
energy-related carbon dioxide emissions, standing as the largest source of energyrelated carbon dioxide emissions in U.S. industry.132 Table 7, below, summarizes
the results of the U.S. Energy Information Association’s 1998 Manufacturing
Consumption Survey (MECS), which surveyed more than 15,000 plants every four
years.
SIC*
Code
CO2
Emissions
(Millions
Metric Tons)
Share of Total
Manufacturing
Emissions
(%)
Carbon
Intensity of
Energy Supply
(Million Metric
Tons per
Quadrillion Btu
of Energy
Consumed)
Petroleum
29
320.4
21.6
45.26
Chemicals
28
319.2
21.5
45.84
Metals
33
251.0
16.9
68.17
Paper
26
118.4
8.0
37.40
Food
20
90.4
6.1
59.05
Glass
32
82.9
5.6
67.76
303.6
20.4
55.20
1,485.8
100.0
50.91
Industry
Group
Other
Manufacturing
Total
*Standard Industry Classification
Table 7: Carbon Dioxide Emissions from Manufacturing by Industry Group, 1998
Source: Energy Information Association, 1998133
The trends of energy consumption in the U.S. manufacturing sector show an overall
increase in energy-related CO2 emissions from 1991 to 1998 of 234.4 million metric
tons, or 18.7%, corresponding to a 36.4% increase in demand for manufacturing
products over the same period.134 In the European Union, CO2 emissions from fossilfuel use (either for combustion or feedstock) in the manufacturing sector accounted
for 15% of total greenhouse emissions in 2000. Between 1990 and 2000, the EU
experienced an 8% reduction in CO2 emissions, due primarily to energy efficiency
improvements and structural change in Germany. Furthermore, as Figure 15
U.S. Department of Energy (DOE) (2003), Emissions of Greenhouse Gases in the United States 2003,
http://www.eia.doe.gov/oiaf/1605/ggrpt/manufacturing.html (accessed November 2006).
133
Energy Information Association (EIA) (1998) Manufacturing Energy Consumption Survey, Form EIA-846;
Monthly Refinery Report, NS Form EIA-810.
134
Ibid.
132
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indicates, over the period of 1990 – 1999, gross value industrial output in Europe
increased by 8%, indicating a “decoupling” of emissions from gross value added.
Figure 28: Carbon dioxide emissions from EU manufacturing sector and gross value
added.
Source: European Environment Agency, 2002135
Encouraging in the USA manufacturing companies are adopting best practice in
energy efficiency, demand management, whole system design, and using green
energy to make deep cuts in company-wide greenhouse gas emissions. Initiatives
such as the Chicago Manufacturing Centre GreenPlants136 program are providing
manufacturing companies in the Chicago area with a facilitated approach to
implementing such practices for greenhouse gas reductions and improved
competitiveness. The following case stories give a flavor of the sorts of programs
coming into effect.
Gugele, B. et al. (2002) Greenhouse Gas Emissions Trends in Europe, 1990 – 2000, European Topic Centre
on Air and Climate Change, European Environment Agency, Copenhagen.
136
Additional information at: Chicago Manufacturing Centre n.d. GreenPlants Initiative,
http://www.cmcusa.org/initiatives/greenplants.cfm (accessed November 2006).
135
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International Examples of Best Practice in Greenhouse Gas Reductions
1. Small Manufacturer - Harbec Plastics Inc., U.S.137
Harbec Plastics Inc. is a small New York based custom-injection molding company
with expertise in both low volume prototypes and large production runs. They
service customers in the automotive, medical equipment, and office products
industries. Noting how increasing electricity rates, power surges and blackouts,
were severely affecting the company’s competitiveness, the management at Harbec
set out to implement best practice in energy efficiency, co-generation, renewable
electricity, and green building development. Injection molding is an energy
intensive process requiring a series of machining, heating and cooling processes
that consume a lot of energy, and generate large amounts of waste heat. Not only
do these use energy, they also detract from worker performance and comfort,
particularly in the hot and humid summer months. The conventional solution of
implementing an air-conditioning system was quickly eliminated due to high cost,
and the decision was made, instead, to engage in energy efficiency practices and
reuse the waste heat in the molding process.
The company first captured the “low hanging fruit” by replacing inefficient older
equipment with efficient lighting, motors, soft starts and inverter drives. Harbec
then replaced two-dozen hydraulic-powered injection-molding machines with a
more efficient alternative. Although the new machines cost 50% more than the
originals, the replacements would recover the cost differential in three years from
reduced energy consumption. The new machines further reduced waste heat and
excess moisture, were much quieter, and effectively cut greenhouse emissions from
the molding operation in half.
On 14 August 2003, a blackout rolled across 8 northeastern U.S. states shutting
Harbec, and millions of other customers down. To provide a cleaner and more
reliable source of power, Harbec invested in the use of highly efficient micro
turbines that would run on locally sourced natural gas, methane, or waste gases,
and would also cut transmission inefficiencies. Waste heat from the micro turbine
set-up would power the air conditioning for the entire molding production facility.
The micro turbines would produce 1,500,000 kWh annually, and reduce carbon
emissions by 90% compared to drawing energy from traditional fossil fuel plants.
The result is an annual carbon dioxide emissions saving of 1012.5 tons. Harbec
further took advantage of the local winds to install wind power generation on site.
Though the location was considered a non-viable wind generation location for
commercial wind farm developers, the small turbines generated the electricity at a
lower cost than buying the electricity purchased from the grid at peak rate times.
Coupled with the distributed power on site, the 250kW Fuhrlaender wind turbine
would be capable of generating 350,000 kWh of electricity annually, or 20-25% of
137
Clean Air – Cool Planet n.d. Case Study: Harbec Plastics, http://www.cleanaircoolplanet.org/information/pdf/Harbec_case_study.pdf (accessed November 2006).
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Harbec’s total annual energy requirements. Finally, the turbine eliminated annual
carbon dioxide emissions of 264 tons.
Figure 29: Harbec Plastics wind turbine
Source: Harbec Plastics, n.d.138
Harbec has also made use of the U.S. Green Building Council’s Leadership in Energy
and Environmental Design (LEED) program, to implement within the plant’s facilities
day lighting via skylights, insulated wall segments, preinstalled interior and exterior
siding, a warm air re-circulation system, and radiant floor heating. The above
activities undertaken by Harbec Plastics Inc., including other initiatives such as a
Green Fleet program, have lead to an annual carbon dioxide emissions reduction of
1807.94 tons.
2. Large Manufacturer: DuPont139
Global chemicals manufacturing giant DuPont has built upon its early success of
developing alternatives to chlorofluorocarbons (CFCs) to reduce greenhouse gas
emissions from its global operations by 67% since 1990, reducing energy use by
9% below 1990 levels during an increase in production of 35%, and sourcing 3% of
its energy from renewables. The inventory of greenhouse emissions and
identification of point source reductions began in 1991, where DuPont retrofitted
facilities in Texas, Canada, the UK, and Singapore in a US$50 million program to
reduce nitrous oxide emissions (310 time more potent than carbon dioxide as a
greenhouse gas). Paul Tebo, DuPont’s vice president for safety, health and the
environment, stated “the company’s major stretch goal for global operations is to
achieve zero injuries, illnesses, incidents, wastes and emissions.” The result of this
process has been a 55% percent reduction in emissions from global operations.
138
139
Ibid.
The Climate Change Group, n.d. Case Studies, http://www.theclimategroup.org/index.php?pid=430
(accessed November 2006).
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DuPont heightened its aggressive corporate energy policy, with a focus on
maximizing energy efficiency, lowering the environmental impact of energy
consumption, and renewing power infrastructure. The company engaged groundfloor teams to search for energy efficiency improvements throughout operations –
installing efficient lighting, heating and cooling, compressed air and co-generation.
The energy efficiency program kept energy use “flat” between 1990 and 2000,
saving DuPont US$2 billion, while production increased 35%. Through the use of
renewables, DuPont save a further US$10-15 million annually. It has set targets to
reduce greenhouse gases by 65% below 1990 levels by 2010, hold energy use
constant at 1990 levels and source 10% of global energy from renewables.140
3. Large Manufacturer: Intel Corporation141
Founded in 1968, Intel Corporation has grown into a world leader in the
manufacture of computer chips and additional computer, networking and
communications products. In response to the business case for reducing
greenhouse gas emissions, Intel have reduced perfluorocarbon (PFC) emissions by
35% between 2001 and 2003; held its total worldwide energy use constant from
2002 to 2003; and are purchasing 14 million kWh annually of clean wind power. To
meet the goal of a 10% reduction of PFC emissions below 1995 levels by 2010, as
stated in the World Semiconductor Council agreement of 1999, Intel will reduce PFC
emission by more than 90% per silicon wafer, through chemical substitution,
process optimization, and abatement in manufacturing processes.
Intel is making significant ground in reducing end-user emissions through improving
the efficiency of it products, such as the development of the Instantly Available PC
(IAPC) technology, which reduces energy usage by 71%. The U.S. EPA estimates
the IAPC technology will avoid 159 million tones of CO2 emissions between 2002
and 2010. Intel has spent US$2-3 million per year on energy conservation
initiatives in global facilities, resulting in annual energy cost savings of US$10
million. The company has set an internal goal of reducing energy consumed per
unit of production by 4% from 2002 – 2010. Future priorities of Intel include the
preparation for involvement in the emerging carbon market, and its effects on
global operations.
140
141
Ibid.
Ibid.
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Prospering in a Carbon-Constrained World
Semi-conductor Wafer Production (PFC emissions)
In April 1999, the World Semiconductor Council (WSC) announced its intention to
reduce perfluorocarbon (PFCs) emissions by at least 10% below the industry's 1995
baseline level by year-end 2010.142 The current processes to manufacture
semiconductors require the use of many of these high greenhouse-warmingpotential gases (see Table 6), and 1080% of these gases pass through the
manufacturing tool chambers un-reacted and are released into the air. PFCs are
unsurpassed in their process performance, and are vital to etching intricate circuitry
features on silicon wafers and for cleaning chemical vapor deposition tool chambers
(CVDs). Although PFC use did not begin until the late 1980s, their application
facilitated the development of significantly more complex and faster processing
semiconductors. Table 8 presents some of the process chemicals used by the
industry and the environmental impact of these gases if released to the
atmosphere.
Compound
Application
Atmospheric
Lifetime
(years)*
Global
Warming
Potential
(100
year)*
CVD
Chamber
Cleaning
Plasma
Etching
CO2
N/A
N/A
variable
1
C2F6
Yes
Yes
10,000
9,200
CF4
Yes
50,000
6,500
SF6
Yes
3,200
23,900
Yes
740**
10,800**
Yes
264
11,700
2,600
7,000
3,200
8,700
NF3
Yes
CHF3
C3F8
Yes
c-C4F8
*IPCC, 1995.
Yes
143
Yes
**IPCC, 2001.
144
Table 8: Electronic gas applications and climate impact
Source: U.S. EPA, n.d.145
PFCs are dissociated in plasmas and thereby provide highly reactive fluorine atoms
in the manufacturing tool chambers. In CVD tool chamber cleaning applications, the
US EPA, n.d. PFC Reduction Partnership for the Semiconductor Industry,
http://www.epa.gov/highgwp/semiconductor-pfc/overview.html (accessed November 2006).
143
Intergovenmental Panel on Climate Change (IPCC) (1995) Greenhouse Gas Inventory Reference Manual,
IPCC WG1 Technical Support Centre, Hadley Centre, Bracknell, UK.
144
Houghton, J. T. Ding, Y. Nogua, M. Griggs, D. Van der Linden, P. Maskell, K. (eds.) Intergovenmental
Panel on Climate Change (IPCC) (2001) Climate Change 2001. The scientific basis, Cambridge University Press.,
Cambridge, U.K.
145
US EPA, n.d. PFC Reduction/Climate Partnership for the Semiconductor Industry,
http://www.epa.gov/highgwp/semiconductor-pfc/overview.html (accessed November 2006).
142
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fluorine atoms react with and remove excess materials from the surface of the tool
chambers themselves. In the case of plasma etching, the free fluorine atoms
selectively react with and remove insulating and/or conductive materials from the
exposed surface of a silicon wafer to create the intricate circuitry patterns found on
modern semiconductors. The semiconductor industry is implementing a variety of
emission reduction strategies, such as switching to alternative input gases, for
example NF3, which react and are utilized more efficiently in the process, thereby
emitting significantly less PFC into the exhaust stream. IBM is using NF3 to replace
as much as 98% of PFCs in some processes.
Figure 30: IBM Circuit Board
Source: Printed Circuit Board Fabricators, 1999146
Other methods include fine-tuning the production processes to use and emit less
PFC gas. While the industry has made significant advances in controlling emissions
from CVD processes, there is still considerable work needed to economically reduce
PFC emissions from delicate plasma etching processes. More detailed information on
the costs of reducing PFC emissions from semiconductor manufacturing is available
at the U.S. EPA's web site.147 Some companies, such as Swiss headquartered CCX
member STMircoelectronics (ST), are showing that it is possible to significantly
reduce PFC emissions. ST has set its own internal target for PFCs, which is to
reduce its emissions to 10% of 1995 levels (reduction by a factor of 10) per unit of
production by 2008, two years before the WSC deadline PFC emissions rose 33%
1998-2003. ST has managed to cut the emission rate by 53% compared with the
1995 baseline. In 2003 it reached a rate of 40% alternative chemicals compared
with 2% in 1995.148 There are numerous online resources to assist individual firms
to address these issues.149
Printed Circuit Board Fabricators (1999) Homepage, http://www.pcbfab.com/index1.html (accessed
November 2006).
147
U.S. EPA (2001) Cost and Emission Reduction Analysis of PFC, HFC, and SF 6 emissions from semiconductor manufacturing in the U.S. www.epa.gov/highgwp/pdfs/chap6_semi.pdf (accessed November 2006).
148
STMicroelectronics (2004) Sustainability Report 2003, p. 92-3,
http://www.st.com/stonline/company/environm/sustdev/sustdev03.pdf (accessed November 2006).
149
U.S. EPA n.d. Documents, Tools, Resources www.epa.gov/highgwp/semiconductor-pfc/resources.html
(accessed November 2006).
146
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Many countries, including the U.S., led on this issue before the WSC announced its
PFC reduction targets. The U.S. EPA's PFC Reduction/Climate Partnership150 for the
Semiconductor Industry was launched in 1996, and has served as a catalyst for
semiconductor companies in Europe, Japan, Korea, and Taiwan to organize similar
voluntary programs and join with the U.S. to establish the first global industry
climate protection goal. The U.S. EPA program has, overall, been very successful at
reducing PFC emissions below business as usual (see Figure 18). The figure below
shows the U.S. semiconductor industry partners' historical and expected future PFC
emissions (green) compared to its "business as usual" (BAU) emissions (blue). The
BAU scenario reflects the partners’ direct PFC emissions assuming they take no
action to reduce emissions. The semiconductor industry's impressive growth pattern
is historically cyclical. While production slowed and declined in 2001 and 2002,
rising demand for personal computers and mobile handsets in 2003 has sparked a
recovery and return to industry growth expected to approach 11 percent annually
through 2007.151
Figure 31: Business as usual PFC emissions vs. actual PFC emissions due to GHG
emission reductions.
Source: U.S. Environmental Protection Agency, n.d.152
U.S. EPA (n.d) PFC Reduction/Climate Partnership www.epa.gov/highgwp/semiconductor-pfc/index.html
(accessed November 2006).
151
GreenBiz (n.d.) U.S. E.P.A SF6 Emission Reduction Partnership for Electric Power Systems
http://www.greenbiz.com/frame/1.cfm?targetsite=http://www.epa.gov/highgwp1/sf6 (accessed Feb 2007).
152
U.S. EPA (2006) PFC Reduction/Climate Partnership – Accomplishments,
http://www.epa.gov/highgwp/semiconductor-pfc/accomplish.html (accessed November 2006).
150
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Figure 32: Wafer Chip, Motorola
Source: Precision Camera, n.d.153
Motorola is a CCX member who has taken a leadership role in the U.S. EPA’s
Industry Partnership Program. It is also a member of the World Semiconductor
Council and co-chaired the Semiconductor Industry Association PFC Task Force. As
a charter member of the EPA PFC Emission Reduction Partnership, Motorola has
developed technical solutions to address emissions reduction, and was one of the
first companies to develop and release a formal strategy to reduce emissions after
working on this issue for nearly six years. Motorola has openly shared its technology
developments, evaluation results, and strategies with its competitors in the
industry.
Intel, Novellus Systems, and NEC are other leading companies who have won
awards for their efforts to reduce PFC emissions from this sector.154 Another award
winner is Air Products and Chemicals (APC) Inc., who has made significant
contributions to the semiconductor industry in characterizing and reducing PFC
emissions. They developed analytical methods to accurately measure emissions
from semiconductor processes and have used these techniques to characterize the
vast majority of processes used in the industry. APC also developed and helped
implement strategies for minimizing PFC emissions and have optimized chambercleaning processes by working with integrated circuit manufacturers and original
equipment manufacturers. PFC emission reductions of as much as 85% have been
achieved where these optimized processes have been implemented. Before the
invention of the Hitachi Super Catalytic Decomposition System in 1998, there were
no economical means of destroying PFCs. Hitachi Ltd. and Hitachi America Ltd.
successfully developed a way to decompose these molecules through catalysis.
Semiconductor and liquid crystal display manufacturing industries are now using the
process which has proven to be more than 99% efficient at decomposing all PFC
gases while maintaining a low cost of ownership to the operational facility.
Gallery of Local Texas Photographers n.d. Kirk Tuck Photography, http://www.precisioncamera.com/gallery/tuck/ktuck.htm (accessed November 2006).
154
Ibid.
153
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The World Semiconductor Council (WSC), through aiming to reduce
perfluorocompound (PFCs) emissions by 10% below the 1995 baseline level by
2010, are setting a target very similar to CCX. The technologies listed allow
companies to go well beyond this. Hence, it makes sense, once again, for
companies in this sector, such as those mentioned, to join CCX/ECX.
Cement Production
Cement is one of the basic building blocks of society. The industry produces 1.6
billion tons of cement annually - a 'glue' which holds together much of our modern
global infrastructure.
It employs about 850,000 workers in facilities in 150
countries. In 2000, the industry had an estimated global annual revenue of US$97
billion and has grown by nearly 4% percent annually over the last decade. The
cement industry is one of the most capital-intensive industries: the cost of a new
cement plant can be equivalent to about 3 years of revenue. Modern cement plants
have capacities well in excess of 1 million tons per year, and once built, facilities
may last for 50 years.
Figure 33: Cement Industry Greenhouse Gas Emissions
Source: Batelle Memorial Institute, 2002155
Cement production is energy-intensive and, as a result, the industry is responsible
for 3 to 5% of global CO2 emissions. As a result, the World Business Council for
Sustainable Development has identified the cement sector as one of the six
industries on which to focus independent research and stakeholder consultations in
order to align its practices and policies with the requirements of sustainability.156
Cement production inherently consumes large amounts of materials and energy,
and innovations that could radically reduce resources used are hampered by
155
156
World Business Council for Sustainable Development (2002) Toward a Sustainable Cement Industry, World
Business Council for Sustainable Development, p 218.
WBCSD n.d. Cement Sustainability Initiative, http://www.wbcsdcement.org/ (accessed December 2006).
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existing standards and specifications. Policies to address climate change may have
serious financial consequences for the cement industry, and in the absence of action
on the part of cement companies, the financial liabilities associated with the
industry’s CO2 emissions could exceed current profits, or result in large increases in
the price of cement. A proactive and well-managed strategy to lower CO2 emission
from cement production could not only reduce the potential liability, but also yield
financial benefits for the industry.
The main greenhouse gas emitted by the cement industry is CO2. The industry
currently emits 730 to 990 kilograms of CO2 for every 1000 kilograms of cement
produced. Furthermore, it requires the equivalent of 60 to 130 kilograms of fuel oil
and 110 kWh of electricity to produce one ton of cement. In 2000, the average
North American cement producer emitted .99kg of CO2 per kg of cement. The
Western European cement industry emitted .84kg of CO2 per kg of cement.
Figure 34: Energy Consumption in U.S. cement production by fuel, 1970 to 1997
Source: Martin, Worrell and Price, 1999 157
The largest portion of GHG emissions from production of cement worldwide
(approximately 50%) originates from the process reaction that converts limestone
to calcium oxide, the primary precursor to cement. Other cement related GHG
emissions come from fossil fuel combustion at cement manufacturing operations
(about 40% of the industry’s emission); transport of raw materials (about 5%) and
combustion of fossil fuel required to produce the electricity consumed by cement
manufacturing operations (about 5%).
In cement plants, direct CO2 emissions result from the following sources:
-
157
calcinations of limestone in the raw materials;
Martin, N. Worrell, E. Price, L. (1999) Energy Efficiency and Carbon Dioxide Emissions Reduction Opportunities in
the U.S. Cement Industry, Ernest Orlando Lawrence Berkeley National Laboratory, Berkeley, p42.
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-
conventional fossil kiln fuels;
-
alternative fossil-based kiln fuels;
-
biomass kiln fuel; and
-
non-kiln fuels.
Over 90% of in-house energy is used to fire kilns to heat limestone in the
calcinations process. The remaining energy is in the form of electricity to operate
kilns, clinker grinding plants and other equipment. Since the early 1980s, there has
been a steady trend away from other sources of energy towards a heavier reliance
on coal and coke. One of the best, technically proven approaches for reducing
process emission lies in reducing the amount of clinker in cement. Substituting
pozzolanic materials, such as blast furnace slag, fly ash and natural pozzolans for
clinker substantially reduced process-related CO2 emissions. In addition, the dry
process is up to two times more efficient than wet cement production.
Further energy efficiency options include:
1. conversion from direct to indirect firing;
2. improved recovery from coolers; and
3. installation of roller presses, vertical mills and high efficiency separators.
Figure 35: Carbon emissions from the U.S. cement industry by clinker production
process
Source: Martin, Worrell and Price, 1999158
158
Ibid.
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Further research and development could provide new manufacturing processes to
reduce the cement industry’s GHG emissions. Examples of innovations that could
reduce CO2 emissions in the future include:
-
non-limestone based binders;
-
hybrid plants that produce both energy and cement;
-
engineered carbon capture and sequestration;
Through a blend of magnesium oxide and conventional cement, Australian inventor
John Harrison of TecEco Pty. Ltd. developed “eco-cement.” This new blend of
cement incorporates magnesium oxide (magnesia) and wastes to make it
environmentally sustainable. Eco-Cement uses a lower heating temperature during
manufacturing, so less fossil fuels are used. Wastes such as fly and slags etc can be
included, without incurring problems such as delayed reactions. Eco-Cement
absorbs CO2 from the atmosphere to set and harden and can be recycled.159
Case Study: CEMEX - leading global producer and marketer of quality
cement and ready-mix concrete products.
Launched in 1994, the CEMEX Eco-efficiency Program160 is designed to optimize
energy and raw material efficiency to produce an economic and ecological benefit
derived from a reduction of environmental impact. In 2000 alone, the program
saved this Mexican-based cement company a total of $35.1 million, while total
savings are estimated at more than $60 million. Furthermore, CEMEX reduced their
CO2 emissions by 2.5 million metric tons through a variety of methods that
included:
developing and implementing technology and innovative practices for production
processes and new cement plant design;
-
-
selective mining techniques and optimal quarry exploitation;
-
recycling and reuse of materials;
use of alternative raw materials (e.g., blast furnace slag and fly ash, by products
from steel plants and power stations);
-
-
use of natural cementing materials (pozzolana); and
use of alternative fuels by reusing wastes (petcoke, waste oils, used solvents,
etc.).
-
Raw Materials Preparation
Efficient transport system
-
159
160
Australian Broadcasting Company, The New Inventors: Eco-Cement by John Harrison,
http://www.abc.net.au/newinventors/txt/s1296184.htm
Additional information at: Cemex n.d. Cemex Homepage, http://www.cemex.com/ (accessed November 2006).
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Raw meal blending systems (dry process)
Conversion to closed circuit wash mill
High-efficiency roller mills (dry cement)
High-efficiency classifiers (dry cement)
-
Clinker Production (Wet)
-
Clinker Production (Dry)
Kiln combustion system
Kiln
combustion
system
improvements
improvements
Kiln shell heat loss reduction
Kiln shell heat loss reduction
Use of waste fuels
Use of waste fuels
Conversion to modern grate coolerConversion to modern grate cooler
Optimize grate coolers
Heat recovery for power generation
Conversion to pre-heater, preLow pressure drop cyclones for
calciner kilns
suspension pre-heaters
Conversion to semi-wet kilns
Long dry kiln conversion to multistage pre-heater kiln
Optimize grate coolers
Long dry kiln conversion to multistage pre-heater, pre-calciner kiln
Addition of pre-calciner to preheater
Finish Grinding (applies to wet and dry cement production)
Improved grinding media (ball mills)
High-pressure roller press
High-efficiency classifiers
Improve mill internals
-
General Measures
Preventative maintenance (insulation, compressed air losses, maintenance)
Reduced kiln dust wasting
Energy management and process control
High-efficiency motors
Efficient fans with variable speed drivers
-
Product Changes
Blended cements
Reducing the concentration of C3S in cements
Reducing fineness of cement for selected uses
-
Table 9: Energy efficient practices and technologies in cement production
Source: (Worrell et al)161
161
Worrell, E. Galitsky, C (2004) Energy Efficiency Improvement Opportunities for Cement Making:An Energy Star
Guide for Energy and Plant Managers. Environmental Energy Technologies Division: Ernest Orlando Lawrence
Berkeley National Laboratory Sponsored by the U.S. Environmental Protection Agency
(http://www.energystar.gov/ia/business/industry/Cement_Energy_Guide.pdf) (accessed February 2007)
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Ammonia Production
Ammonia is produced by the Haber process, which combines hydrogen gas with
atmospheric nitrogen at high temperatures (~500oC) and very high pressure (~250
atmospheres, ~351kPa). The hydrogen gas produced is usually derived from
methane, producing CO2 as a byproduct of the reaction.
Figure 36: The Ammonia Manufacturing Process
Source: Japan Fertilizer & Ammonia Producers Association, n.d.162
Given that often the ammonia process produces CO2 onsite from stripping hydrogen
atoms from methane, carbon sequestration techniques are also relevant here as a
method to reduce GHG emissions. Before CO2 gas can be sequestered from power
plants or industrial sources, it must be captured as a relatively pure gas. But CO2 is
already routinely separated and captured as a by-product of industrial processes
such as synthetic ammonia production.
162
Japan Fertilizer and Ammonia Producers Association n.d. Homepage, http://jaf.gr.jp/www/english/english.htm
(accessed November 2006).
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Figure 37: CO2 separation and capture at an ammonia plant.
Source: Haldor Topsoe163
Clearly these production methods are perfect for co-generation, because the
process is done at high temperatures.164 Such savings count for CFI’s under the
stationary combustion criteria and methodologies. However, when looking for GHG
reduction opportunities, it is helpful to ask more fundamental questions about the
processes involved. Namely, what is the real need here? Are there other ways of
meeting that need? Ammonia is largely made for fertilizers. Production of
nitrogenous fertilizer from atmospheric nitrogen uses an enormous amount of
energy - about 30 gigajoules for every ton of ammonia.165 Are there ways to
replenish the soil with nutrients other than through artificial ammonia based
fertilizers? If so, which of them has the smallest ecological footprint? Taking a
Natural Capitalism / Whole Systems Approach requires finding answers to these
fundamental questions. Current scientific, technological, and engineering knowledge
provide a multitude of ways to meet civilizations needs today. In designing whole
systems solutions one of the criteria sought is synergies; that is, other potential
opportunities and problems that could be addressed simultaneously. The following
two discussion points are examples of this.166
163
164
165
166
Haldor Topsoe n.d. Products and Services, http://www.haldortopsoe.com/site.nsf/all/BBNN5PKJ8W?OpenDocument (accessed February 2007).
Additional information at: Renewable Energy Technologies n.d. Cogeneration Technologies,
http://www.cogeneration.net (accessed November 2006).
Additional information at: CSIRO Greenhouse Solutions n.d. CSIRO Climate Program,
http://www.csiro.au/csiro/ghsolutions/s7.html (accessed November 2006).
Please note that the following does not count for CFI’s under the current CCX rules. They are presented to
illustrate the point that, in seeking to address the opportunities presented by CFI’s, this report is not covering
all the opportunities for GHG reductions for industry and society.
Prospering in a Carbon-Constrained World
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Organic Recycling: Case Study of the Multiple Benefits of Greenhouse Gas
Reduction Strategies
Adopting a whole system approach allows us to consider the problem of nutrient reenrichment of the soil, and ask are there problems facing society that could, in fact,
provide a solution? The answer is yes.
Landfill in all its forms has become one of the largest long-term problems facing
urban society today. It steals space, devalues property, threatens waterways and
contaminates the land. It is the graveyard of societies waste, and it compromises
the very survival of future generations. At the same time, at the other end of the
process, farming depletes soils, and nitrogen fertilizers pollute waterways leading to
algal blooms. Depletion of soil quality is a problem that makes the headlines in
newspapers globally almost every day. A recent science report in Britain stated that
in excess of 30 percent of farm soils in the UK were deficient in organic material.
Figure 38: Map of soil degradation globally
Source: UNEP Global Resource Information Database (GRID), n.d.167
167
UNEP Financial Information Engine on Land Degradation (FIELD) n.d. Field Main Page, http://www.gmunccd.org/English/Field/soil.htm (accessed November 2006).
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Yet the greatest contaminant in landfill is organic material. Over 15 percent, and in
some regions as much as 27 percent of all the materials regions put into landfill are
organic (food wastes, clippings from lawns and ovals, agriculture wastes),168 and a
very large part of this has come from farming processes. The U.S. EPA states, “yard
trimmings and food residuals together constitute 23 percent of the U.S. municipal
solid waste stream.”169 Farming is a mineral extractive industry that progressively
removes from the soil not only the organic fraction, but also minerals and trace
elements. All of this material is either exported or carried into the cities where it is
processed through people and, passing through a waste management system, ends
up in either our landfill or our sewage treatment works. It is this organic material
which leaches through the landfill to create further problems of contamination and
pollution. There is a constant outcry from the emerging organic composting industry
that there is no market for their products. At the same time our soils cry out for the
application of the organic materials, micronutrients and the microbial activity that is
compacted into our landfills every day.
Plants cannot make minerals and trace elements and these important ingredients
for healthy plant growth are not put into our soils through the application of
fertilizer. The process of degradation of our soils costs societies millions of dollars
per year. At the same time, one of the factors in this degradation, chemical fertilizer
is constantly rising in cost, both to the farmer and to the broader community.
Therefore if this organic material could be returned to the food chain we could
eliminate a large part of the problem of landfills, create local employment programs
and go some way to relieving the destruction of our soils through the overuse of
chemical fertilizer and unsustainable farming practices. Municipalities need
programs that are focused on the removal of organic materials from the waste
stream and the processing of this material into a viable, balanced organic product
for use on farms.
True Landfill Costs
In most urban societies around the world, the cost of landfill is skyrocketing. Yet
landfill fees only cover a small part of the actual cost of landfill. The true costs of
landfill, when all burial, amenity, administration, security, replacement, and oncosts are included, is in most cases at least three times the cost charged at the
gate. Even in small unattended country landfills, when all costs are included, the
price per ton is often around $50– $70. If these funds were redirected, they could
be used for the processing of our organic materials into compost suitable, or even
specifically designed for, farm use. In most instances the cost of this process would
be far less than the current cost of landfill. It would have the additional benefits of
168
169
Government of the Australian Capital Territory (2000) The Next Step in the No Waste Strategy. ACT
Government No Waste by 2010 Program, Canberra.
(www.nowaste.act.gov.au/__data/assets/pdf_file/12462/thenextstepinthenowastestrategy.pdf) (accessed
February 2007).
Ibid.
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reducing the fertilizer bill for local farmers, increasing the organic levels in the soil,
raising the microbial density of the soil and, at the same time, the ability to produce
quality products. Once organic material is removed and used in this way, all other
products in our waste streams become available for reuse. The 1 percent of
hazardous waste in any stream of material could be removed before it becomes a
problem, leaving the remaining inert wastes and packaging to be used in local
industrial processes or, when sufficient material becomes available, transported to
national markets. Globally there are now a raft of process innovations, and an
emerging industry, in organic recycling,170 and vertical composting units.171
However, other changes in the packaging industry could bring even larger benefits
to farmers.
Figure 39: Vertical Composting Units
Source: Perry Group Ltd, n.d.172
Packaging for Community Profit
As the humble brown paper bag taught us many years ago, packaging does not
need to be complex in its makeup to be effective, and indeed even when it is
complex it does not need to be antisocial. It can be designed to be recycled to
paper or to compost, depending on its clean or contaminated state. When combined
with the major corporate commitments to the development of safe biodegradable
plastics, this will see us growing increasing quantities of our compostable or
recyclable packaging within the coming years. Eastman, BASF, Mitsubishi, Cargill
The U.S. Composting Council website provides a comprehensive overview and links to further organizations.
Additional information at: U.S. Composting Council, n.d. U.S. Composting Council,
www.compostingcouncil.org/index.cfm (accessed November 2006).
171
Vertical Composting Unit (VCU) is an enclosed aerobic composting system suited to processing biological waste
in small to medium sized municipal and industrial applications. Additional information at: VCU Technology n.d.
VCU Technology, http://www.vcutechnology.com/indexx.cfm?sectionid=4 (accessed November 2006); and VCU
Technology n.d. VCU Composting Technology,
http://www.secureserver5.com/vcu/pdfs/VCU_English_updated.pdf (accessed November 2006).
172
Perry Group Ltd. n.d. Homepage, http://www.perry.co.nz/index.asp?PageID=2145822637 (accessed November
2006).
170
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Dow, Toyota, ADM, and Dupont have all recognized the need for change, while
other companies such as Ford, 3M, Daimler Chrysler, Proctor & Gamble, Fujitsu,
NTT, and Sony have either made or expanded their commitment to the adoption
and use of biodegradable plastics in their product lines. There is a nexus between
waste management, soil management, landfill, product and packaging design. It is
that part of the solution to these multiple problems has a common source - the soil.
We can have pollution, desertification, contamination, and waste, or we can have
employment, good food, clean air, and health. The EU Commission has completed a
thorough study of the benefits and costs of organic recycling versus other methods
and found that “generally, the analysis of external costs and benefits is favorable to
the separate collection and treatment of bio-wastes through composting or
anaerobic digestion.”173
Ensuring Carbon: Nitrogen Balance
While organic compost waste has many minerals and nutrients in it that help rebuild
the soils, they can have one weakness in that it is common that the nitrogen levels
in the organic compost are less, not more, than the soil. Therefore, if incorrectly
applied they can deplete soils of their nitrogen rather than help them. There are a
number of strategies for dealing with this problem.
For plantations, where human health concerns are minimal, there is a way to
address the issue of the nitrogen:carbon balance, and in doing so solve another
environmental problem. Australia’s leading R&D body, the CSIRO, has run a 10-year
project to address, as thoroughly as possible, issues related to how best to reuse
the nitrogen rich treated effluent (from cities and towns) on plantations. Given that
cities and country towns have a continual source of treated effluent that is nitrogen
rich, this “waste” can be used to ensure that the correct nitrogen:carbon balance is
maintained in the plantation soil.
The CSIRO conducted a 10-year a benefit/cost analysis of the Wagga Wagga
Effluent Plantation Project, focusing on the design, establishment and management
of sustainable effluent-irrigated plantations throughout Australia.174 Estimates were
derived for effluent-irrigated plantations that utilized the project's design and
management principles, or which were undertaken because of the project, from
1992-1999 (during the life of the project) and in the coming 10 years (following
release of the national guideline). Not including the very considerable environmental
benefits of protecting soil and water resources achieved by following the Guideline's
principles, the national net benefit attributable to the Wagga Wagga Effluent
European Commission (YEAR) Economic Analysis of Options for Managing Biodegradable Municipal Waste. Final
Report to the European Commission. p. 185.
http://europa.eu.int/comm/environment/waste/compost/econanalysis_finalreport.pdf (accessed November
2006).
174
Sultech Pty Ltd. (1999) Impact Analysis and Evaluation: CSIRO Forestry, Wood and Paper Industries Sector.
173
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The Natural Edge Project 2006
Plantation Project over 17 years
optimistically AUD$482 million.175
was
conservatively
AUD$53
million,
and
Figure 40: CSIRO Effluent plantation project, Wagga Wagga, Australia
Source: CSIRO, n.d.176
175
176
Ibid.
CSIRO n.d. Effluent plantation project http://www.ffp.csiro.au/pff/effluent_guideline/waggaproject.htm
(accessed November 2006).
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Prospering in a Carbon-Constrained World
HFC-23 Emissions from the Production of HCFC-22 and
Conversion to CO2 Equivalence
Prior to 1990, the only significant emissions of HFCs resulted from generation of
HFC-23 as a byproduct of the production of HCFC-22. HCFC-22 is currently used in
refrigeration and air-conditioning systems and as a chemical feedstock for
manufacturing synthetic polymers. The U.S. Inventory Report provides detailed
descriptions on HFC-23 emissions from HCFC-22 production and how they are
estimated (see the chapter entitled “Industrial Processes”).177 Opportunities for the
reduction of HFC-23 emissions from the production of HCFC-22 are well covered by
Sally Rand and Deborah Ottinger (U.S. Environmental Protection Agency) and
Marvin Branscome (Research Triangle Institute), and so we refer the reader to their
report.178
N2O from Adipic Acid and Nitric Acid Production
N2O is a potent GHG that has a global warming potential (GWP) of 310 times that of
CO2, when normalized over 100 years, and an atmospheric lifetime of 120 years.179
Industrial on-site sources account for 7 percent of global N2O production. The two
largest industrial sources of N2O emissions are from adipic and nitric acid
production. The U.S. is the world’s major producer of these acids, with three
companies in four locations accounting for approximately 40 percent of world
production. Reducing N2O emissions from their production can be achieved through
the use of catalytic destruction, thermal destruction, or various N2O
recycling/utilization technologies (see Table 10).
Currently, the three largest adipic acid producing plants in the U.S. voluntarily
control N2O emissions. Sixty three percent of production employs catalytic
destruction, 34 percent uses thermal destruction, and 3 percent of production has
no N2O abatement measures. Currently, the nitric acid industry controls for NOx
using non-selective catalytic reduction (NSCR). NSCR is very effective at controlling
N2O emissions.180
U.S EPA n.d. US Emissions Inventory 2003,
http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsGHGEmissionsUSEmissionsI
nventory2003.html (accessed November 2006).
178
Rand, S. Ottinger, D. and Branscome, M. n.d. Opportunties for the Reduction of HFC-23 Emissions from the
Production of HFC-22, US EPA and Research Triangle Institute, http://arch.rivm.nl/env/int/ipcc/docs/IPCCTEAP99/files/m99a7-1.pdf (accessed November 2006).
179
Houghton, J.T., Meira Filho, L.G., Callander, B.A., Harris, N., Kattenberg, A. and Maskell, K. (eds)
Intergovernmental Panel on Climate Change (IPCC) (1996) Climate Change 1995: The Science of Climate
Change, Contribution of Working Group 1 to the second assessment report of the Intergovernmental Panel on
Climate Change, Cambridge University Press, Cambridge.
180
US EPA (2000) U.S. Adipic Acid and Nitric Acid N2O Emissions 1990-2020: Inventories, Projections and
Opportunities for Reductions,www.epa.gov/nitrousoxide/pdfs/adipic_nitric_n2o.pdf (accessed December 2006).
177
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Abatement
Technology
N 2O
Destruction
Factor
Extent of
Implementation
in the U.S.
Description
Catalytic
Destruction
90 – 95
percent
Two plants
comprising
approx. 63
percent of U.S.
production
capacity.
N2O destruction is achieved
using a N2O decomposing
catalyst, metal-zeolite catalysts
(i.e. noble metals, precious
metals). Using a catalyst allows
operation at a much lower
temperature (Reimer, 199a).
Thermal
Destruction
98 – 99+
percent
One plant,
comprising
approx. 34
percent of U.S.
production
capacity.
One example of thermal N2O
destruction is the destruction of
off-gases in boilers using
reducing flame burners with
premixed methane (or natural
gas) (Reimer, 1999a).
Recycling,
Utilization
Technologies
90 – 98
percent
In 2000, a 20,000
metric ton
expansion unit at
one of the U.S.
plants will
implement an N2O
recycling/utilizatio
n technology.
This technology uses N2O offgas as an oxidant to produce
phenol from benzene. The
phenol produced will be used in
the nylon process, with the
remaining capacity sold on the
open market. Once the
technology has been
demonstrated successfully,
there are plans for expanded
use. It is estimated to result in
a 20 percent cost reduction in
the production of adipic acid
(CW, 1998). Solutia has since
announced delayed
implementation of this
technology.
Recycle
to
Nitric Acid
98 – 99
percent
None currently.
A French company has licensed
and implemented a technology
patented
by
DuPont
that
recycles N2O to produce nitric
acid by burning the gas at high
temperatures in the presence of
steam (CW, 1998). The benefits
of this process are two fold: it
captures the N2O from adipic
acid production and avoids the
N2O generated by conventional
nitric acid production.
Table 10: Abatement technologies Source: U.S. EPA, 2000181
181
US EPA (2000) U.S. Adipic Acid and Nitric Acid N2O Emissions 1990-2020: Inventories, Projections and
Opportunities for Reductions, www.epa.gov/nitrousoxide/pdfs/adipic_nitric_n2o.pdf (accessed December 2006).
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Prospering in a Carbon-Constrained World
Electrical Transmission Equipment (SF6 emissions)
SF6 has a global warming potential 23,900 times greater than that of CO2, and an
atmospheric life of 3,200 years. Therefore, one pound of SF6 has the same global
warming impact of 11 tones of CO2. The main use of SF6 is in the electric power
industry, which uses roughly 80 percent of all SF6 produced worldwide, which uses
it for insulation and current interruption in electric transmission and distribution
equipment. Ideally, none of this gas would be emitted into the atmosphere. In
reality, significant leaks occur from aging equipment, and gas losses occur during
equipment maintenance and servicing. SF6 emissions from electric power
transmission equipment can be quantified and reduced using the protocols
developed by the WRI/WBCSD. Numerous nations also have their own programs.
For example, the U.S. EPA’s SF6 Emission Reduction Partnership for Electric Power
Systems Scheme.182 From 1999-2003, this program achieved reductions in SF6
emissions of ~6 percent.183
Figure 41: SF6 emission reduction partnership emission rate trend, 1999 – 2003
Source: US EPA, n.d.184
US EPA, n.d. SF6 Reduction Partnership for Electric Power Systems, www.epa.gov/highgwp/electricpower-sf6
(accessed November 2006).
183
US EPA, n.d. SF6 Reduction Partnership for Electric Power Systems:Resources
www.epa.gov/highgwp/electricpower-sf6/resources.html (accessed November 2006).
184
US EPA n.d. SF6 Emission Reduction Industry Partnership program, http://www.epa.gov/highgwp1/sf6
(accessed November 2006).
182
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The most promising and cost-effective options to reduce SF6 emissions are:
Leak detection and repair. The U.S. EPA estimates that if consistently and
aggressively implemented in the U.S., SF6 emissions could be reduced by 20
percent.
-
Use of recycling equipment The U.S. EPA estimates that SF6 recycling could
eliminate 10 percent of total related emissions from the U.S. electric industry.
-
Reducing the amount of SF6 needed in the first place. In 1999, PG&E set a threeyear goal to reduce SF6 emissions annually by 50 percent from a 1998 baseline.
PG&E has successfully achieved this goal by implementing several key policies and
procedures resulting in more efficient and cost-effective use of SF6. The savings
from reduced gas purchases totaled about US$400,000.185
-
In the future, superconductivity has the potential to revolutionize electric
transmission systems in the same way fiber optics revolutionized the
communications industry. Unlike conventional wires made of materials such as
copper, super-conducting wires made of advanced materials have the ability to
carry large electrical current without resistance losses. High temperature
superconductors (HTS) conduct electricity with extremely high efficiency. When an
electrical conductor is cooled sufficiently, electrical resistance disappears, which
allows a very large electrical current to flow through it. Since this prevents heat
loss, these wires require much less insulation, which means they need less SF6.
Almost 40 percent of the capital investment currently required to produce and
deliver electricity goes to construct transmission and distribution facilities. Seven
and one-half percent of electricity generated in the United States each year is
currently lost due to the resistance of copper and aluminum wire. By the middle of
the 21st century, the electricity superhighway could be dominated by hightemperature superconducting (HTS) wires in cables (Figure 29), transformers, and
current controllers. Superconductors, which have nearly zero resistance, could
make available most of the energy that is currently lost in distribution, without
requiring any additional fossil fuel use or generating capacity. In addition to
reducing electricity losses, HTS materials could strengthen the reliability of the U.S.
electricity infrastructure; eliminate hazardous materials from electrical systems; and
create thousands of new high-technology domestic jobs.
185
US EPA, n.d. SF6 Reduction Partnership for Electric Power Systems: Case Study,
www.epa.gov/highgwp/electricpower-sf6/pdf/PGE_casestudy.pdf (accessed November 2006).
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Prospering in a Carbon-Constrained World
Figure 42: Cross-Sectional View of Cold Dielectric Design of High-Temperature
Superconducting
Source: Interlaboratory Working Group, 2000 186
186
Interlaboratory Working Group: Oak Ridge National Lab., Lawrence Berkeley Lab.; and National Renewable
Energy Lab., (2000) Scenarios for a Clean Energy Future, ORNL/CON-476, LBNL-44029 and NREL/TP-62029379, November, p366.
Prospering in a Carbon-Constrained World
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The Natural Edge Project 2006
Part 3: Transport Sector - Mobile Combustion
CO2 emissions from vehicles operated by each CCX ember are included emission
sources if they represent large emission sources – namely 10,000 metric tons of
CO2 equivalent per year or more. Corporate transportation emissions can take the
form of either direct or indirect emissions. Direct emissions refer to only those
emissions that are associated with owned or controlled sources, such as company
owned vehicle fleets and corporate aircraft. Indirect emissions refer to all other
company-related emissions, including employee commuting, short-term vehicle
rentals, and upstream/downstream transportation emissions, such as those
associated with material inputs or consumer use. There is a range of ways that
business, municipalities and universities can reduce their greenhouse gas emissions
from transport (mobility).
Corporate and government fleets can, over time, purchase more efficient
cars/trucks (see Table 11).
-
Organizations can do much to encourage car-pooling of staff.187 Companies can
join government sustainable transport schemes such as the U.S. EPA’s Smart
Transport Partnership for assistance in setting up such schemes.
-
Business travel with airlines can now be done in a climate neutral way. For the
first time ever, airplane travel can be certified as having a net zero impact on the
earth's climate. TripleE, one of the United States' leading socially responsible
businesses, recently announced that it received certification from the Climate
Neutral Network allowing it to offer a first-of-its-kind travel program that prevents
air travel from contributing to global warming. "Every time we fly, drive a car or
spend the night in a hotel, we contribute to global warming. We're providing a great
way for travelers to reduce their role in this problem," said Mitchell Rofsky, TripleE's
president. TripleE is investing in offset projects to meet their climate neutral
commitments, the first of which is the installation of natural gas boilers to replace
inefficient and polluting oil-burning boilers in public schools throughout Portland,
Oregon. This will save the schools thousands of dollars and keep hundreds of tons
of CO2 out of the atmosphere.
-
Stock turnover of fleets is another significant opportunity to reduce GHG
emissions from transport. This could help any company running a fleet of cars,
buses, or airplanes. For instance, new airplanes are 20 percent more efficient than
older models.
-
187
USA EPA n.d. Smart Transport Partnership: Nike case study, www.epa.gov/smartway/partners/nike.htm
(accessed November 2006).
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Prospering in a Carbon-Constrained World
Specifications
Emission
Standard
HONDA CIVIC GX
1.7L 4, auto
PZEV
HONDA INSIGHT
1.0L 3, auto
SULEV II
57
56
TOYOTA PRIUS
1.5L 4, auto
PZEV
60
51
HONDA CIVIC
HYBRID
1.3L 4, auto
PZEV
47
48
TOYOTA COROLLA
1.8L 4, manual
ULEV II
32
41
TOYOTA ECHO
1.5L 4, manual
Tier 2 bin 9
35
42
NISSAN SENTRA
1.8L 4, manual
PZEV
28
35
HONDA CIVIC HX
1.7L 4, manual
ULEV I
36
44
PONTIAC VIBE /
TOYOTA MATRIX
1.8L 4, manual
ULEV II
30
36
MAZDA 3
2.0L 4, manual
PZEV
28
35
2.3L 4, auto
PZEV
36
31
2.0L 4, manual
PZEV
26
35
Make & Model
FORD ESCAPE
HYBRID
FORD FOCUS /
FOCUS WAGON
MPG: MPG:
City Hwy
34
30
Table 11: The greenest vehicles of 2005
Source: Greencars.com, 2005188
Figure 43: Ford Escape Hybrid
Source: Tom Strongman, n.d.189
188
189
Greencars.com n.d. Greenest Cars of 2005 www.greenercars.com/12green.html (accessed November 2006).
Tom Strongman’s Auto Ink n.d. 2005 Ford Escape Hybrid,
http://www.tomstrongman.com/RoadTests/EscapeHybrid/Index.htm (accessed November 2006).
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Universities and Municipalities
There is much that Universities and Municipalities can do also to reduce emissions
from transport. Encouraging public transport, cycling and walking has all sorts of
hidden economic benefits. For instance, encouraging these forms of transport
prevents the need to build more vertical parking in the inner city or on university
campuses, which can mean significant financial savings for municipalities and
universities. For instance, the “Getting Students and Staff Out of the Car” program
at Cornell University, New York, saved US$3,123,000.190 Creating a “Bus-Riding
Campus” at the University of Colorado-Boulder, saved them US$1,000,000. There is
much that municipalities can do to send clearer market signals to internalize the
real externalized costs of current transport usage. For example, consider the
congestion eco-tax recently implemented in London.
For most, traffic is one of the few areas of politics that remains untouchable.
Although economists could see that charging people directly for driving in certain
areas of a city would make traffic more manageable, especially if linked to a
hypothecated long-term improvement of public transport, no politician would take
on the powerful car lobby. The political risks are very high, as Ken Livingstone,
Mayor of London, found in 2002. He established an expensive, though non-invasive,
system of monitoring cars and charging drivers to cross through inner London. In
the first few weeks a 20-25 percent reduction in traffic was observed (and was
greatly appreciated by communities and by business). The £130 million per year
collected is already being channeled into improved public transport. There have
been few substantial complaints. Cities around the world are now preparing to copy
the London experiment. A long-term project to tackle what was seen as an
insurmountable problem has begun to work. The political risk has paid off – the
vision has worked.191 There are many great efforts and remarkable individual
achievements to report, but to ensure that over the next 30 years we achieve more
than the last 30, more integrated approaches are needed.
Feebates: Municipalities
Another simple and positive policy that municipalities can implement is feebates.
Feebates simply combine both a fee on the most environmentally harmful brands of
a certain product, whilst providing income to governments, allowing them to
provide a rebate to encourage consumers to purchase the most environmentally
benign products. Operationally feebates are very simple, as in the example of the
car outlined by Hawken et al in Natural Capitalism. When you bought a new car,
you would pay an extra fee if it were an inefficient user of fuel, or alternatively get a
190
National Wildlife Federation (NWF) (1998) Green Investment, Green Return: How Practical Conservation Projects
Save Millions on America's Campuses, NWF, Reston, VA.
191
UK Government, Transport For London (2003) Congestion Charging 6 Months On,
http://www.tfl.gov.uk/tfl/downloads/pdf/congestion-charging/cc-6monthson.pdf (accessed December 2006).
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rebate if it were energy-efficient. The neutral point would be set so that fees and
rebates balanced, so it becomes neither an inflationary measure nor a disguised
tax.
The fees and rebates may impact at point of sale or on annual registration fees, and
usually offset each other thereby ensuring fiscal neutrality. In principle this can be a
cost neutral program to government, not involving any new taxes being created.
Australian state governments in particular have many rebate schemes now to
encourage consumers to purchase more water and energy efficient products and are
to be congratulated for that; but as yet, Australia does not have a single feebate
scheme. Feebate variations already exist in Ontario (Canada), Germany, Denmark,
Austria, the UK, and parts of the U.S. In June 2004, France announced it would be
implementing a feebate scheme on all cars.
The key benefit of feebates is that they would ensure that industry knows that clear
market signals will be sent to the consumer to purchase more efficient products,
stimulating innovation in the right direction for sustainability. But government
would still need to work with industry to phase in feebates to ensure industry has
time to respond. To reduce administrative costs, feebates can be targeted to those
consumer products that have the largest ongoing environmental impacts, such as
cars, and within the home refrigerators and washing machines. Feebates have been
criticized because it is difficult to accurately calculate the externality costs in order
to know what a fair fee and rebate amount would be, but this is true of any attempt
to internalize externalities. The benefit of feebates over other attempts to build
externalities into market signals is that feebates can be phased in before
governments have compiled databases on the real costs of externalities that are not
straightforward to determine.
These are but some of the strategies that can assist to reduce GHG emissions from
mobile transportation. Another strategy that transportation, airline, and car
companies can investigate is carbon offsets as mentioned in the case of TripleE. The
airline industry in particular has one of the fastest growing carbon footprints. U.K.
studies show that within 50 years the airline industry in the U.K. will be responsible
for 30 percent of that country’s GHG emissions. Investing in carbon offsets is
therefore a critical strategy for such industries to continue to reduce their
emissions.
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Part 4 - Offsets
Capturing Methane from Coal Mines
Methane from landfill emissions can be captured and burnt for energy, but there are
other sources of methane emissions that can also be converted into energy. For
instance, methane is liberated through natural degasification during underground
and surface coal mining. It is also emitted from ventilation systems, used at
underground mines, which ensure methane levels remain within safe
concentrations. The technologies that oxidize this low-concentration methane are
especially promising. There are also many innovative technologies available to
capture and produce coal-bed methane (CBM) and coal mine methane (CMM).
Furthermore, the development of advanced drilling technologies, such as in-mine
and surface directional drilling systems, may enable fewer wells to produce more
gas, thus increasing efficiency and reducing emissions.192 The uptake of these
technologies is being encouraged by governments around the world. For instance,
The U.S. EPA and the U.S. DOE are working with Consol Energy to demonstrate
thermal oxidation of ventilation air methane. Ventilation air methane equipment can
use up to 100 percent of the methane released from a mine ventilation shaft. It also
generates heat that can be used for power production.
Figure 44: Capturing methane from coal mines
Source: U.S. Climate Technology Program, 2003193
192
US Government n.d. U.S. Climate Change Technology Program, http://www.climatetechnology.gov (accessed
November 2006).
193
U.S. Climate Change Technology Program (2003) Research and Current Activities, US Government,
http://www.climatetechnology.gov/library/2003/currentactivities/car24nov03.pdf (accessed November 2006).
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Prospering in a Carbon-Constrained World
Forestry Offsets Project
Forestry offsets projects are those through which forestry practices remove CO2
from the atmosphere. The term “sinks” is also often used to describe forestry lands
that absorb CO2. These projects can help prevent global climate change by
enhancing carbon storage in trees, preserving existing tree carbon, and by reducing
emissions of CO2, methane (CH4) and nitrous oxide (N2O).
Key Forestry
Offset Project
Types
Explanatory note
Effect on greenhouse
gases
Afforestation
Tree planting on lands
previously not in forestry.
Increases carbon storage
through sequestration.
Reforestation
Tree planting on lands,
such as restoring trees on
severely burned lands that
will demonstrably not
regenerate without
intervention.
Increases carbon storage
through sequestration.
Forest preservation Protection of forests that
Avoids CO2 emissions via
or avoided
otherwise would have been conservation of existing
deforestation
cleared.
carbon stocks.
Forest management Modification of forestry
practices, such as
lengthening the harvestregeneration cycle.
Increases carbon storage
by sequestration
Table 12: Key forestry offset project types and their effect on GHGs
Source: U.S. EPA, 2006194
Agriculture and forestry projects are typically discrete activities with clearly defined
geographic boundaries, timeframes, and institutional frameworks. The GHG Protocol
Initiative for Project GHG Accounting and Reporting, convened by World Resources
Institute and World Business Council for Sustainable Development has much
information on ways to address the following key issues regarding management of
forestry offset projects.195 The key issues associated with quantifying the GHG
benefits of forestry projects, (i.e., used to offset another entity's GHG emissions),
are:
-
establishing baselines;196
U.S. Environmental Protection Authority (EPA) (2006) Table: Forestry Practices that Sequester or Preserve
Carbon, www.epa.gov/sequestration/forestry.html (accessed November 2006).
195
World Business Council on Sustainable Development & World Resources Institute n.d. Greenhouse Gas Protocol
Initiative, www.ghgprotocol.org/reduction/index.htm (accessed November 2006).
196
U.S. EPA n.d. Establishing baselines for projects, www.epa.gov/sequestration/baselines.html (accessed
November 2006).
194
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identifying leakage for the unanticipated decrease or increase in GHG benefits
outside of the project's accounting boundary as a result of project activities;197
-
addressing duration to address the fact that the benefits of GHG offset projects
in forestry are partially or completely reversible;198 and
-
monitoring and verifying GHG benefits to ensure credibility for the results claimed
by your project.199
-
Many organizations are active in establishing and assessing agricultural and forestry
projects such as GHG offsets. For instance, American Electric Power (AEP) is
currently involved in Bolivia,200 Brazil,201 and in Louisiana's Catahoula National
Wildlife Refuge.202 AEP has joined in partnerships with governmental agencies, local
and international environmental groups to preserve and restore wild lands and
wildlife habitats. The U.S. EPA website also features other companies doing similar
good work.203
CCX offers opportunity for organizations to achieve significant carbon sequestration
credits through sequestration not just in the U.S., but also in Brazil. Few people
realize that 20 percent of the world's annual CO2 emissions result from land-use
change; primarily deforestation in the tropical regions of Central and South
America, Africa, and Asia. These lands are being transformed from relatively highcarbon stock natural forests to generally lower-carbon stock crop, agro-forestry,
grazing, or fuel-wood lands and urban areas. Whilst these changes through land
clearing, forest harvest, and fire provide immediate economic benefits and rural
livelihood, in the long term it will lead to devastation of these rural economies as
tropical soils run out of nutrients.
Soil Offsets
Emissions from soil disturbance can be reduced by a number of approaches, such as
reduced tillage; erosion control; irrigation management; changes in rotations; and
crop cover. The IPCC estimates that improved productivity and conservation tillage
can allow increases in soil carbon at an initial rate of around 0.3 tones of
Carbon/ha/yr.204 The potential of carbon sequestration, on a global scale, is about
0.6-billion tones to 1-billion tones per year.205
The idea of using soils for absorbing CO2 comes from Rattan Lal, Professor of Soil
Science at Ohio State University. Currently, soils don’t act as a carbon sink; they
Ibid.
Ibid.
199
Ibid.
200
Noel Kempff Mercado National Park n.d. Homepage, www.noelkempff.com (accessed November 2006).
201
Guaraqueçaba Climate Action Project n.d. Homepage, www.guaracap.com (accessed November 2006).
202
Catahoula Wildlife Refuge n.d. Homepage, http://www.fws.gov/catahoula/ (accessed November 2006).
203
US EPA (2006) Carbon Sequestration in Agriculture and Forestry: Project Analysis,
http://www.epa.gov/sequestration/project_analysis.html (accessed November 2006).
204
Watson, R.T. et al. (eds.) (2000) Special Report on Land Use, Land-Use Change, and Forestry,
Intergovernmental Panel on Climate Change, Cambridge University Press. p204.
205
Lal, R. (YEAR) ABC Earthbeat Radio Interview: Rattan Lal,
http://www.abc.net.au/rn/science/earth/stories/s226590.htm (accessed November 2006).
197
198
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Prospering in a Carbon-Constrained World
act as a carbon source. Ever since humanity began to farm, soils have been losing
carbon, due to practices such as plowing that opens-up the soil and mixes oxygen
into it, leading to oxidation of the carbon riches in the soil. In addition, plowing the
soil decreases the structural stability, making it more vulnerable to erosion by water
and wind. As the erosion happens, it removes the light fraction of the soil, which is
organic matter content. Plowing, therefore, depletes the carbon in the soil in two
ways. To reduce carbon loss from soil, alternative methods of farming are needed,
such as new methods of plowing, or simply agricultural systems that plough much
less. The critical point is that ploughs not only dig a furrow through the soil, but
they also turn it over, and it is this that does the damage. Plowing in a way that
doesn’t turn the soil, or not plowing at all, is called “reduced tillage”. It is now a
respected method for preventing soil erosion that also involves using plenty of
mulch and manure, and planting crops to enhance the soil. Professor Lal believes
that applying these techniques around the world would sequester a significant
amount of carbon.
Ian Noble, former chief executive of the Australian CRC for Greenhouse Accounting,
says sequestering carbon in soil offers a distinct advantage: “Carbon stored in the
soil is actually much safer for reversibility than, for example, trees and other
vegetation. However, there are some risks. Say, for example, the farmer has been
carrying out… a minimum tillage for 10, 15 years or more, and then for one reason
or another they go back to deep plowing. Even for a few years, that can release a
lot of the carbon that’s been stored. So any monitoring system has to be accurate
enough to detect that, and make sure that that’s properly accounted for… Minimum
tillage was not done originally for Kyoto purposes; it was done because it was good
agricultural practice, and we’d like to encourage that practice throughout, not just
the Annex 1 countries, the developed countries, but also through the developing
countries. So it is a very worthwhile thing to do for many different purposes.”
For more information please consult Professor Lal’s homepage at Ohio State
University,206 and the U.S. EPA’s website that provides extensive resources for
calculating baselines regarding soil carbon offsets.207
Farming Offsets
At least 5 percent of many nations’ GHG emissions stem from cattle and sheep.
Australia’s CSIRO is exploring ways to help sheep and cattle to digest rough and low
nutrient pastures more efficiently. By modifying the bacteria in the animal's rumen,
scientists have found livestock yield more meat, wool and milk - and less methane.
Trials have shown live weight gains of about 20 percent in sheep and cattle, and 9
Lal, R. (2004) No-Till Farming Offers Fix to Global Problems, www.ag.ohio-state.edu/~news/story.php?id=2880
(accessed November 2006).
207
U.S. EPA, n.d. Carbon Sequestration in Agriculture and Forestry: Resources,
www.epa.gov/sequestration/tools_resources.html (accessed November 2006).
206
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percent fleece weight gains. In digesting more of their food, the animals release 1880 percent less methane through belching.208
Representative
Time over which
carbon
sequestration may occur
sequestration
before saturating
rate in U.S.
(Assuming no disturbance,
harvest or interruption of
(Metric tons of C
practice)
per acre per year)
Activity
Afforestation
Reforestation
a)
c)
Changes in forest
management
Conservation or
riparian buffers
Conversion from
conventional to
reduced tillage
References
0.6 – 2.6
b)
90 – 120+ years
Birdsey 1996209
0.3 – 2.1
d)
90 – 120+ years
Birdsey 1996210
0.6 – 0.8
e)
If wood products included in
accounting, saturation does
not necessarily occur if C
continuously flows into
products.
Row 1996211
0.2
f)
IPCC 2000212
0.1 – 0.3
g)
Not calculated
Lal et al.
1999213
0.2 – 0.3
h)
15 – 20 years
West and Post
2002214
25 – 50 years
Lal et al. 1999
25 – 50 years
Follet et al.
2001215
0.2 i)
Changes in
grazing land
management
0.02 – 0.5
Biofuel
substitutes for
fossil fuels.
1.3 – 1.5
j)
k)
Saturation does not occur if
Lal et al. 1999.
fossil fuel emissions are
continuously offset.
Table 13: US EPA on Representative Carbon Sequestration Rates and Saturation
Periods for Key Agricultural & Forestry Practices
Source: U.S. Environmental Protection Agency, n.d216
U.S. EPA (1998) Small Steps Make a Difference: Improving your Cow-Calf Business and the Environment in the
Southeastern US, www.epa.gov/sequestration/pdf/smallsteps.pdf (accessed November 2006).
209
Birdsey, R.A. (1996) ‘Regional Estimates of Timber Volume and Forest Carbon for Fully Stocked Timberland,
Average Management After Final Clearcut Harvest’, in Sampson, R.N. and Hair, D. (eds.) Forests and Global
Change. American Forests, Washington, DC. Volume 2: Forest Management Opportunities for Mitigating Carbon
Emissions.
210
Ibid.
211
Row, C. (1996) ‘Effects of selected forest management options on carbon storage’ in Sampson, R.N. and Hair,
D. (eds.) Forests and Global Change. American Forests, Washington, DC. Volume 2: Forest Management
Opportunities for Mitigating Carbon Emissions. pp 27-58.
212
Watson, R.T. et al. (eds.) (2000) Special Report on Land Use, Land-Use Change, and Forestry,
Intergovernmental Panel on Climate Change, Cambridge University Press. p. 184.
213
Lal, R. Kimble, J.M. Follett, R.F. and Cole, C.V. (1999) The Potential of U.S. Cropland to Sequester Carbon and
Mitigate the Greenhouse Effect, Lewis Publishers, Broken Sound Parkway, NW.
214
West, T.O. and Post, W.M. (2002) ‘Soil Carbon Sequestration by Tillage and Crop Rotation: A Global Data
Analysis’, Soil Science Society of America Journal 2002,
http://cdiac.ornl.gov/programs/CSEQ/terrestrial/westpost2002/westpost2002.html (accessed December 2006).
215
Follett, R.F., Kimble, J.M. and Lal, R. (2001) The Potential of U.S. Grazing Lands to Sequester Carbon and
Mitigate the Greenhouse Effect, Lewis Publishers, Broken Sound Parkway, NW.
216
U.S. EPA n.d. Sequestration rates, www.epa.gov/sequestration/rates.html (accessed November 2006).
Important Note: Any associated changes in emissions of methane (CH4) nitrous oxide (N2O) or fossil CO2 not
included.
208
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Prospering in a Carbon-Constrained World
Table 13 Notes:
a) Values are for average management of forest after being established on
previous croplands or pasture.
b) Values calculated over 120-year period. Low value is for spruce-fir forest type
in Lake States; high value for Douglas Fir on Pacific Coast. Soil carbon
accumulation included in estimate.
c) Values are for average management of forest established after clear-cut
harvest.
d) Values calculated over 120-year period. Low value is for Douglas Fir in Rocky
Mountains; high value for Douglas Fir in Pacific Coast. No accumulation in soil
carbon is assumed.
e) Select examples, calculated over 100 years. Low value represents change
from 25-year to 50-year rotation for loblolly pines in Southeast; high value is
change in management regime for Douglas Fir in Pacific Northwest. Carbon in
wood products included.
f) Forest management here encompasses regeneration, fertilization, choice of
species and reduced forest degradation. Average estimate here is not specific
to U.S., but averaged over developed countries.
g) Assumed that carbon sequestration rates are same as average rates for lands
under USDA Conservation Reserve Program.
h) Estimates include only conversion from conventional to no-till for all cropping
systems except for wheat-fallow systems, which may not produce net carbon
gains. Estimates of changes in other greenhouse gases not included.
i) Assumed that average carbon sequestration rates are same for conversion
from conventional till to no-till, mulch-till or ridge-till. Estimates of changes in
other greenhouse gases not included.
j) See Improve/Intensify Management section in Table 16.1 of Follett et al.,
(2001). Low end is improvement of rangeland management; high end is
changes in grazing management on pasture, where soil organic carbon is
enhanced through manure additions. Estimates of flux changes in other
greenhouse gases not included.
k) Assumes growth of short-rotation woody crops and herbaceous energy crops,
and that burning this biomass offsets 65-75 percent of fossil fuel in CO2
emissions. Estimates of changes in other greenhouse gases not included.
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Douglas G. Cogan, Corporate Governance and Climate Change: Making the Connection, , a CERES
Sustainable Governance Project Report Prepared by the Investor Responsibility Research Center, June
2003.
1
Tim Weber, Business Editor, BBC News website, in Davos,
http://news.bbc.co.uk/1/hi/business/4221219.stm
2
3
Personal communication at the 2002 Fortune Magazine Annual Meeting, Aspen, Colorado.
4
www1.dupont.com/NASApp/dupontglobal/corp/index.jsp?page=/social/SHE/usa/us3b.html
Joseph Romm and William D. Browning, Greening the Building and the Bottom Line: Increasing
Productivity Through Energy-Efficient Design, (Colorado: Rocky Mountain Institute, 1994).
5
Vital Signs 2003 by WorldWatch Institute: Molly O. Sheehan wrote the section "Carbon Emissions
and Temperature Climb", pp. 40-41. In this section is a chart called "Global Average Temperature and
Carbon Emissions from Fossil Fuel Burning, 1950-2002, and Atmospheric Concentrations of Carbon
Dioxide, 1960-2002".
6
Geoffrey Lean, “Global Warming Approaching Point of No Return, Warns Leading Climate Expert,”
The Independent on Sunday, U.K. Sunday, January 23, 2005.
7
8
David Grossman, Columbia Journal of Environmental Law, February 2003.
9
Jeffrey Ball, Wall Street Journal, May 7, 2003.
Francis X. Lyons, “Sarbanes-Oxley and the Changing Face of Environmental Liability Disclosure
Obligations,” Gardner Carton & Douglas LLP, former US EPA regional administrator.
www.gcd.com/db30/cgi-bin/pubs/Sarbanes2.pdf.
10
“Global Warming Approaching Critical Point 'An Ecological Time-bomb is Ticking Away',” CNN Report,
Monday, January 24, 2005, posted: 3:59 PM EST (2059 GMT).
11
A. Lovins and Lovins, L. H., Climate: Making Sense and Making Money, (Colorado: Rocky Mountain
Institute, 1997) Also highly recommended is A. Lovins, and Lovins, H., Brittle Power (Colorado: Rocky
Mountain Institute, 1997) Chapter 17.
12
Drozdiak, W., “Big Corporations Alter View of Global Warming,” Washington Post Service, Friday,
November 24, 2000.
13
14
www.chicagoclimatex.com/news/CCXPressRelease_040701.html.
Coal Industry Advisory Board: International Energy Agency (IEA) and the Organization for Economic
Co-operation and Development (OECD), “Factors affecting the take up of clean coal technologies,”
Overview Report, 1996.
15
16
www.naturalgas.org/environment/naturalgas.asp
Hamilton C et al 2002, Long-Term Greenhouse Gas Scenarios, Discussion Paper No. 48, The
Australia Institute, Canberra p.38
17
Mark Z. Jacobson and Gilbert M. Masters , Wind is Competitive with Coal .Science Aug 24 2001:
1438. Department of Civil and Environmental Engineering, Stanford University, Stanford, CA 943054020, USA.
18
19
Lester R. Brown, Eco-Economy Update 2003-10, Earth Policy Institute 2003, December 3, 2003,
‘Coal: U.S. Promotes whiles Canada and Europe move beyond. (www.earthpolicy.org/Updates/Update30.htm)
Carbon Disclosure Project: Climate Change and Shareholder Value In 2004, Prepared by Innovest
Strategic Value Advisors, May 2004.
20
A. Lovins, Datta, K., Feiler, T., Rábago, K., Swisher, J., Lehmann, A. and Wicker, K., Small Is
Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size, (Colorado:
Rocky Mountain Institute Publications, 2002) www.smallisprofitable.com.
21
22
www.greenmountainpower.com/whoweare/green.shtml
The Jobs Connection: Energy Use and Local Economic Development, produced for the U.S.
Department of Energy (DOE) by the National Renewable Energy Laboratory, a DOE national laboratory.
The document was produced by the Technical Information Program, under the DOE Office of Energy
Efficiency and Renewable Energy. (www.flasolar.com/pdf/energy_jobs.pdf)
23
24
Personal communication from Ed Smeloff, General Manager SMUD, Oct, 2000.
25
www.smud.org/cpp/info/CPPFS.pdf
26
http://www.millionsolarroofs.org/index.html
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Prospering in a Carbon-Constrained World
27
BP Sustainability Report (2003) (www.bp.com)
Greg Bourne, then CEO of BP, “2050: Australia’s Energy Future,” interview, ABC Earthbeat
(08.30.03) Australia, (www.abc.net.au/rn/science/earth/stories/s931647.htm)
28
STMicro-electronics (2003) Sustainable Development report
(www.bl.uk/pdf/eis/stmicroelectronics2003is.pdf)
29
U.S. Environmental Protection Agency - PFC Reduction/Climate Partnership for the Semiconductor
Industry (www.epa.gov/highgwp/semiconductor-pfc/overview.html)
30
DuPont Sustainable Growth 2002 Progress Report: Creating Shareholder and Societal Value ... While
Reducing Our Footprint Throughout the Value Chain.
31
32
ibid
IBM, “Environment and Well-Being Report,” 2003 (www8.ibm.com/ibm/au/environment/annual/2003.html) p8
33
Presentation by Ravi Kutchibhotla, corporate program manager for energy management, IBM –
Conference of the Reducers, May 12, 2004, Toronto.
34
US Climate Change Technology Research Program - Research and Current Activities: Reducing
Emissions of Other Greenhouse Gases. (www.climatetechnology.gov)
35
Nike Partners with World Wildlife Fund and the Center for Energy and Climate Solutions to Reduce
Greenhouse Gas Emissions, Nike Joins Climate Savers Program, October 2, 2001.
36
The US Department of Energy, Energy Efficiency and Renewable Energy program provides extensive
overview of industry energy efficiency developments. (www.eere.energy.gov/EE/industry.html).
Further US resource web sites of note include (www.metaefficient.com) and (www.rmi.org). For a
comprehensive overview of organizations and databases on energy efficiency in the US and Europe
(www.energyefficient.com.au/links.html)
37
38
Watts, R. G. 1997, Engineering Response to Global Climate Change, Lewis Publishers, New York
39
http://www.climatetechnology.gov/library/2003/currentactivities/car24nov03.pdf
The World Business Council cement sustainability initiative provides a range of reference material.
(www.wbcsd.org)
40
41
ibid p.40
42
http://www.apcrc.com.au/Programs/Geodisc_Sleipner.htm
R. H. Williams, “Fuel De-carbonization for Fuel Cell Applications and Sequestration of the Separated
CO2,” Res. Rep., No. 295, January 1996, Princeton University Centre for Energy and Environmental
Studies, Princeton U., Princeton, NJ 08540.
43
44
45
Denver Mayors Office Press Release - 4/22/2004 Denver to Begin Using Biodiesel Fuels.
Andy Wales. How We Manage Our Fleets. 2001. HSBC Holdings.
Ray C. Anderson, Interface Chairman, “A Call for Systemic Change,” Plenary Lecture at the 3rd
National Conference on Science, Policy and the Environment: “Education for a Sustainable and Secure
Future” Sponsored by the National Council for Science and the Environment January 31, 2003.
Interface is a charter partner in the US EPA’s SmartWay Transport voluntary partnership as well as a
partner with Business for Social Responsibility's Green Freight Group.
46
47
World Business Council for Sustainable Development, “Interface: Sustainability Means ‘Business as
Usual’,” case study, 2004.
RIS International & Torrie Smith Associates, Moving Towards Kyoto: Toronto – Emission Reductions
1990-1998, Policy Report for Toronto Atmospheric Fund, April 22, 2003.
(www.city.toronto.on.ca/taf/pdf/moving_towards_kyoto_policyreport.pdf)
48
49
This case study has been drawn from www.metaefficient.com.
Birkeland, J. (2002) Design for Sustainability: A Sourcebook of Integrated Eco-Logical Solutions,
Earthscan, London.
50
Design by Simon Velez, built on land provided by the Caldas Committee of the Coffee Federation,
and funded by the Manizales Chamber of Commerce, chaired by Dr. Mario Calderon.
51
52
IPCC, Special Report on Emissions Scenarios, (Cambridge, UK: Cambridge University Press, 2000).
IPCC, “Special Report on Land Use, Land-Use Change And Forestry”
(www.grida.no/climate/ipcc/land_use/index.htm)
53
The Negawatt Revolution: Electric Efficiency and Asian Development, by Amory Lovins and Ashok
Gadil (www.rmi.org/images/other/Energy/E91-23_NegawattRevolution.pdf) A greatly abridged
version of this article was published in August 1991 by The Far Eastern Economic Review.
54
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55
RMI "Saving the Utilities" (www.rmi.org/sitepages/pid322.php)
Amory Lovins and Gadgil, A., “The Negawatt Revolution: Electric Efficiency and Asian
Development,” www.rmi.org/images/other/Energy/E91-23_NegawattRevolution.pdf. A greatly
abridged version of this article was published in August 1991 by The Far Eastern Economic Review.
56
Hawken, P., Lovins, A. and Lovins, L. H. (1999) Natural Capitalism: Creating the Next Industrial
Revolution, Earthscan, London
57
Larry Flynn, “Driven to be Green,” Building Design and Construction Magazine, November 1, 2003,
sourced from www.bdcmag.com/magazine/articles/BDC0311kToyota.asp.
58
59
(http://www.eere.energy.gov/femp/services/awards_presidential2002.cfm).
S. Arora, and Cason, T., “An Experiment in Voluntary Environmental Regulation: Participation in
EPA’s 33/50 Program,” Journal of Environmental Economics & Management, vol. 28, no 3, 1995,
pp271–286.
60
S. Arora and Cason, T., “Why do Firms Volunteer to Exceed Environmental Regulations?
Understanding Participation in EPA’s 33/50 Program,” Land Economics, November 1996, pp 413–432.
S. DeCanio, “The Efficiency Paradox: Bureaucratic and Organizational Barriers to Profitable EnergySaving Investments,” Energy Policy, vol. 26, no 5, 1998, pp441–454.
61
S. DeCanio and Watkins, W., “Investment in Energy Efficiency: Do the Characteristics of Firms
Matter?,” Review of Economics and Statistics, February 1998, pp95–107.
Sony Electronics Inc. is not only committed to being the best at bringing advanced technology
together with the needs of the end-user, it is also dedicated to protecting and improving the
environment in all areas of the company's operations.
(http://news.sel.sony.com/corporateinfo/environmental_affairs/)
62
Joseph Romm (U.S. Department of Energy) and William Browning (Rocky Mountain Institute)
‘Greening the Building and the Bottom Line.
63
64
ibid
65
Natural Capitalism p 52. http://www.rmi.org/sitepages/pid208.php.
Case study from greenerbuildings.com:
http://www.greenerbuildings.com/case_studies_detail.cfm?LinkAdvID=38528).
66
67
http://www.h-m-g.com/projects/daylighting/projects-PIER.htm
For a detailed synthesis of this thesis refer to Hargroves, K. and Smith, M., The Natural Advantage
of Nations: Business Opportunities, Innovation and Governance in the 21st Century, (London:
Earthscan, 2005). Developed by The Natural Edge Project, www.naturaledgeproject.net.
68
Lovins, A. and Lovins, L. H., Climate: Making Sense and Making Money, (Colorado: Rocky Mountain
Institute, 1997). Also highly recommended is Lovins, A. and Lovins, H., Brittle Power, (Colorado:
Rocky Mountain Institute, 1982), Chapter 17.
69
3M – Reducing Greenhouse Gas Emissions,
www.solutions.3m.com/wps/portal/_l/en_US/_s.155/115245/_s.155/115898.
70
Refer to key works such as Hawken, P., et al., 1999, Natural Capitalism: Creating the Next
Industrial Revolution, and Hargroves, K. et al., 2005, The Natural Advantage of Nations.
71
72
Center for Energy and Climate Solutions, www.energyandclimate.org/strategic.cfm.
Green Investment, Green Return - How Practical Conservation Projects Save Millions on America's
Campuses, National Wildlife Federation, http://www.nwf.org/campusEcology/HTML/gigr.cfm.
73
RIS International &Torrie Smith Associates, Moving Towards Kyoto: Toronto – Emission Reductions
1990-1998, policy report for Toronto Atmospheric Fund, April 22, 2003,
www.city.toronto.on.ca/taf/pdf/moving_towards_kyoto_policyreport.pdf.
74
75
City of Toronto Webpage, Toronto Atmospheric Fund, http://www.city.toronto.on.ca/taf/ .
76
Climate Change, Heidelberg Germany, 2001, http://www.energie-cites.org/BD/PDF/hei-cha-en.pdf.
Woking Borough Council Energy Services, Taking Stock: Case Study 2, 2003,
www.takingstock.org/Downloads/Case_Study_2-Woking.pdf.
77
Cities for Climate Protection (CCP) is a performance-oriented campaign that offers a framework for
local governments to develop a strategic agenda to reduce global warming and air pollution emissions,
with the benefit of improving community livability, http://www.iclei.org/co2/index.htm.
78
79
Episcopal Power and Light Project, www.theregenerationproject.org/epl.html.
80
Interfaith Power and Light Project, www.theregenerationproject.org/ipl/.
81
Ibid.
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“Corporate Environmental Governance: A study into the influence of Environmental Governance and
Financial Performance,” Prepared by Innovest Strategic Value Advisors November, 2004,
www.innovestgroup.com/publications.htm.
82
83
Ibid., p. 12.
84
ibid,p13
85
Ibid., p. 13.
86
ibid,p43
87
ibid 50
88
ibid 51
Braithwaite, J. and Drahos, P., Global Business Regulation, (Cambridge, U.K.: Cambridge University
Press, 2000).
89
Carbon Disclosure Project Appendix: “Renewable Energy and Clean Technology”: Global Market
Overview.
90
91
http://www.shell.com/home/media-en/downloads/scenarios.pdf.
M. Mansley, Long Term Financial Risks to the Carbon Fuel Industry from Climate Change, (London:
Delphi Group, 1995).
92
Carbon Disclosure Project, Climate Change and Shareholder Value In 2004, prepared by Innovest
Strategic Value Advisors, May 2004.
93
Hargroves, K and Smith, M (2005) The Natural Advantage of Nations: Business Opportunities,
Innovation and Governance in the 21st Century, Earthscan, London. Developed by The Natural Edge
Project (www.naturaledgeproject.net)
94
Michael E. Porter and Claas van der Linde, "Toward a New Conception of the EnvironmentCompetitiveness Relationship," Journal of Economic Perspectives, vol. 4, no. 4, Fall 1995, pp. 97-118.
95
Carbon Disclosure Project: Climate Change and Shareholder Value In 2004, prepared by Innovest
Strategic Value Advisors, May 2004,
96
97
Douglas G. Cogan, Corporate Governance and Climate Change: Making the Connection, June 2003,
a CERES Sustainable Governance Project Report prepared by the Investor Responsibility Research
Center.
Corporate Environmental Governance: A study into the influence of Environmental Governance and
Financial Performance, prepared by Innovest Strategic Value Advisors November 2004.
98
“100 Most Sustainable Companies Named at Davos,” GreenBiz.com. The Global 100 Most
Sustainable Corporations in the orld is a project initiated by Corporate Knights Inc., with Innovest
Strategic Value Advisors Inc. as the exclusive research analytic data provider,
www.greenbiz.com/news/news_third.cfm?NewsID=27635
99
100
Katie Sosnowchik, “Between Blue and Yellow: What's In a Name?,” Green@work.
Evelyn Iritani, “From the Streets to the Inner Sanctum, “The Los Angeles Times, Sunday, February
20, 2005, http://www.truthout.org/docs_2005/L022005Y.shtml.
101
For further discussion of the Shell story see forward by Hunter Lovins in Hargroves, K. and Smith,
M., The Natural Advantage of Nations, 2005, Earthscan, London.
102
World Business Council for Sustainable Development, "Annual Review 2003 - Reconciling the Public
and Business Agendas."
103
104
Evelyn Iritani, “From the Streets to the Inner Sanctum.”
"Expecting Sales Growth, CEOs Cite Worker Retention as Critical to Success”,
PricewaterhouseCoopers Trendsetter Barometer, March 15, 2004, www.barometersurveys.com.
105
106
http://www.med.harvard.edu/chge/cccostspress.html.
107
http://www.pewclimate.org/hurricanes.cfm.
108
Munich Re, 28 December, 2004, press release, www.munichre.com.
“Insurer Warns of Global Warming Catastrophe,” Planet Ark, March 4, 2004,
http://www.planetark.com/dailynewsstory.cfm/newsid/24122/story.htm.
109
110
Maggie McKee, ‘US states sue over global warming’, NewScientist.com news service, 22 July, 2004.
Grossman, D., “Warming Up to a Not-so-Radical Idea: Tort-based Climate Change Litigation,”
Columbia Journal of Environmental Law, February, 2003.
111
112
Amy Cortese, “As the Earth Warms, Will Companies Pay?” August 18, 2002.
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Francis X. Lyons, “Sarbanes-Oxley and the changing face of environmental liability disclosure
obligations,” TRENDS, Volume 35, Number 2, November/December 2003,
http://www.gcd.com/db30/cgi-bin/pubs/Sarbanes2.pdf.
113
114
GreenBiz.com, February 18, 2005, www.GreenBiz.com.
115
http://www.planetark.com/dailynewsstory.cfm/newsid/29556/story.htm.
116
http://www.greenbiz.com/news/news_third.cfm?NewsID=27474, London, December 7, 2004.
Carbon Disclosure Project: “Climate Change and Shareholder Value”: Prepared by Innovest
Strategic Value Advisors, May 2004.
117
Interlaboratory Working Group 1997, “Scenarios of U.S. Carbon Reductions: Potential Impacts of
Energy-Efficient and Low-Carbon Technologies by 2010 and Beyond,” Oak Ridge, TN and Berkeley, CA:
Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. ORNL-444 and LBNL40533. September. Apparently no longer available on the internet. Mintzer I, Leonard J A & Schwartz P
2003, US Energy Scenarios for the 21st Century, Pew Center on Global Climate Change.
118
References to reports that show that deep cuts in greenhouse emissions are possible. H.,Turton,
Ma, J., Saddler, H. and Hamilton, C., Long-Term Greenhouse Gas Scenarios, Discussion Paper No. 48,
The Australia Institute, Canberra, 2002. Department of Trade and Industry, Our Energy Future –
Creating a Low Carbon Economy, Energy White Paper, UK Department of Trade and Industry, 2003,
version 11 on www.dti.gov.uk/energy/whitepaper/; R. Denniss, Diesendorf, M. and Saddler, H., A
Clean Energy Future for Australia, a report by the Clean Energy Group of Australia, 2004.
119
Department of Trade and Industry, Our Energy Future – Creating a Low Carbon Economy, Energy
White Paper, UK Department of Trade and Industry, 2003,version 11.
120
.
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