Category Archives: Carbon GHG

Highlights from the Preliminary Draft Regulation for a California Cap-And-Trade program, Part I

On November 24, 2009, California released a preliminary draft regulation for a cap-and-trade program, in accordance with the California Global Warming Solutions Act of 2006 (AB 32) for public review and comment. At 132 pages, it was a doozy. Most likely in an effort to minimize comments, the deadline for comments on the initial draft is January 11, 2010. However, if you are really interested, a workshop to discuss the proposal is being held on December 14, 2009.

The goal for the cap-and-trade program, which is being designed to be consistent with the Western Climate Initiative, is to establish a cap covering at least 85% of California’s GHG emissions and allow trading to ensure cost-effective emission reductions. The goal is to start the program in 2012 with approximately 600 of the state’s largest GHG-emitting stationary sources (including industrial sources above 25,000 MTCO2e) and electricity imports and expand the program, which would include industrial sources under 25,000 MTCO2e and transportation fuels, until it covers up to 90% of the state’s GHG emissions.

The current design is slanting towards three compliance periods — 2012 to 2014, 2015 to 2017, and 2018 to 2020 — and sets a cap for each. In each compliance period, a covered entity would be expected to surrender a portion of their current emissions until the 2020 target, which is to reduce GHG emission to 1990 levels, is hit.

When passed, the act, which is currently 65 pages in length and broken into 15 sub-articles, will become sub-chapter 10 climate change, article 5, sections 95800 to 96550, title 17, of the California Code of Regulations. Here are some of the important points in sub-articles 3 to 7.

SubArticle 3: Applicability

The article applies to the following greenhouse gases:

CO2,

N2O,

CH4,

SF6,

HFCs,

PFCs, and

NF3.

The article applies to industrial entities with recognized GHG producing processes, electricity deliverers, transportation fuel deliverers, natural gas deliverers, and deliverers of natural gas liquids.

SubArticle 4: Compliance Instruments

The Executive Officer will create GHG allowances and offset credits. Each compliance instrument issues represents a limited authorization to emit up to one metric tone of CO2e.

SubArticle 5: Registration and Tracking System

Any entity covered as of January 1, 2012 must register by March 31, 2012. Any entity that becomes a covered entity must register within 90 days of becoming covered. An entity must maintain a current and valid registration in order to receive compliance instruments (allowances and offset credits).

SubArticle 6: California Greenhouse Gas Allowance Budgets

A base budget of allowances will be created for each fiscal year. These allowances may be adjusted to account for voluntary investment in renewable sources of electricity generation.

SubArticle 7: Surrender Requirements for Covered Entities

The program will require all annual emissions reports to be verified by an independent accredited verifier. It will also require the relevant records to be maintained for at least 10 years.

In part II, we’ll cover sub-articles 8 through 15 and summarize the draft.

If the US Implements Cap and Trade Instead Of Carbon Tariffs, Are You Ready?

Share This on Linked In

As my long-time readers will recall, green and sustainability were major foci of this blog before they became popular topics among other bloggers. As a result, I’ve been following, and occasionally blogging about, carbon tariffs for years, which I expected to see more of in the (near) future as some states and provinces have already implemented a carbon tax (like California and British Columbia) and a bill was introduced into US Congress.

But recently I’ve been seeing references to cap and trade, which disturbed me for reasons I couldn’t quite pinpoint, mainly because I never saw a good definition of what it was, how it might be implemented, or what impacts it will have on your (global) supply chain. Needless to say, I was glad to see this recent article on the supply chain and cap and trade by Supply Chain Digest Editor-in-Chief Dan Gilmore and find out that I’m not alone. Seems Dan was in the same boat too.

So he did some research, and a few calculations, and arrived at some conclusions which are even more disturbing than you might expect. Not only will cap and trade, which would dole out carbon permits for so many tons of CO2 to your company, cost you and be more complicated than a carbon policy needs to be, but it will add volatility and risk into your supply chain … and that’s not good. You see, if cap and trade comes into play, we have the following unknowns to deal with:

  • the details
    depending on the implementation of cap and trade, the impact on your supply chain could be anywhere on the scale from minor nuisance through major burden
  • the complexity
    any scheme will necessarily be more complex than a straight carbon tariff (per ton) and will take years to implement
  • the global impact
    how will offshore carbon production be addressed, will it result in a move back to near-shore or home production, and will it result in more telecommuting to reduce office space?
  • the cost
    if your emissions are capped, you either have to reduce them or buy permits from your competitors, who will be auctioning them to the highest bidder … so you have no way to plan for the potential cost in advance

Policies should reduce the risk and volatility of your supply chain, not add to them … which is precisely what a cap and trade approach will do. So be sure to support your local trade association in lobbying for a straight carbon tariff. At least you can plan for that.

What’s Worse? The Personal Automobile or 15 Container Ships?

A recent article in The Guardian noted that the health risks of shipping pollution have been ‘underestimated’, to put it very lightly. A recent study by the Danish government’s environmental agency found that ONE giant container ship can emit the same amount of cancer and asthma-causing chemicals as 50 Million cars. That’s right … just 15 of the world’s biggest cargo ships emit more pollution than the roughly 750 Million cars currently in operation around the globe … AND THERE ARE 90,000 of them! Current estimates is that global shipping is responsible for 3.5% to 4.0% of ALL climate change emissions.

So the next time you start calculating the costs of global sourcing you might want to step back and think about whether a temporary savings of a few percentage points is really worth global sourcing when YOU could be ultimately responsible for not only draining trillions of dollars from the world’s economy to pay for the health care required to treat the tens of thousands of victims who suffer from pollution-induced lung and heart disease but causing thousands of deaths a year. I don’t know about you, but I think it’s time for home-cost country sourcing.

Green CAPS and the Triple Bottom Line (of Sustainability)

In one of its final critical issues reports from 2008, CAPS addressed the topic of Green Corporate Strategies and how green issues will increasingly influence the actions of consumers, politicians, and other societal stakeholders as we move further into the 21st century.

In addition to highlighting key issues in the establishment of green strategies, internal strategies, and external strategies, the report also addressed the Triple Bottom Line (TBL) framework and how one may use it to measure the green-ness of a given approach or strategy. Incorporating economic performance, environmental performance, and social performance, the TBL assesses a given initiative in terms of the “business case”, the extent to which environmental harm is minimized, and the extent to which the company fulfills its social obligation to be a good corporate citizen — as a truly sustainable initiative is one that succeeds on all three counts.

More specifically, an economically sound green strategy will address energy and water costs, waste disposal costs, maintenance costs, operational costs, and / or health costs; an environmentally sound green strategy will address emissions and pollution, greenhouse cases, natural resources, and / or waste disposal; and a socially sound green strategy will address the corporation’s planet stewardship, it’s recognition that it is a global citizen, and future generations.

The report also offers some suggestions on how to start:

  • Smart small, but do something.
  • Insure proposed strategies are aligned with overall corporate strategies and goals.
  • Incorporate green into your purchasing processes and RFXs.
  • Be proactive.
  • Make sure you’re not just greenwashing.
  • Form a cross-functional team to scale your efforts company wide.

This is probably the most useful contribution of the entire report, which doesn’t really say anything that hasn’t been said before. The biggest problem most companies have with green is where to start, so anything that provides advice on this issue is certainly worth a few minutes of your time.

Carbon: Hype, Reality, and Management

Supply Chain Consulting recently published a pair of white-papers on Carbon, Hype & Reality and Mastering Proactive Carbon Management, that provide a decent starting point for a company just starting down the path to addressing it’s carbon footprint and getting it under control.

In Hype & Reality, Supply Chain Consulting cuts through the hype to the simple facts of carbon management, which are:

  • Everyone can contribute to effective energy management
  • You can’t compete on green unless you are green
  • You can’t claim carbon emission improvements without benchmarks and auditable processes
  • If you’re not committed to carbon management, you’re not corporately responsible in today’s marketplace

It also summarizes the status of global green house gas regulations in the US, Australia, China, and the UK. Highlights include:

  • Australia
    Mandatory legislation that requires mandatory reporting of any company facility that emits more than 25,000 tons of carbon dioxide-equivalent annually. Companies that don’t register or that report inaccurate numbers will be fined as much as $220,000.
  • China
    China has set a target to reduce per unit GDP energy consumption by 4% annually by 2010 with an aim to raise this to 20% in the near future.
  • United Kingdom
    The UK Climate Change Bill became law in 2008 and brought the Carbon Reduction Commitment with it that makes base-line emission reporting mandatory in 2008 and 2009 and reductions mandatory starting in 2010.
  • United States
    President Obama plans to set ambitious reduction goals and some states, like California, have moved ahead on their own.

In Mastering Proactive Carbon Management, Supply Chain Consulting presents their 5-Step Model for achieving a green supply chain.

  1. Master the Basics
    Start by educating employees about the importance of carbon management and going green to build awareness and develop an internal focus on improving basic operations.
  2. Involve the Company
    Begin your carbon journey by completing a static carbon footprint analysis which will help you identify improvements that will reduce energy usage and lower carbon emissions.
  3. Map Your Processes
    Progress to automating your carbon management efforts that will allow you to capture a “live” footprint at any time that includes internal and external supply chain processes. This allows you to consider carbon impacts in your sourcing and production decisions and reduce emissions up-front.
  4. Footprint Your Products
    Take your processes to the next level so that you can allocate your carbon footprint by product line. This allows you to target your worst offenders first and identify which lines have the most reduction opportunities.
  5. Optimize Your Supply Chain
    Re-design your entire supply chain to create an eco-friendly network.