U.S. Market Consequences of Global Climate Change
Prepared for the Pew Center on Global Climate Change
Dale W. Jorgenson, Harvard University
Richard J. Goettle, Northeastern University
Brian H. Hurd, New Mexico State University
Joel B. Smith, et al, Stratus Consulting, Inc.
Download Report (pdf)
Download Appendix A (pdf)
Download Appendix B (pdf)
Eileen Claussen, President, Pew Center on Global Climate Change
Over the next century, global climate change is likely to have substantial consequences for the economy of the United States and the welfare of its citizens. As scientists work to narrow remaining uncertainties about the magnitude and timing of future warming, it is becoming increasingly important that we improve our understanding of the likely implications for human and natural systems.
In this report, a team of authors led by Dale Jorgenson of Harvard University developed an integrated assessment of the potential impacts of climate change on the U.S. market economy through the year 2100. The analysis combines information about likely climate impacts in specific market sectors with a sophisticated computable general equilibrium model of the U.S. economy to estimate effects on national measures of productivity, investment, consumption and leisure. To account for uncertainties— both in the trajectory of future climate change and in the ability of different sectors to adapt—a variety of scenarios were modeled to characterize a range of possible outcomes.
The results indicate that climate change could impose considerable, lasting costs or produce smaller, temporary benefits for the U.S. market economy in coming decades. Importantly, potential costs under pessimistic assumptions are larger and persist longer than potential benefits achieved under optimistic assumptions. Because of “threshold effects” in key sectors like agriculture, initial benefits from a moderate amount of warming begin to diminish and eventually reverse as temperatures continue to rise toward the end of the century and beyond. These findings suggest that near-term action to limit the pace and scale of future climate change would be warranted not only because the potential damages outweigh potential benefits (which are transient in any case), but because early intervention would reduce the long-term damage under either set of assumptions, and reduce the need for more costly measures if pessimistic scenarios materialize.
This study makes an important contribution to our current understanding of the potential impacts of climate change, but it represents at best a partial assessment of the full range of those impacts. Certain market sectors (e.g., tourism) and a variety of indirect effects (e.g., climate change induced healthcare expenditures) could not be included because of a lack of data. Even more significantly, the analysis does not account for critical non-market impacts such as changes in species distributions, reductions in biodiversity or loss of ecosystem goods and services. These types of effects are described in a companion Pew Center report—A Synthesis of Potential Impacts of Climate Change on the United States—but remain extremely difficult to value in economic terms. Their inclusion in a more complete evaluation of both market and non-market impacts would almost certainly offset any temporary market benefits and add to the negative impacts, thereby underscoring the case for mitigative action.
The Pew Center and the authors are grateful to Henry Jacoby and Billy Pizer for helpful comments on previous drafts of this report.
The continued accumulation of heat-trapping gases in the atmosphere is projected to have far reaching consequences for earth’s climate in coming decades. For example, in 2001, the Intergovernmental Panel on Climate Change (IPCC) predicted that average global temperatures could rise anywhere from 1.4oC to 5.8oC (2.5-10.4oF) over the 21stcentury, with warming for the United States as much as 30 percent higher. Climatic shifts of this magnitude would affect human and natural systems in many ways. Therefore, quantifying these impacts and their likely costs remains a critical challenge in the formulation of appropriate policy responses.
This study aims to advance understanding of the potential consequences of global climate change by examining the overall effect on the U.S. economy of predicted impacts in key market activities that are likely to be particularly sensitive to future climate trends. These activities include crop agriculture and forestry, energy services related to heating and cooling, commercial water supply, and the protection of property and assets in coastal regions. Also considered are the effects on livestock and commercial fisheries and the costs related to increased storm, flood and hurricane activity. Finally, the analysis accounts for population-based changes in labor supply and consumer demand due to climate-induced mortality and morbidity. Impacts in each of these areas were modeled to estimate their aggregate effect on national measures of economic performance and welfare, including gross domestic product (GDP), consumption, investment, labor supply, capital stock and leisure.
At present, our knowledge of the direct or indirect impacts of climate change on a broad range of economic activities is incomplete. Accordingly, there are important sectors and activities—such as tourism—that are omitted from this effort. Similarly, there is little information concerning possible interactions among the benefits and costs in different sectors. For example, the impacts on crop and livestock agriculture may have consequences for human health. Given the absence of reliable insights into such externalities or spillovers, these effects are also excluded from consideration. These limitations suggest that the results of this analysis are likely to understate the potential market impacts of climate change.
More importantly, this analysis does not consider the non-market impacts of climate change such as changes in species distributions, reductions in biodiversity, or losses of ecosystem goods and services. These considerations are essential to a complete evaluation of the consequences of climate change but are very difficult to value in economic terms. A companion report, A Synthesis of Potential Impacts of Climate Change on the United States, provides more detail on the relative vulnerability of different U.S. regions to both the market and non-market impacts of climate change.
To capture the range of market consequences potentially associated with climate change in the United States and to address the considerable uncertainties that exist, several distinct scenarios were developed for this analysis. Each incorporates different assumptions about the magnitude of climate change over the next century and about the direction and extent of likely impacts in the market sectors analyzed. Specifically, three different levels of climate change (low, central and high) were considered in combination with two sets of market outcomes (optimistic and pessimistic) for a total of six primary scenarios. In terms of climate, the low, central and high scenarios encompass projected increases in average temperature ranging from 1.7oC to 5.3oC (3.1-9.5oF) by 2100, together with precipitation increases ranging from 2.1 to 6.6 percent and sea-level rise ranging from 17.2 to 98.9 cm (7-40 inches) over the same period. In terms of impacts, the optimistic and pessimistic scenarios reflect a spectrum of outcomes from the available literature concerning the sensitivity of each sector to climatic shifts and its ability to adapt. As one would expect, the optimistic scenarios generally project either smaller damages or greater benefits for a given amount of climate change compared to the pessimistic scenarios.
Because several of the market sectors included here are especially sensitive to changes in precipitation, two additional scenarios were analyzed. The first assumes the high degree of temperature change combined with lower precipitation (“high and drier”) while the second assumes the low level of temperature change combined with higher precipitation (“low and wetter”).
By introducing the sector-specific damages (or benefits) associated with each of these scenarios into a computable general equilibrium model that simulates the complex interactions of the U.S. economy as a whole, the combined effect of climate impacts across multiple sectors could be assessed in an integrated fashion. Detailed results are described in the body of this report, but five principal conclusions emerge:
1) Based on the market sectors and range of impacts considered for this analysis, projected climate change has the potential to impose considerable costs or produce temporary benefits for the U.S. economy over the 21st century, depending on the extent to which pessimistic or optimistic outcomes prevail. Under pessimistic assumptions, real U.S. GDP in the low climate change scenario is 0.6 percent lower in 2100 relative to a baseline that assumes no change in climate; in the high climate change scenario, the predicted reduction in real GDP is 1.9 percent. Under the additional “high and drier” climate scenario, however, real GDP is reduced more dramatically—by as much as 3.0 percent by 2100 relative to baseline conditions. Furthermore, under pessimistic assumptions negative impacts on GDP grow progressively larger over time, regardless of the climate scenario. In contrast, under optimistic assumptions real U.S. GDP by 2100 is 0.7 to 1.0 percent higher than baseline conditions across the low, central and high climate scenarios, but these benefits eventually diminish over time. Nevertheless, to the extent that responses in certain key sectors conform to the optimistic scenarios, there is a distinct possibility that some degree of climate change can provide modest overall benefits to the U.S. economy during the 21st century.
2) Due to threshold effects in certain key sectors, the economic benefits simulated for the 21st century under optimistic assumptions are not sustainable and economic damages are inevitable. In contrast to the pessimistic scenarios which show increasingly negative impacts on the economy as temperatures rise, the economic benefits associated with optimistic scenarios ultimately peak or reach a maximum. Specifically, the agriculture and energy sectors initially experience significant cost reductions, but only so long as climate change remains below critical levels. Once temperature and other key climate parameters reach certain thresholds, however, benefits peak and begin to decline—eventually becoming damages. Different thresholds apply in different sectors and the time required to reach them depends on the rate at which warming occurs. In the high climate change scenario, the trend toward economic benefits under optimistic assumptions slows and peaks around mid-century, whereas, in the central climate case, this transition appears toward century’s end. In the optimistic, low climate change scenario, benefits continue to accrue throughout the 21st century. Nevertheless, the existence of these thresholds means that continued climate change—even if it proceeds slowly—eventually reverses market outcomes so that predicted economic benefits are only transient and temporary.
3) The effects of climate change on U.S. agriculture dominate the other market impacts considered in this analysis. Currently, the agriculture, forestry and fisheries industries represent about 2.0 percent of total U.S. industrial output and about 3.5 percent of real GDP. However, agriculture accounts for a much larger share of the overall climate-related economic impact estimated in this analysis. For example, across the low, central and high climate change scenarios, field crop and forestry impacts account for over 70 percent of the total predicted effect of climate change on real GDP under optimistic assumptions and almost 80 percent of the total GDP effect under pessimistic assumptions. These figures rise to 75 and 85 percent, respectively, if one includes climate effects on livestock and commercial fisheries. Clearly, significant impacts in relatively small sectors can exert a disproportionate influence on the overall economic consequences of a given climate change.
4) For the economy, wetter is better. All else being equal, more precipitation is better for agriculture —and hence better for the economy—than less precipitation. Not surprisingly, reductions in precipitation are costlier at higher temperatures than at lower temperatures and the negative impacts of drier climate conditions are greater under pessimistic assumptions than they are under optimistic assumptions. These results are driven by model assumptions about the relationship between agricultural output and different levels of precipitation; they do not consider regional or seasonal variability nor do they account for possible changes in the incidence of extreme events such as drought and flooding. To date, variations in precipitation have not been routinely incorporated in assessments of the agricultural impacts of climate change; nevertheless, they are potentially quite important and could significantly affect actual benefits or damages associated with climate change in this sector of the economy. Therefore, in future assessments, more attention should be paid to the specific effects of precipitation under different climate scenarios.
5) Changes in human mortality and morbidity are small but important determinants of the modeled impacts of climate change for the U.S. economy as a whole. An increase in climate-induced mortality or illness reduces the population of workers and consumers available to participate in the market economy, in turn leading to a loss of real GDP. In this analysis, mortality and morbidity effects alone account for 13 to 16 percent of the aggregate predicted effect of climate change on the economic welfare of U.S. households. Failure to include such effects therefore understates the potential market impacts of climate change as well as the likely benefits of climate-mitigating policies. Furthermore, the economic consequences of the mortality and morbidity effects arising from a given change in temperature are at the low end of mortality valuations found in the reported literature. Hence, the contribution of health effects to the aggregate market impacts of climate change could be even higher than these results suggest.
Taken together, these findings have important implications for current policy debates and for ongoing efforts to further refine our understanding of the likely impacts of global climate change. From a policy standpoint their primary relevance lies in the extent to which they support (or diminish) the case for intervention to avoid or mitigate the impacts being evaluated. Specifically, does the analysis suggest that the likely consequences of future climate change will be sufficiently negative as to warrant near-term actions aimed at reducing greenhouse gas emissions? This question is all the more difficult to answer because the benefits of policy intervention tend to accrue slowly, over a long period of time, while the costs of mitigative action must be borne in the near term.
On the one hand, the results of this analysis clearly point to the possibility that climate change could produce measurable negative impacts on the U.S. economy within this century that might justify anticipatory policy responses. On the other hand, the fact that some of the scenarios analyzed produce positive, albeit temporary, benefits for the U.S. economy in the same timeframe might seem to weigh in favor of forgoing, or at least delaying, such actions.
A number of nuances in these results—together with several larger considerations related to limitations inherent in the study’s design—argue against the latter conclusion. Within the scope of this analysis, perhaps the most important point is the fact that most, if not all, potentially positive impacts of climate change under optimistic assumptions are likely to be transient and unsustainable over the long run in the face of steadily rising temperatures. If, on the other hand, pessimistic assumptions prove to be more correct, the economic impacts of climate change are not only immediately negative, but worsen steadily over time. Thus, the potential for temporary economic benefits must be balanced against the potential for immediate and lasting economic damages.
A second important point is that the modeling results reveal asymmetries in the magnitude of potential benefits versus potential damages. Specifically, the economic losses estimated under pessimistic assumptions are generally larger than the transient benefits gained under optimistic assumptions in all but the low climate change scenarios. Moreover, the asymmetry becomes more pronounced with rising temperatures as certain types of costs—such as those associated with extreme weather events—increasingly offset possible benefits to other sectors of the economy.
A further caution relates to the partial and incomplete nature of the analysis itself. This effort was limited from the outset to considering only market impacts of global climate change within the United States. As has already been noted, it was not possible to include all potentially climate-sensitive market sectors in the analysis; nor was it possible to account for all externalities or spillover effects. Moreover, the results of this analysis are not likely to be representative of other parts of the world, especially for those countries whose overall economic well-being is more closely tied to sectors like agriculture. For these countries, the potential damages associated with future climate change could be a much larger proportion of GDP than in the United States and the downside risks under pessimistic assumptions—especially in regions where climate change is likely to cause increasingly warmer and drier conditions—could be far more substantial.
Even more significant, in terms of drawing policy conclusions from these results, is the fact that the underlying analysis does not address a host of potential non-market impacts associated with climate change. These include shifts in species distribution, reductions in biodiversity, losses of ecosystem goods and services and changes in human and natural habitats. Such impacts—many of which are explored in other Pew Center reports—are probably of great concern to the public and could carry substantial weight in future policy deliberations. They are, however, extremely difficult to value in economic terms. To the extent that they have been assessed—even qualitatively—the results suggest that climate-related impacts on natural systems are far more likely, on the whole, to be negative rather than positive. As such they would tend to add to any negative market impacts associated with future climate change, while offsetting potential market benefits of the kind simulated in this study under optimistic assumptions.
In sum, the disparity in results between optimistic and pessimistic scenarios—and the likelihood that a consideration of non-market impacts would tend to exacerbate this disparity—highlights the continuing uncertainty associated with quantifying climate change impacts. The fact that the economic losses associated with pessimistic scenarios are both larger and more continuous than the transient benefits gained under optimistic scenarios would seem, by itself, to provide some support for cautionary action on climate change. In fact, such action—by slowing the pace and magnitude of temperature increases in the U.S. market consequences of global climate change coming decades—actually could forestall any damages or even improve the odds that optimistic rather than pessimistic outcomes prevail. If, on the other hand, worst-case scenarios appear more likely over time and ultimately justify more dramatic intervention, early efforts to achieve moderate near-term emissions reductions may help avoid the need for more costly measures later on. Meanwhile, high priority should be given to improving and integrating future assessments of market and non-market outcomes and to refining our understanding of the probabilities associated with varying degrees of climate change and the positive or negative responses that follow.
April 16, 2004
Contact: Katie Mandes (703) 516-4146
The Impacts and Market Consequences of Global Climate Change
Two new reports from the Pew Center on Global Climate Change
Washington, DC — Over the next century, global climate change may have serious consequences for the economy of the United States and the health and welfare of its citizens, according to two new reports by the Pew Center on Global Climate Change.
The first report, A Synthesis of Potential Climate Change Impacts on the United States by Joel B. Smith of Stratus Consulting, Inc., is the final in a series of Pew Center reports chronicling the possible national and regional effects of global climate change on important economic sectors, health, and natural resources.
The second report, U.S. Market Consequences of Global Climate Change, presented by lead author Dale Jorgenson of Harvard University, provides an in-depth analysis of the potential effects of climate change on the U.S. economy.
Anyone interested in global climate change or climate change policy is invited to attend.
WHEN: Wednesday, April 28, 2004 at 10 A.M.
WITH: Eileen Claussen, President, Pew Center on Global Climate Change;
Joel B. Smith, Vice President, Stratus Consulting, Inc.;
Dale W. Jorgenson, Professor, Harvard University; and
Richard J. Goettle, Professor, Northeastern University
WHERE: National Press Club, First Amendment Room
529 14th Street, N.W.
Washington, DC 20045
All materials pertaining to this press briefing are embargoed until April 28, 2004 at 10 A.M.
The 10-50 Solution: Technologies and Policies for a Low-Carbon Future
A workshop sponsored by the Pew Center on Global Climate Change and the National Commission on Energy Policy
March 25-26, 2004
The St. Regis Hotel, Washington, DC
On March 25-26th, the Pew Center on Global Climate Change and the National Commission on Energy Policy (NCEP) sponsored a workshop entitled “The 10-50 Solution: Technologies and Policies for a Low-Carbon Future.” The goal of this workshop was to articulate a long-term vision for a low-carbon economy within 50 years and to discuss the technologies, industrial processes and policies needed in the short and medium term to achieve it. Over 100 policy-makers, business leaders, NGO representatives, and leading experts participated in the event.
In preparation for the workshop, the Pew Center and NCEP commissioned background papers on technological advances in five key areas (efficiency, hydrogen, carbon sequestration/coal gasification, advanced nuclear technologies, and renewables) and on policies designed to promote these and other low-carbon technologies in the marketplace. Workshop presentations and final proceedings, including a summary of common themes and policies identified during the workshop, and workshop background papers are now available.
For Immediate Release:
March 17, 2004
Contact: Jack Riggs, Aspen Institute
Contact: Katie Mandes, Pew Center
Diverse Group of Leaders Outlines Framework for Mandatory Climate Change Action
Washington, March 17 – A mandatory greenhouse gas reduction program for the U.S. could be both effective and politically feasible, according to a diverse group of business, government, and environmental leaders brought together by the Aspen Institute and the Pew Center on Global Climate Change.
The group, which included representatives of the energy, mining and automobile industries, environmental and consumer organizations and Congressional staff, did not debate whether there should be a mandatory policy. Instead, they started with the premise that all parties want to ensure, if mandatory action is taken, that climate policies will be environmentally effective, economical and fair.
“What is truly significant is that such a diverse group was able to reach consensus on several elements of what a mandatory national policy might look like,” said Eileen Claussen, President of the Pew Center on Global Climate Change.
Recommendations for a policy framework are detailed in a report released today on Capitol Hill by the dialogue’s co-chairs, Eileen Claussen, President of the Pew Center on Global Climate Change, and Robert W. Fri, Visiting Scholar and former President of Resources for the Future.
The group agreed upon a set of criteria to evaluate program design options, including environmental effectiveness, cost effectiveness and competitiveness, administrative feasibility, distributional equity, political feasibility, and encouragement of technology development.
Two principles guided the choice of recommendations. First, the desire for broad rather than sector-specific coverage, and coverage of multiple gases, not just CO2, guided the participants. This ensured long-term environmental effectiveness and distributional equity. Second, there was consensus that phasing of actual reduction targets would be important and that a modest start would be preferable. This would send a signal that reducing greenhouse gases was national policy. Deeper cuts could occur later, as technology evolves and capital stock turns over in response to early market signals generated by the policy.
After considering several possible designs, participants reached consensus on a hybrid program that combines elements of a cap-and-trade program with tradable efficiency standards. An initially modest but declining absolute national cap on greenhouse gas emissions would be placed on large sources such as electric utilities and manufacturers. Deeper cuts could occur later, as technology evolves and the economy responds to the policy. The group did not attempt to specify the level of the absolute cap on CO2 emissions, or the date it should go into effect.
A similar cap would apply to emissions from transportation fuel suppliers, coupled with tradable CO2-per-mile automobile standards. The group also recommended tradable efficiency standards for appliances and other manufactured products.
Manufacturers, utilities and other large emitting sources that fell short of or exceeded the new standard could buy, sell or trade emission credits in a nationwide emissions trading program, allowing emissions reductions to be achieved where it can be done most cost effectively. Emission credits would be awarded for removing existing CO2 from the atmosphere by verifiable means, possibly through land-use related carbon sequestration projects such as afforestation and energy plantations.
Participants also stressed the importance of a policy that encourages development and diffusion of new technologies, both to reduce emissions and to provide new market opportunities for U.S. business.
“The report represents a framework, not a fully developed policy – a starting point for further dialogue rather than a final product,” commented Fri. Nonetheless, he noted it should prove helpful to those seeking to balance policy and politics, environmental effectiveness and cost, and efficiency and equity in designing a mandatory greenhouse gas reduction program.
The Aspen Institute is a non-profit organization founded in 1950 to foster enlightened leadership and open-minded dialogue on contemporary issues in a non-partisan setting. The Pew Center on Global Climate Change is an independent, non-profit and non-partisan organization dedicated to providing credible information and innovative solutions in the effort to address global climate change.
The report “A Climate Policy Framework: Balancing Policy and Politics” can be found on the Aspen Institute’s and the Pew Center on Global Climate Change’s websites, www.aspeninst.org/eee and www.c2es.org.
Emissions Trading in the U.S.: Experience, Lessons and Considerations for Greenhouse Gases
Prepared for the Pew Center on Global Climate Change
A. Denny Ellerman and Paul L. Joskow, Massachusetts Institute of Technology
David Harrison, Jr., National Economic Research Associates, Inc.
Eileen Claussen, President, Pew Center on Global Climate Change
In recent years, emissions trading has become an important element of programs to control air pollution. Experience indicates that an emissions trading program, if designed and implemented effectively, can achieve environmental goals faster and at lower costs than traditional command-and-control alternatives. Under such a program, emissions are capped but sources have the flexibility to find and apply the lowest-cost methods for reducing pollution. A cap-and-trade program is especially attractive for controlling global pollutants such as greenhouse gases because their warming effects are the same regardless of where they are emitted, the costs of reducing emissions vary widely by source, and the cap ensures that the environmental goal is attained.
Report authors Denny Ellerman and Paul Joskow of the Massachusetts Institute of Technology and David Harrison of National Economic Research Associates, Inc. review six diverse U.S. emissions trading programs, drawing general lessons for future applications and discussing considerations for controlling greenhouse gas emissions. The authors derive five key lessons from this experience. First, emissions trading has been successful in its major objective of lowering the cost of meeting emission reduction goals. Second, the use of emissions trading has enhanced—not compromised—the achievement of environmental goals. Third, emissions trading has worked best when the allowances or credits being traded are clearly defined and tradable without case-by-case certification. Fourth, banking has played an important role in improving the economic and environmental performance of emissions trading programs. Finally, while the initial allocation of allowances in cap-and-trade programs is important from a distributional perspective, the method of allocation generally does not impair the program’s potential cost savings or environmental performance.
With growing Congressional interest in programs to address climate change—including the recent introduction of economy-wide cap-and-trade legislation controlling greenhouse gas emissions—the application of lessons learned from previous emissions trading programs is timely. In addition to this review, the Pew Center is simultaneously releasing a complementary report, Designing a Mandatory Greenhouse Gas Reduction Program for the U.S., which examines additional options for designing a domestic climate change program.
The authors and the Pew Center are grateful to Dallas Burtraw and Tom Tietenberg for reviewing a previous draft of this report. The authors also wish to acknowledge Henry Jacoby, Juan-Pablo Montero, Daniel Radov, and Eric Haxthausen for their contributions to various parts of the report, and James Patchett and Warren Herold for their research assistance.
Emissions trading has emerged over the last two decades as a popular policy tool for controlling air pollution. Indeed, most major air quality improvement initiatives in the United States now include emissions trading as a component of emissions control programs. The primary attraction of emissions trading is that a properly designed program provides a framework to meet emissions reduction goals at the lowest possible cost. It does so by giving emissions sources the flexibility to find and apply the lowest-cost methods for reducing pollution. Emission sources with low-cost compliance options have an incentive to reduce emissions more than they would under command-and-control regulation. By trading emission credits and allowances to high-cost compliance sources, which can then reduce emissions less, cost-effective emission reductions are achieved by both parties. When inter-temporal trading is allowed, sources can also reduce emissions early, accumulating credits or allowances that can be used for compliance in future periods if this reduces cumulative compliance costs. Accordingly, cap-and-trade programs achieve the greatest cost savings when the costs of controlling emissions vary widely across sources or over time. In practice, well-designed emissions trading programs also have achieved environmental goals more quickly and with greater confidence than more costly command-and-control alternatives.
Emissions trading has achieved prominence beyond the United States largely in the context of discussions regarding implementation of the Kyoto Protocol, a proposed international agreement to control emissions of carbon dioxide (CO2) and other greenhouse gases. The Kyoto Protocol provides for the use of various emissions trading mechanisms at the international level. Some countries already are developing emissions trading programs while the process of ratifying the Protocol moves forward. Both the United Kingdom and Denmark have instituted greenhouse gas (GHG) emissions trading programs, and, in December 2002, the European environment ministers agreed on the ground rules for a European Union trading program that would begin in 2005 for large sources of CO2 emissions (and later for other GHG emissions). Indeed, proposals to control GHG emissions in the United States also include the use of emissions trading.
The theoretical virtues of emissions trading have been recognized for many decades—the basic elements were outlined in Coase (1960) and elaborated in Dales (1968)—but actual emissions trading programs have been brought from the textbook to the policy arena mostly in the last decade. It is important to recognize, however, that while properly designed emissions trading programs can reduce the cost of meeting environmental goals, experience does not indicate that significant emissions reductions can be obtained without costs. Emissions trading can be an effective mechanism for controlling emissions by providing sources with the flexibility to select the lowest-cost opportunities for abatement, but it does not make costs disappear. Moreover, emissions trading programs must be designed properly in order to realize their potential cost-reduction and environmental compliance goals. As with any emissions control program, poor design is likely to lead to disappointing results.
Experience with emissions trading, including both the design and operation of trading programs, provides a number of general lessons for future applications. This report reviews the experience with six emissions trading programs with which one or more of the authors have considerable experience:
- The early Environmental Protection Agency (EPA) Emissions Trading programs that began in the late 1970s;
- The Lead Trading program for gasoline that was implemented in the 1980s;
- The Acid Rain program for electric industry sulfur dioxide (SO2) emissions and the Los Angeles air basin (RECLAIM) programs for both nitrogen oxides (NOx) and SO2 emissions, all of which went into operation in the mid-1990s;
- The federal mobile source averaging, banking, and trading (ABT) programs that began in the early 1990s; and
- The Northeast NOx Budget trading program, which began operations in the late 1990s.
Based on this experience, this report identifies and discusses five general lessons concerning the design and implementation of emissions trading programs, and two considerations of particular relevance for GHG applications.
General Lessons from Experience with Emissions Trading
Emissions trading has been successful in its major objective of lowering the cost of meeting emission reduction goals. Experience shows that properly designed emissions trading programs can reduce compliance costs significantly compared to command-and-control alternatives. While it is impossible to provide precise measures of cost savings compared to hypothetical control approaches that might have been applied, the available evidence suggests that the increased compliance flexibility of emissions trading yields costs savings of as much as 50 percent.
The use of emissions trading has enhanced—not compromised—the achievement of environmental goals. While some skeptics have suggested that emissions trading is a way of evading environmental requirements, experience to date with well-designed trading programs indicates that emissions trading helps achieve environmental goals in several ways.
For one thing, the achievement of required emission reductions has been accelerated when emission reduction requirements are phased-in and firms are able to bank emissions reduction credits. The Lead Trading program for gasoline, the Acid Rain program for the electric industry, the federal mobile source ABT programs, and the Northeast NOx Budget programs each achieved environmental goals more quickly through these program design features. Moreover, giving firms with high abatement costs the flexibility to meet their compliance obligations by buying emissions allowances eliminates the rationale underlying requests for special exemptions from emissions regulations based on “hardship” and “high cost.” The reduction of compliance costs has also led to instances of tighter emissions targets, in keeping with efforts to balance the costs and benefits of emissions reductions. Finally, properly designed emissions trading programs appear to provide other efficiency gains, such as greater incentives for innovation and improved emissions monitoring.
Emissions trading has worked best when allowances or credits being traded are clearly defined and tradable without case-by-case pre-certification. Several different types of emissions trading mechanisms have been implemented. Their performance has varied widely, and these variations illuminate the key features of emissions trading programs that are most likely to lead to significant cost savings while maintaining (or exceeding) environmental goals.
The term “emissions trading” is used, often very loosely, to refer to three different types of trading programs: (1) reduction credit trading, in which credits for emission reductions must be pre-certified relative to an emission standard before they can be traded; (2) emission rate averaging, in which credits and debits are certified automatically according to a set average emission rate; and (3) cap-and-trade programs, in which an overall cap is set, allowances (i.e., rights to emit a unit) equal to the cap are distributed, and sources subject to the cap are required to surrender an allowance for every unit (e.g., ton) they emit.
The turnaround in perception of emissions trading over the last decade—from a reputation as a theoretically attractive but largely impractical approach to its acceptance as a practical framework for meeting air quality goals in a cost-effective manner—largely reflects the increased use of averaging and cap-and-trade type programs. The performance of the early EPA reduction credit programs was very poor and gave “emissions trading” a bad name. These early EPA programs emphasized case-by-case pre-certification of emission reductions and were characterized by burdensome and time-consuming administrative approval processes that made trading difficult. The averaging and cap-and-trade programs have been much more successful. While the use of cap-and-trade or averaging does not guarantee success, and the problems with the reduction credit-based approach can be reduced by good design, avoiding high transaction costs associated with trade-by-trade administrative certification is critical to the success of an emissions trading program. The success of any emissions trading program also requires several additional elements: emissions levels must be readily measured, legal emissions rates or caps must be clearly specified, and compliance must be verified and enforced aggressively.
Banking has played an important role in improving the economic and environmental performance of emissions trading programs. Early advocates of emissions trading tended to emphasize gains from trading among participants (i.e., low-cost compliance sources selling credits and allowances to high-cost compliance sources) in the same time period. The experience with the programs reviewed here indicates that inter-temporal trading also has been important. The form that inter-temporal trading most often takes is credit or allowance banking, i.e., reducing emissions early and accumulating credits or allowances that can be used for compliance in future periods. Banking improves environmental performance and reduces cumulative compliance costs. Moreover, it has been particularly important in providing flexibility to deal with many uncertainties associated with an emissions trading market—production levels, compliance costs, and the many other factors that influence demand for credits or allowances. Indeed, the one major program without a substantial banking provision, the Los Angeles RECLAIM program, appears to have suffered because of its absence.
The initial allocation of allowances in cap-and-trade programs has shown that equity and political concerns can be addressed without impairing the cost savings from trading or the environmental performance of these programs. Because emissions allowances in cap-and-trade programs are valuable, their allocation has been perhaps the single most contentious issue in establishing the existing cap-and-trade programs. However, the ability to allocate this valuable commodity and thereby account for the economic impacts of new regulatory requirements has been an important means of attaining political support for more stringent emissions caps. Moreover, despite all the jockeying for allowance allotments through the political process, the allocations of allowances to firms in the major programs have not compromised environmental goals or cost savings. The three cap-and-trade programs that have been observed so far all have relied upon “grandfathering,” i.e., distributing allowances without charge to sources based upon historical emissions information, which generally does not affect firms’ choices regarding cost-effective emission reductions and thus the overall cost savings from emissions trading. There are other methods of allocating initial allowances—such as auctioning by the government and distributing on the basis of future information—that can affect cost savings and other overall impacts; but the major effects of the initial allocation are to distribute valuable assets in some manner and to provide effective compensation for the financial impacts of capping emissions on participating sources.
Considerations for Greenhouse Gas Control Programs
Emissions trading seems especially well-suited to be part of a program to control greenhouse gas emissions. The emissions trading programs reviewed for this report generally have spatial or temporal limitations because sources of the pollutants included in these programs—such as lead, SO2, and NOx—may have different environmental impacts depending on the sources’ locations (e.g., upwind or downwind from population centers) and the time of the emissions (e.g., summer or winter). The concerns of trading programs associated with climate change are different because greenhouse gases are both uniformly mixed in the earth’s atmosphere and long-lived. The effects of GHG emissions thus are the same regardless of where the source is located and when the emissions occur (within a broad time band). This means that emissions trading can be global in scope as well as inter-temporal, creating an opportunity for the banking of emission credits, which allows emissions to vary from year to year as long as an aggregate inter-temporal cap is achieved.
Emissions trading is also well suited for GHG emissions control because the costs of reducing emissions vary widely between individual greenhouse gases, sectors, and countries, and thus there are large potential gains from trade. While other market-based approaches, such as emissions taxes, also would provide for these cost savings, the cap-and-trade version of emissions trading has the further advantage of providing greater certainty that an emission target will be met. Moreover, GHG emissions generally can be measured using relatively inexpensive methods (e.g., fuel consumption and emission factors), rather than the expensive continuous emissions monitoring required for some existing trading programs.
Furthermore, emissions trading provides important incentives for low-cost compliance sources initially outside the program to find ways to participate, and thereby further reduce costs. This opt-in feature is useful because an environmentally and cost-effective solution for reducing concentrations of greenhouse gases should be comprehensive and global, whereas initial controls on GHG emissions will—for political reasons—likely be limited, if not to certain sectors and greenhouse gases, then almost certainly to a restricted number of countries. Therefore, an important criterion for initial measures is that they be able to induce participation by sources not yet controlled. The markets created by cap-and-trade programs provide incentives for sources outside the trading program to enter if they can provide reductions more cheaply than the market prices—a common feature of any market. Although, as discussed below, the voluntary nature of these incentives can create some problems, the ability to induce further participation is an important reason to include a market-based approach initially. Indeed, it is hard to imagine how command-and-control regulations or emissions taxes could provide similar incentives to non-participants to adopt new measures to reduce greenhouse gas emissions.
Opt-in or voluntary features have a strategic role that is likely to warrant their inclusion despite the potential problems associated with them. Experience with allowing sources not covered by mandatory emissions trading programs to “opt-in,” i.e., to voluntarily assume emissions control obligations and to participate in the emissions market, has revealed a trade-off. Setting clear baselines for opting-in lowers transactions costs and thus encourages participation; but some of this participation consists of credits for calculated “reductions” that are unrelated to the trading program and actually lead to increased emissions. For example, in the Acid Rain Program, evidence indicates that many of the voluntary participants received credits for having emissions below the pre-specified baseline even though they took no abatement actions. The simple emissions baseline had been set higher than these facilities’ actual emissions, so at least some of the credits they received did not represent real emissions reductions.
This experience suggests that the decision whether or not to include opt-in provisions should be determined by weighing the cost-saving benefits against the emissions-increasing potential. For greenhouse gases, the potential cost-savings benefits of including a voluntary element in the mandatory program are large because initial efforts are not likely to be comprehensive and global, as they must be eventually to achieve their environmental goals and be cost-effective. Opt-in provisions also have value in improving measurement and monitoring techniques, in familiarizing participants with the requirements of emissions trading, and more generally with inducing participation of sources outside the trading program that can offer cheaper abatement. As a result, allowing participants outside the mandatory GHG emissions control program to opt-in has a strategic value that has not been prominent in other opt-in programs. Indeed, it should be possible to learn from existing experience with opt-in programs how to reduce adverse effects while achieving cost-savings.
Viewed from a broad historical perspective, emissions trading has come a long way since the first theoretical insights forty years ago and the first tentative application almost a quarter of a century ago. Although still not the dominant form of controlling pollution in the United States or elsewhere, emissions trading is being included in an increasing number of programs and proposals throughout the world, and its role seems likely to expand in the future.
Emissions trading has emerged as a practical framework for introducing cost-reducing flexibility into environmental control programs and reducing the costs associated with conventional command-and-control regulation of air pollution emissions. Over the last two decades considerable experience with various forms of emissions trading has been gained, and today nearly all proposals for new initiatives to control air emissions include some form of emissions trading. This report has attempted to summarize that experience and to draw appropriate lessons that may apply to proposals to limit GHG emissions. In doing so, we hope that the reader has gained a better understanding of emissions trading and the reasons for its increasing importance as an instrument for addressing environmental problems.
Six diverse programs constitute the primary U.S. experience with air emissions trading. The EPA’s early attempts starting in the late 1970s to introduce flexibility into the Clean Air Act through netting, offsets, bubbles, and banking were not particularly encouraging. Most of the potential trades, and economic gains from trading, in these early systems were frustrated by the high transaction costs of certifying emission reductions. The first really successful use of emissions trading occurred in the mid-1980s when the lead content in gasoline was reduced by 90 percent in a program that allowed refiners to automatically earn credits for exceeding the mandated reductions in lead content and to sell those credits to others or bank them for later use.
The Acid Rain or SO2 allowance trading program for electricity generators, which has become by far the most prominent experiment in emissions trading, was adopted in 1990 and implemented beginning in 1995. This innovative program introduced a significantly different form of emissions trading, known as cap-and-trade, in which participants traded a fixed number of allowances—or rights to emit—equal in aggregate number to the cap, instead of trading on the differences from some pre-existing or external standard as had been the case in the early EPA trading programs and the lead phase-down program.
Another cap-and-trade program, the RECLAIM program for both SO2 and NOx emissions, was developed and implemented at the same time as the Acid Rain program by the regulatory authority in the Los Angeles Basin as part of its efforts to bring that area into attainment with National Ambient Air Quality Standards. The RECLAIM program is the first instance of emissions trading both supplementing and supplanting a pre-existing command-and-control structure that theoretically was capable of achieving the same environmental objective. The standards of the pre-existing command-and-control system largely determined the level of the cap, and the program’s ten-year phase-in design and trading provided the flexibility that led to the achievement of environmental goals that had been previously elusive. RECLAIM also introduced trading among different sectors.
The 1990 Amendments to the Clean Air Act also provided enabling legislation for two other emissions trading programs. Emissions from mobile sources were more effectively and efficiently controlled by the introduction of mobile source averaging, banking, and trading programs. The mobile source programs followed the example of the lead phase-down program by allowing firms to create credits automatically for any reductions beyond a required uniform emission standard and to use these credits in lieu of more costly reductions elsewhere or later within the company and to sell them. The 1990 Amendments also provided the mechanism that encouraged states in the Northeastern United States to adopt cap-and-trade programs to control NOx emissions that contributed to ozone non-attainment in that region of the country. As was the case in the RECLAIM program, emissions trading was adopted as a means to attain environmental objectives more quickly and cost-effectively than had proved possible through conventional command-and-control regulation.
There are many lessons to be gained from the experience with these six programs, but the five most important lessons can be summarized as follows. First, the major objective of emissions trading, lowering the cost of meeting emission reduction goals, has been achieved in most of these programs. Second, emissions trading has not compromised the achievement of the environmental goals embodied in these programs. If anything, and this is perhaps surprising, the achievement of those goals has been enhanced by emissions trading. Third, emissions trading has worked best in reducing costs and achieving environmental goals when the credits being traded are clearly defined and readily tradable without case-by-case certification. Fourth, temporal flexibility, i.e., the ability to bank allowances, has been more important than generally expected, and the ability to bank has contributed significantly to accelerating emission reductions and dampening price fluctuations. Fifth, the initial allocation of allowances in cap-and-trade programs has shown that equitable and political concerns can be met without impairing either the cost savings from trading or the environmental performance of these programs. In addition, the success of any emissions trading program requires that emissions levels can be readily measured and compliance verified and enforced.
All of these five lessons are relevant when considering the use of emissions trading in a program aimed at reducing GHG emissions. In fact, emissions trading seems especially appropriate for this environmental problem. Greenhouse gas emissions mix uniformly and remain in the atmosphere for a long time. Thus, it matters little where or when the emissions are reduced, as long as the required cumulative reductions are made. These specific characteristics of GHG emissions eliminate two of the concerns that have limited the scope of emissions trading in many other programs.
Although an effective GHG mitigation program must eventually be global in scope and comprehensive in its coverage of pollutants and economic sectors, the likelihood that control efforts will be limited initially to the richer countries, the more easily measurable gases, and perhaps to certain sectors of the economy introduces another consideration. The ability to induce initially uncapped sources to participate voluntarily in the early efforts will reduce costs and prepare the way for extending the caps. Thus, providing opportunities to opt-in for uncapped sources that can reduce emissions at lower cost than those within the cap has a strategic value beyond the potential cost savings. Although some existing programs with voluntary provisions have revealed opportunities for misuse, these problems can be managed more successfully now with the benefit of experience. The strategic value of opt-in provisions in any GHG emission control program makes their inclusion highly desirable.
Emissions trading has come a long way since the first theoretical insights forty years ago and the first tentative application almost a quarter of a century ago. Since then, the use of emissions trading has expanded steadily and significant experience has been gained. Although not the dominant form of controlling pollution in the United States or elsewhere, emissions trading now seems firmly established as a valuable instrument and its future use seems sure to increase. Our review of experience over the past quarter century suggests that this trend toward greater use of emissions trading will improve the performance of environmental regulation, including efforts to control GHG emissions.
About the Authors
A. Denny Ellerman, Massachusetts Institute of Technology
Dr. Ellerman is a Senior Lecturer with the Sloan School of Management at the Massachusetts Institute of Technology, where he also serves as the Executive Director of the Center for Energy and Environmental Policy Research and of the Joint Program on the Science and Policy of Global Change. His former employment includes Charles River Associates, the National Coal Association, the U.S. Department of Energy, and the U.S. Executive Office of the President. He served as President of the International Association for Energy Economics for 1990. Dr. Ellerman received his undergraduate education at Princeton University and his Ph.D. in Political Economy and Government from Harvard University. His current research interests focus on emissions trading, climate change policy, and the economics of fuel choice, especially concerning coal and natural gas.
Paul L. Joskow, Massachusetts Institute of Technology
Paul L. Joskow is Elizabeth and James Killian Professor of Economics and Management at MIT and Director of the MIT Center for Energy and Environmental Policy Research. He received a B.A. from Cornell University in 1968 and a Ph.D. in Economics from Yale University in 1972. Professor Joskow has been on the MIT faculty since 1972 and served as Head of the MIT Department of Economics from 1994 to 1998.
At MIT he is engaged in teaching and research in the areas of industrial organization, energy and environmental economics, and government regulation of industry. Professor Joskow has published five books and over 100 articles and papers in these areas. He has been studying the behavior and performance of the SO2 allowance trading program created by the Clean Air Act Amendments of 1990 for several years and is a co-author of the book Markets for Clean Air: The U.S. Acid Rain Program (Cambridge University Press).
Professor Joskow has served as a consultant on regulatory and competitive issues to organizations around the world. He served on the EPA’s Acid Rain Advisory Committee from 1990-1992 and was a member of the Environmental Economics Advisory Committee of the EPA’s Science Advisory Board from 1998-2002. He is a Director of the National Grid Transco Group and the Whitehead Institute for Biomedical Research and a Trustee of the Putnam Mutual Funds. He is a Fellow of the Econometric Society and the American Academy of Arts and Sciences.
David Harrison, Jr. , National Economic Research Associates, Inc.
David Harrison is a Senior Vice President at National Economic Research Associates (NERA), an international firm of 500 consulting economists operating in 16 offices on five continents and a Marsh & McLennan company. Dr. Harrison is co-chair of NERA’s energy and environmental economics practice.
Before joining NERA in 1988, Dr. Harrison was an Associate Professor at the John F. Kennedy School of Government at Harvard University, where he taught microeconomics, environmental and energy policy, transportation policy, and benefit-cost analysis. He was a member of the Faculty Steering Committee of Harvard’s Energy and Environmental Policy Center. Dr. Harrison earlier served as a Senior Staff Economist on the President’s Council of Economic Advisors, where his areas of responsibility included environmental regulation, natural resource policy, transportation policy, and occupational health and safety.
Dr. Harrison has consulted for private firms, trade associations, and government agencies in the U.S. and abroad on many energy and environmental issues. Dr. Harrison has been active in the development of major emissions trading programs, including serving on the advisory committee to develop RECLAIM, an author of proposals for averaging, banking, and trading programs for mobile sources and for NOx trading proposals for the Northeast, and a consultant to the European Commission (EC) with regard to aspects of its proposed greenhouse gas emissions trading program. He is currently advising the UK government with regard to aspects of its EU program and the EC with regard to trading programs for non-greenhouse gas emissions.
Dr. Harrison holds a Ph.D. in Economics from Harvard University, a M.Sc. in Economics from the London School of Economics, and a B.A. in Economics from Harvard University.
Tackling Climate Change: 5 Keys to Success
Remarks by Eileen Claussen
President, Pew Center on Global Cliamte Change
4th Annual Dartmouth Student Science Congress
May 2, 2003
Thank you very much. It is a pleasure to be here at Dartmouth for the Fourth Annual Student Science Congress. I understand that as part of these proceedings, students will be voting on a series of ballot questions. I have not yet seen these questions, but tonight I am nevertheless going to try to influence your answers.
For example, if one of the questions is “How serious a problem is global warming?” I encourage you to answer that it is a very serious problem indeed. And, if one of the questions is “Who was your favorite speaker during the Congress?” . . . well, just keep in mind that Claussen sort of rhymes with awesome.
Seriously, I appreciate this opportunity to address your Student Science Congress, and I applaud the organizers of this event for taking on a topic of such pressing importance. Whether we like it or not, global warming is shaping up as one of the most important challenges of the 21st century. It is going to drive far-reaching changes in how we live and work, how we power our homes, schools, factories and office buildings, how we get from one place to another, how we manufacture and transport goods, and even how we farm and manage forests. It touches every aspect of our economy and our lives, and to ignore it is to live in a fantasy land where nothing ever has to change – and where we never have to accept what the science tells us about what is happening to our world.
My goal tonight is to give you a clear idea of where we stand today in the effort against global climate change. To do that, I’d first like to offer you an insider’s look at how the world and the United States have responded to this challenge over the last decade.
Then, after the history lesson – and don’t worry, there will not be a test – I want to look forward. And I’d like to suggest to you five keys to success – five things we need to do if were are to successfully meet the challenge of climate change.
So, to begin with, let’s travel back in time to 1992, when another George Bush was our President, and when the nations of the world gathered in sunny Rio de Janeiro for the United Nations Conference on Environment and Development, affectionately known as the Earth Summit. This was the event, you may recall, where more than 150 countries signed an agreement called the United Nations Framework Convention on Climate Change.
The UNFCCC, as it is known, set an ambitious long-term objective: to stabilize greenhouse gas concentrations in the atmosphere at a level that would – and I quote – “prevent dangerous anthropogenic (or human-caused) interference with the climate system.” This is a goal that the United States, and virtually every other nation, has embraced.
As a first step, industrialized countries agreed to a voluntary emissions target: they aimed to reduce their greenhouse gas emissions to 1990 levels by the year 2000. Before long, however, it became clear that the targets would not be met and that voluntary commitments could not deliver genuine action. So the United States and others countries began to negotiate a new agreement, one with binding targets, and they agreed at the outset that these new commitments would extend only to the industrialized countries, which so far have contributed the most to the problem.
The result, negotiated five years after the Rio summit in Kyoto, Japan, is the Kyoto Protocol. The Protocol requires countries to reduce or limit their emissions of greenhouse gases in relation to 1990 levels, with different countries agreeing to different targets. The agreement also includes a number of features advocated by the United States to ensure countries a high degree of flexibility as they work to achieve their targets. They can make actual emission reductions at home, trade emission credits with others who have made reductions, and use “sinks” such as farms and forests to remove carbon from the atmosphere.
During the negotiations in Kyoto, Vice President Al Gore flew to the ancient Japanese capital to help hammer out the deal. And what the U.S. negotiators ultimately agreed to was a binding 7-percent reduction in emissions below 1990 levels by 2012.
The problem was that it was already 1997, and U.S. emissions had already risen over 1990 levels by more than 8 percent. In other words, we had pledged to reduce our emissions by nearly 14 percent and we didn’t have any kind of program in place to do this, nor any will to put such a program into place.
Another problem was that the United States Senate, under the Byrd-Hagel resolution, had recently voted unanimously that the United States should not sign any climate treaty that – quote – "would result in serious harm to the economy of the United States" or that did not impose some type of commitment on developing countries as well.
Of course Kyoto did not include commitments for developing countries, because the parties, including the United States, agreed at the outset that it would not. And the target agreed to by the United States was portrayed by those who wished to kill the treaty as clearly harmful to our economy, a charge that was not effectively countered by the Administration. So the fact of the matter is that the Kyoto Protocol negotiated by the Clinton administration was about as welcome in the Senate as the proverbial skunk at a lawn party – and senators had no intention of holding their noses so they could tolerate this thing. They just plain didn’t want it anywhere near them.
The Clinton administration, for its part, did nothing to try to bring about the ratification of this treaty that its people had made such a big deal of signing. Granted, the President at the time was caught up in a scandal, and Vice President Gore was gearing up for a presidential run of his own and surely wanted to avoid being publicly associated with anything that could be said to pose a threat the economy. But still, the whole episode of U.S. participation in Kyoto -- and, before that, the UNFCCC -- was enough to recall the line from Shakespeare: “full of sound and fury, signifying nothing.” The bottom line: We clearly were not prepared to deliver at home what we were promising abroad.
But the story does not end there. To fast forward to 2000, American voters elected another President – another Bush – and within months of entering office his administration made a unilateral decision to reject the Kyoto Protocol out of hand, instead of working to change it and make it better. Needless to say, this decision was not received warmly by other nations that had persevered through years of difficult negotiations and that had acceded to U.S. demands early on that the treaty include trading and other business-friendly mechanisms.
As an aside, I think it is interesting to note that in the recent run-up to the war in Iraq, it was hard to find an article about other countries’ perceptions of the United States that did not mention the impolitic way in which this Administration rejected Kyoto. It was perceived as a real slap in the face – a confirmation of global fears that the United States, which is responsible for almost one-fourth of global greenhouse has emissions, had no intention of acting seriously on this issue.
As if to confirm these fears, the Bush administration last year announced a climate strategy that was big on rhetoric but not-so-big on results. Here is what this strategy does: It sets a voluntary “greenhouse gas intensity” target for the nation. The idea is to reduce the ratio of greenhouse gas emissions to U.S. economic output, or GDP. But the funny thing about the White House target – an 18 percent reduction in greenhouse gas intensity by 2012 – is that it would allow actual emissions to grow by 12 percent over the same period.
What’s more, the Administration’s strategy relies entirely on voluntary measures. This despite the fact that U.S. climate policy has consisted primarily of voluntary measures for more than a decade. And what have these voluntary measures achieved? As of 2001, U.S. greenhouse gas emissions were up 11.9 percent over their 1991 levels. And so now we are more than ten years removed from the Earth Summit, and we still – still – have no real plan in place to reduce the U.S. contribution to the problem that we and other countries identified back then as – quote – “a common concern of humankind.”
The reason I have presented this history lesson is to show that, as the world has set out in the last decade to respond to the problem of climate change, the United States has been both a driver and a drag on the process, a driver in terms of development of a framework for action, a drag because we have made no serious attempt to implement that framework. We are like the boyfriend or girlfriend who says sweet things all the time but will never truly commit. And lately we aren’t even saying sweet things any more.
The reality is that it is long past the time for playing these sorts of games. We should have committed long ago to serious action on this issue and, having failed, it is all the more urgent that we get serious now. What does that mean? What principles should guide these efforts? I’d like to offer five – five keys to success in meeting the challenge of climate change.
Key Number One: We must forge a global response to the problem of climate change. As I already said, the United States is responsible for one-fourth of global greenhouse gas emissions. The 15 countries of the European Union are responsible for another one-fourth. The remainder is divided among other developed nations and rapidly developing countries such as China and India. And, while developed countries clearly are responsible for a majority of these emissions, that will not be the case in the future as emissions continue to grow more rapidly in developing countries than anywhere else.
It is one of the most contentious issues in the debate over global climate change – that is, the perceived divide between the interests and obligations of developed and developing countries. Equity demands that the industrialized world—the source of most past and current emissions of greenhouse gases—act first to reduce emissions. This principle is embedded in both the UNFCCC and the Kyoto Protocol, which sets binding emission targets for developed countries only. However, with the Protocol expected to enter into force sometime this year or next, it is now time to turn our attention to what happens next. And as we do this, we need to think broadly of a framework that will include not only the countries that will be implementing the Kyoto protocol, but also the United States, Australia, and the major emitting countries in the developing world.
I do not claim to know what form this framework should take. But here’s what I do know: It must be effective; over the coming decades, it must significantly reduce global emissions of greenhouse gases. It also must be fair. We must recognize who bears responsibility for climate change, and who will bear the brunt of its impacts; and we must arrive at an equitable sharing of responsibility for addressing it. That probably means different kinds of measures for different countries at different times, but all the major emitting countries must do their part. Finally, this new framework must marry our environmental goals with our economic and development objectives. In the developing world in particular, commitments that are not consistent and compatible with raising standards of living and promoting sustainable economic growth have little chance of success. And even in the developed world, all countries will have to be convinced that the environmental goals they agree to, the carbon limits they accept, will not impede their efforts to sustain economic growth. This will mean not only ensuring that countries are given flexibility in how they meet their goals, but also that they can turn over the existing capital stock and acquire more climate friendly technology at prices that they can afford.
This brings us to the second Key to Success in our efforts to address the climate issue: We need to think in terms of both short-term and long-term actions. There is a great deal we can do now to reduce our emissions. At the same time, we need to be looking ahead to longer-term, and potentially more far-reaching, reductions in the years and decades to come.
At the Pew Center, we are developing a plan we call the 10/50 Solution. The idea is to think ahead to where we need to be 50 years from now if we are going to meet the challenge of climate change, and then to figure out decade by decade how to do it.
Why look 50 years out? Because achieving the necessary reductions in our greenhouse gas emissions will ultimately require innovation on a level never before seen. It will require a massive shift away from fossil fuels to climate-friendly sources of energy. And, as I said at the start of my remarks, it will require fundamental changes in how we live and work and grow our economies.
The 10-50 approach doesn’t just look long-term, though. It recognizes that in order to realize that 50-year vision, we have to start right now. We can start with the low-hanging fruit – the countless ways we can reduce greenhouse emissions at little or no cost by simply being more efficient: everything from more fuel-efficient cars and trucks, including hybrids, to energy-efficient appliances and computers, efficiency improvements in industry, and even better management of animal wastes.
In the medium to long term, the challenge is to begin what we have called a second industrial revolution. The Pew Center is just now completing a scenario analysis that identifies several technologies as essential to our ability to create a climate-friendly energy future for the United States. Among them:
· Number one: natural gas. Substituting natural gas for coal results in approximately half the carbon emissions per unit of energy supplied, but we need policies to encourage the expansion of natural gas supply and infrastructure.
· Number two: energy efficiency. We have the ability to dramatically improve the fuel economy of cars and light trucks right now and in the very near future through a combination of advances in the internal combustion engine or through hybrid electric vehicles.
· Number three: renewable energy and distributed generation. The potential here is enormous, but policy support will be essential in promoting investment and breaking barriers to market entry for these technologies.
· Number four: nuclear power. Despite its problems, the fact remains that our carbon emissions would be much higher without nuclear power.
· Number five: geological sequestration. Sequestration holds the potential of allowing for the continued production of energy from fossil fuels, including coal, even in the event of mandatory limits on carbon emissions.
· And number six: hydrogen and fuel cells. The President’s recent announcement of a new federal commitment to fuel cell research was a welcome one, but we must have policies that will help pull these vehicles into the market.
Looking down this list, it is hard not to see that most, if not all, of these technologies would be important even in a world where we did not have this pressing obligation to reduce the amount of greenhouse gases in the atmosphere. For energy security and economic growth reasons, and a wide range of environmental reasons as well, these are simply smart things to do. The second industrial revolution is not just about responding to the challenge of climate change; it’s about creating a common-sense energy future.
And, in order to create that energy future, we are going to have to keep in mind Key to Success Number Three: Industry must be a partner in shaping and implementing climate solutions. The Pew Center serves as a convenor of leading businesses that are taking practical steps to reduce their contribution to the climate problem. The 38 members of our Business Environmental Leadership Council represent nearly 2.5 million employees and have combined revenues of $855 billion. They include mostly Fortune 500 firms, and they are deeply committed to climate solutions:
· There is DuPont, for example, which made a voluntary pledge to reduce its global emissions of greenhouse gases by 65 percent by the year 2010. And guess what? Late last year, they announced they had achieved this target eight years ahead of schedule.
· Also ahead of schedule in meeting its target is BP, which in 2002 announced it had reduced global greenhouse emissions by 9 million metric tons in just four years. This marked a 10-percent reduction in the company’s emissions – and, like DuPont, BP had originally intended to achieve this goal in 2010.
Over the past several years, it has become clear that there are three types of companies when it comes to the issue of climate change: those that do not accept the science; those that accept the science and are working internally to reduce their contribution to the problem; and those that accept the science, are working internally and are advocating for strong government action to address this issue.
BP, DuPont and the other companies we are working with at the Pew Center clearly fall into this latter group. And I hope that our government – as well as other governments throughout the world – will take full advantage of their expertise and commitment.
The benefits of active involvement by industry in environmental policy making first became clear to me during negotiations on the Montreal Protocol – the agreement that set out to address the man-made threat to the Earth’s protective ozone layer. An important reason for the success of that agreement, I believe, is that the companies that produced and used ozone-depleting chemicals—and that were developing substitutes for them—were very much engaged in the process. As a result, there was a factual basis and an honesty about what we could achieve, how we could achieve it, and when. And there was an acceptance on the part of industry, particularly U.S. companies, that the depletion of the ozone layer was an important problem and that multilateral action was needed.
I am happy to report that we are seeing the same kind of acceptance and determination to act on the climate issue among the companies we work with at the Pew Center. Their involvement should serve as a reminder that it is industry that will develop the technologies and the strategies that will reduce global emissions of greenhouse gases. It is industry that will have to deliver on government requirements and goals. To ignore this as we try to structure a global response to this enormous challenge is to fail.
Speaking of government, let me introduce a fourth Key to Success in responding to climate change: We have to adopt real, mandatory goals. Voluntary approaches, as I have said, simply have not worked to address this problem. In order to engage the full spectrum of industry and society, we need to set clear, mandatory goals for emission cuts, and at the same time provide sensible, business-friendly rules that give companies the flexibility they need to help meet those goals as cost-effectively as possible.
This is the approach embodied in recent legislation introduced by the bipartisan duo of Senators John McCain and Joe Lieberman. This landmark measure for the first time brings together several features that would be critical to the success of a national climate change strategy. The bill would establish ambitious and binding targets for reducing U.S. greenhouse gas emissions. Equally important, it would provide companies with the flexibility to reduce emissions as cost-effectively as possible – thanks to the creation of a rigorous nationwide system allowing emissions trading and providing some credit for carbon storage. Last but not least, the bill would recognize those reductions that are being made now by the companies that are taking the lead on this issue and provide additional flexibility for these early actors.
Of course, the McCain-Lieberman measure has little chance of becoming law any time soon, but it is an encouraging development nonetheless to see our policymakers in Washington finally coming to grips with exactly what it is going to take to yield real progress toward a climate-friendly future. And what it is going to take is a set of real, enforceable commitments.
This leads us finally, and forgive me if this seems redundant, to Key to Success Number Five: The United States must be an integral part of the climate solution. Despite having 4 percent of the world’s population, we have contributed nearly a third of worldwide emissions of greenhouse gases in the last century, and we continue to be the largest source of these emissions worldwide. And still, we have decided to sit on the sidelines while the world moves forward with a plan to begin addressing this challenge. Even worse, we have yet to develop anything resembling a domestic program to reduce our own emissions and protect the climate.
This problem, quite simply, will not be solved without us. We owe it to ourselves, we owe it to other nations, and we owe it to future generations, to commit American ingenuity and American leadership to meeting this challenge. I think the job begins at home: We must achieve a national consensus on how best to reduce our greenhouse gas emissions. And from there, we must engage constructively with other nations in the searching for a lasting global solution.
So there you have it. Five keys to success: We need to address this issue globally. We need to think and act both short-term and long-term. We need to involve industry. We need mandatory goals. And we need the United States to do its part both at home and abroad.
Yet another key to success, as I have learned over the years, is to keep your remarks to a reasonable length. So I will stop there, and I welcome your questions.
Thank you very much.
For Immediate Release
April 22, 2003
Contact: Paul Jackson
UNITED TECHNOLOGIES STEPS UP GLOBAL CONSERVATION EFFORTS
WASHINGTON, D.C. - United Technologies Corp. (NYSE:UTX) said today it has surpassed its 25 percent energy and water usage reduction goals four years ahead of schedule and is increasing them to 40 percent.
The company also announced it is joining the U.S. Environmental Protection Agency's Climate Leaders program. The voluntary industry-government partnership identifies environmental leaders in adopting aggressive goals and strategies for curtailing greenhouse gas emissions at manufacturing and other facilities. Since 1997, UTC has lowered its greenhouse gas emissions by 15 percent.
"EPA applauds United Technologies for its environmental leadership and
strong commitment to conserving our natural resources," said Jeff Holmstead, assistant administrator for the agency's Office of Air and Radiation.
UTC's original conservation plan, announced in 1998, called for the company to reduce both water and energy usage by 25 percent, as a percent of sales, by 2007. The company reported at today's Earth Technologies Forum in Washington, D.C., that it had exceeded those goals by achieving a 27 percent energy reduction and 34 percent water use reduction through 2002. UTC's new goals call for a 40 percent reduction of each by 2007. Performance will be monitored annually to track results and identify further conservation opportunities.
"UTC has more than 200 facilities worldwide participating in these conservation efforts, including more than 100 in the United States, over 50 in Europe and nearly 40 in Asia," said Rick Bennett, vice president of environmental health and safety. " Site audits and conservation tools are available to help facilities identify effective savings opportunities."
Bennett said the new goals exemplify UTC's strong environmental commitment, which has helped conserve both natural and economic resources.
UTC's Carrier Corp. has reduced water consumption at its Shanghai factories by more than 10 million gallons a year. For every $1,000 Carrier invests in low-flow showers and other conservation devices, the company estimates it saves $11,000 per year in associated water costs.
Otis Elevator's Breclav plant in the Czech Republic completed heating, lighting and compressed air system improvements that are conserving more than 1 million kilowatt-hours of electricity and 560,000 cubic meters of natural gas annually.
In the U.S., Sikorsky reduced energy demand at its main manufacturing plant in Stratford, Conn., a full percentage point by converting a temporary rotor-painting booth to a sanding booth with an air re-circulation system that eliminates high-energy dust collection apparatus. Energy savings amount to $94,000 a year.
Another example: Pratt & Whitney, with engineering support from Carrier, replaced centrifugal air compressors and a chilled water plant, upgraded lighting fixtures and completed other projects at its Middletown, Conn., jet engine assembly and test facility that combined have conserved 3.5 million kilowatt-hours of electricity per year.
United Technologies Corp., based in Hartford, Conn., is a diversified company that provides a broad range of high-technology products and services to the building systems and aerospace industries worldwide. More information is available on the company's Web site at http://www.utc.com.
SOLVING THE CLIMATE EQUATION
Mandatory & Practical Steps for Real Reductions
Remarks By Eileen Claussen
President, Pew Center on Global Cliamte Change
Alliant Energy Conference
April 15, 2003
Thank you very much. It is a pleasure to be here in Madison. And to be here on tax day makes it even more special. I hope I can be as creative in my remarks as many Americans are on their Form 1040.
Considering that it is tax day and coming from Washington, as I do, I thought you would be interested to know that Congress is indeed getting very serious about tax simplification. It’s true. The new tax forms they are discussing would include just three parts.
Part One: How much did you make last year? Part Two: How much do you have left? Part Three: Please send in the amount listed in Part Two.
Seriously, I expect you will all be glad to know that I am not here today to talk about taxes. Rather, what I want to talk about is the very taxing problem of global climate change. Okay, that’s the last time today that I will mention taxes.
I know that this morning’s panels included a session on the science of climate change. So I will skip the part of the speech laying out the evidence of how serious a problem this is. I hope that I don’t need to persuade you of that.
Instead, I would like to talk about where we stand today in our efforts to meet the challenge of climate change – and I may surprise some of you by saying there are actually a lot of good things happening. The momentum is building for practical solutions. People and governments are indeed taking important and worthwhile steps to address this problem, and I want to talk with you a little bit about what they are doing.
At the same time, I also want to talk with you about what must happen next. Because what is happening now is clearly not enough. And the priority looking ahead must be to marry a long-term vision of a climate-friendly future with the short-term strategies that will get us there. We need mandatory goals to ensure the broadest possible participation across all industry sectors in this effort. And we need to give businesses the flexibility to achieve those goals as cost-effectively as possible.
But, before I get into all of that, let me give you some background about the organization I represent. The Pew Center on Global Climate Change is a non-profit, non-partisan and independent organization. We consider ourselves a center of research, analysis, and collaboration. We are also a center in another sense – a much-needed centrist presence on an issue where the discussion too often devolves into battling extremes.
Our mission is to provide credible information, straight answers and innovative solutions in the effort to address global climate change. We see ourselves as a force for a pragmatic path forward on this issue. And we fulfill this role by educating the public and key policy makers, and by encouraging the domestic and international community to take practical steps to reduce emissions of greenhouse gases.
Over the past several years, we have issued 45 reports from top-tier researchers on key climate topics such as economic and environmental impacts, policy solutions, equity issues and more. We have convened conferences and symposia, and we have worked with policy makers and businesses throughout the world as they strive to shape climate solutions.
In the course of our work, as you might expect, we have developed a fairly keen sense of where things stand in the global effort to address the climate problem. This is what I want to share with you today. It is the view from 30,000 feet, and I find it’s an especially useful vantage point for assessing our progress on this issue.
What does this high-level view show us? It shows us that despite everything we see and hear coming out of Washington, despite the fact that U.S. climate policy remains in neutral, from a higher altitude we can see that there is actually a great deal of activity under way. There are actually a lot of people who are already hard at work charting the “Path Forward” on climate change that is advertised as the topic of this conference.
Consider this: Despite the opposition of the Bush administration, the Kyoto Protocol stands on the verge of entering into force sometime this year. The ratification of the treaty by Poland and Canada late in 2002 brought the number of ratifying countries to 100. These countries were responsible for nearly 44 percent of global greenhouse gas emissions in 1990. Russia’s expected ratification of the treaty later this year should bring that share to 55 percent, which is the level required for Kyoto to become law.
I have no illusions, of course, that Kyoto is the definitive solution to the climate problem – and I strongly believe, as I will say later, that it is time to start thinking beyond Kyoto. But the simple fact that this critical mass of developed nations have agreed to the treaty – and are already hard at work on strategies to meet their Kyoto emission targets – is a development of truly historic proportions.
Equally encouraging – if not equally historic – are the voluntary efforts of many companies throughout the world to address the climate problem in a proactive way. As many of you know, the Pew Center serves as a convenor of leading businesses that are taking practical steps to reduce their contribution to the problem. The 38 members of our Business Environmental Leadership Council represent nearly 2.5 million employees and have combined revenues of $855 billion. They include mostly Fortune 500 firms, and they are deeply committed to climate solutions:
There is DuPont, for example, which made a voluntary pledge to reduce its global emissions of greenhouse gases by 65 percent by the year 2010. And guess what? Late last year, they announced they had achieved this target eight years ahead of schedule. Also ahead of schedule in meeting its target is BP, which in 2002 announced that it had reduced global greenhouse emissions by 9 million metric tons in just four years. This marked a 10-percent reduction in the company’s emissions – and, like DuPont, BP had originally intended to achieve this goal in 2010.
Other companies have set similar targets and are working hard to meet them. And then there are all the companies that, even if they are not setting targets, are working in other ways to reduce their contribution to the climate problem. Alliant Energy itself – the sponsor of this important gathering – is also the sponsor of an array of energy efficiency and renewable energy programs.
The company’s innovative Second Nature program, for example, allows residential utility customers in Iowa, Minnesota and Wisconsin to buy renewable energy equal to 25 percent, 50 percent or 100 percent of their electric usage. At the end of 2002, Second Nature customers helped generate more than 9.8 million kilowatt-hours of renewable energy, including wind power from a new wind farm in Minnesota and biomass energy from a methane gas plant at a landfill in Mayville, Wisconsin.
Companies such as Alliant, BP and DuPont are not alone in taking proactive steps to address this problem. Also charting a path forward are individual states throughout the country. The Pew Center’s research shows that a majority of states have programs that, while not necessarily directed at climate change, are achieving real emission reductions.
Texas and 13 other states, for example, now require utilities to generate a specified share of their power from renewable sources. New York State’s new energy plan sets a goal of reducing emissions 10 percent below 1990 levels by 2020. What’s more, some states are going beyond target-setting and are establishing direct controls on carbon emissions from power plants and – in the case of California – cars and SUVs.
And I would be remiss not to mention what is happening here in Wisconsin, which since 1993 has required any facility that emits more than 100,000 tons of carbon dioxide to report its emission levels to the Department of Natural Resources. Wisconsin was the first state with a mandatory reporting rule; of the other states, only New Jersey has followed Wisconsin’s lead. And now Wisconsin is hard at work on a new registry that will enable firms to report reductions of CO2 or other greenhouse gases. The state is doing this, in part, to make sure that firms acting now will be able to get credit under future emission reduction regimes.
And so the path forward is being mapped out all around us – by entire nations, and by individual companies and states. Even the news from Washington is not all bad. Last year alone, nearly twice as many climate change bills were introduced on Capitol Hill than in the previous four years combined.
Then, early this year, as all of you know, the bipartisan duo of Senators John McCain and Joe Lieberman forged a landmark measure that for the first time brings together several features that would be critical to the success of a national climate change strategy. This bill would establish ambitious and binding targets for reducing U.S. greenhouse gas emissions. Equally important, it would provide companies with the flexibility to reduce emissions as cost-effectively as possible – thanks to the creation of a rigorous nationwide system allowing emissions trading and providing some credit for carbon storage. Last but not least, the bill would recognize those reductions that are being made now by the companies that are taking the lead on this issue and provide additional flexibility for these early actors.
Of course, the McCain-Lieberman measure has no real chance of becoming law any time soon, but it is an encouraging development nonetheless to see our policymakers in Washington finally coming to grips with exactly what it is going to take to yield real progress toward a climate-friendly future. And what it is going to take, as I stated early in my remarks, is a long-term vision of where we need to be, coupled with short-term strategies that will get us there.
At the Pew Center, we call it the 10/50 Solution. The idea is to think ahead to where we need to be 50 years from now if we are going to meet the challenge of climate change, and then to figure out decade by decade how to do it.
Why look 50 years out? Because achieving the necessary reductions in our greenhouse gas emissions will ultimately require innovation on a level never before seen. It will require a massive shift away from fossil fuels to climate-friendly sources of energy. It will require fundamental changes in how we produce things, how we power our homes and buildings, and how we travel to work.
The 10-50 approach doesn’t just look long-term, though. It recognizes that in order to realize that 50-year vision, we have to start right now. A while back, the Pew Center held a workshop with leading scientists, economists and other analysts to discuss the optimal timing of efforts to address climate change. They each came at it from a different perspective, but the overwhelming consensus was that to be most effective, action against climate change has to begin right now. Among the reasons why:
First, current atmospheric concentrations of greenhouse gases are the highest in more than 400,000 years. This is an unprecedented situation in human history, and there is a real potential that the resulting damages will not be incremental or linear, but sudden and potentially catastrophic. Acting now is the only rational choice under these circumstances.
A second reason to act now is that the risk of irreversible environmental impacts far outweighs the lesser risk of unnecessary investment in reducing or mitigating greenhouse gas emissions.
Third, it is going to take time to figure out how best to meet this challenge. And we must begin learning by doing now.
Fourth, the longer we wait to act, the more likely it will be that we are imposing unconscionable burdens and impossible tasks on future generations.
Fifth, there is an obvious lagtime between the development of policies and incentives that will spur action and the actions themselves.
And, last but not least, we can get started now with a range of “no regrets” policies that have very low or even no costs to the economy.
We can start with the low-hanging fruit – the countless ways we can reduce greenhouse emissions at little or no cost by simply being more efficient: everything from more fuel-efficient cars and trucks, including hybrids, to energy-efficient appliances and computers, efficiency improvements in industry, and even better management of animal wastes.
In the medium to long term, the challenge is to begin what we have called a second industrial revolution. The Pew Center is just now completing a scenario analysis that identifies several technologies as essential to our ability to create a climate-friendly energy future for the United States. Among them:
- Number one: natural gas. Substituting natural gas for coal results in approximately half the carbon emissions per unit of energy supplied, but we need policies to encourage the expansion of natural gas supply and infrastructure.
- Number two: energy efficiency. We have the ability to dramatically improve the fuel economy of cars and light trucks right now and in the very near future through a combination of advances in the internal combustion engine or through hybrid electric vehicles.
- Number three: renewable energy and distributed generation. The potential here is enormous, but policy support will be essential in promoting investment and breaking barriers to market entry for these technologies.
- Number four: nuclear power. Despite its problems, the fact remains that our carbon emissions would be much higher without nuclear power,
- Number five: geological sequestration. Sequestration holds the potential of allowing for the continued production of energy from fossil fuels, including coal, even in the event of mandatory limits on carbon emissions.
- And number six: hydrogen and fuel cells. The President’s recent announcement of a new federal commitment to fuel cell research was a welcome one, but we must have policies that will help pull these vehicles into the market.
Looking down this list, it is hard not to see that most, if not all, of these technologies would be important even in a world where we did not have this pressing obligation to reduce the amount of greenhouse gases in the atmosphere. For energy security and economic growth reasons, and a wide range of environmental reasons as well, these are simply smart things to do. The second industrial revolution is not just about responding to the challenge of climate change; it’s about creating a common-sense energy future.
And how can we make that future happen? Well, for one thing, we need an effective, long-term international agreement – one ensuring that all major emitting countries do their fair share to meet this challenge. The Kyoto Protocol – despite all its flaws, and despite being rejected by President Bush – is a reasonable first step. But even as other countries move ahead to implement it, they need to be looking beyond 2012 when the 1st commitment period ends. Because an agreement that’s going to work – an agreement that can bring in not only the United States, but developing countries as well – will in all likelihood be somewhat different than Kyoto. And it’s going to take some time to get there.
The more immediate challenge, of course, is here at home. That challenge is to get serious about reducing U.S. emissions. And getting serious means recognizing that a national climate strategy that lets emissions continue to grow is really not much of a strategy at all.
The following is a brief overview of transportation solutions undertaken by members of C2ES's Business Environmental Leadership Council (BELC).
For more information on each of these companies efforts to address climate change, please see the Businesses Leading The Way section of this Web site.
- Air Products and Chemicals’ distribution fleet is over 50 percent more fuel-efficient than it was three decades ago. Air Products uses sophisticated logistics scheduling software to maximize the amount of product hauled in each load and determine the optimal delivery routes to customers. Air Products fleet managers have recently set new internal miles per gallon targets to increase fleet efficiency using best practices for driving and maintaining vehicles.
- Air Products and Chemicals develops hydrogen infrastructure and fuel-handling technologies to enable the commercialization of hydrogen as an energy carrier and is working with the private and public sectors to develop a market for hydrogen fuel.
- Air Products and Chemicals is providing hydrogen production, distribution, and vehicle expertise to collaborations of public, private, and government institutions, and is participating in numerous demonstration projects in North America and Europe on the development of hydrogen fuels, fueling systems, and vehicles. For more information visit, Air Product's Hydrogen Energy Website.
- Air Products is part of the California Fuel Cell Partnership, a unique collaboration of auto manufacturers, energy companies, fuel cell companies, and government agencies. The partnership’s goal is to advance and evaluate new automobile technology that can move the world toward practical and affordable environmental solutions. The organization was formed in April 1999 and placed over 40 fuel cell vehicles—cars and buses—on the road between 2000 and 2003. In addition to facilitating the placement of up to 300 vehicles in fleet demonstrations between 2004 and 2007, partnership members will build demonstration hydrogen fuel stations, act to facilitate a path towards commercialization of hydrogen, and enhance public awareness and support.
- Alstom’s Coradia regional train models continue to meet with considerable success with the new generation Coradia Polyvalent, a powerful new addition to the Coradia line that travels at 160 km/h. Alstom’s high performance Coradia Polyvalent engine is light and compact and over 90% of its components are recyclable. In addition, it can capture energy generated during braking and return it to the power grid.
- American Water is working to improve its efficiency of its fleet of cars and trucks and has implemented a "no idle policy" to improve fuel efficiency.
- About 5 percent of American Water’s GHG emissions come from its vehicle fleet, which is used to operate and maintain its water and wastewater systems. American Water continues to work with public utility commissions in the states in which it operates to obtain approval for the increased purchase of high-efficiency, hybrid and electric vehicles.
- BP is part of the California Fuel Cell Partnership, a unique collaboration of auto manufacturers, energy companies, fuel cell companies, and government agencies. The partnership’s goal is to advance and evaluate new automobile technology that can move the world toward practical and affordable environmental solutions. The organization was formed in April 1999 and placed over 40 fuel cell vehicles—cars and buses—on the road between 2000 and 2003. In addition to facilitating the placement of up to 300 vehicles in fleet demonstrations between 2004 and 2007, partnership members will build demonstration hydrogen fuel stations, act to facilitate a path towards commercialization of hydrogen, and enhance public awareness and support.
- BP is taking practical steps to bring hydrogen fuel and fuelling facilities into cities around the world as demonstration projects involving buses and cars with the aim to familiarise commerce and the public with hydrogen as the ultimate clean fuel of tomorrow. BP sees their business role as a supplier of hydrogen fuel and a partner in demonstrating the viability of fuel cells in mobile and stationary applications. This strategy makes use of BP’s core skills in fuel production, storage and distribution.
- BP’s Global Choice program allows Australian business customers to offset the greenhouse gas emissions from their fuel consumption. Participation in the program is free for companies purchasing BP Ultimate or bp autogas and only 1-2 cents per liter to offset regular unleaded or diesel fuels. The offsets are independently audited and certified by the Australian Federal Government’s Australian Greenhouse Office (AGO). Since November 2001, over 6,500 customers have offset 626,095 tonnes of greenhouse gases.
- Cummins joined the U.S. government and other industry partners in the Twenty-First Century Truck Initiative, with the goal of developing commercially viable truck and propulsion system technologies that will dramatically cut fuel use and emissions from medium and heavy-duty trucks and buses.
- Cummins sold over 2000 Compressed Natural Gas engines to the Beijing Public Transportation Corporation for the city bus fleet. These engines exceed Euro II emissions standards.
- Cummins has partnered with Lockheed Martin Control Systems and Orion Bus to produce the diesel engine and soot filter for Lockheed’s hybrid electric drive system for 125 Orion VII hybrid buses, to be purchased by the New York City Metropolitan Transit Authority.
- Daimler seeks early compliance with the Euro 6 standard for passenger cars by 50 percent of all Mercedes-Benz and smart new vehicles in Europe by the end of 2014.
- Daimler will introduce EEV engines for light commercial vehicles in all van production series by the end of 2013, which will lead to a reduction in GHG emitted.
- In 2010, Delta installed winglets on twenty-one 737-800s, fifteen 757-200s and fourteen 767-300ERs (part of a long-term program to save 50 million gallons per year)
- Delta increased the utilization of single-engine taxi procedures, resulting in 5 percent additional savings from the 30 million gallons per year program
- Delta enhanced arrival sequencing software in Atlanta to take into account gate availability, saving an additional 2.1 million gallons a year
- Delta increased the number of aircraft routing options for international flights, saving 1.6 million gallons per year; expanding the engine wash program to include the additional fleets, saving 2.5 million gallons per year.
- Delta revising descent procedures for uncongested airports, saving 1.3 million gallons per year.
- Dominion's home state of Virginia is a very active emerging market for electric vehicles (EVs) and is laying the groundwork for their development and use. The EV market has the potential to grow to 86,000 vehicles, or 5 percent of all vehicle sales in Virginia by 2020.
- Dominion Virginia Power currently has three Plug-In Hybrid Electric Vehicles (PHEVs) in its service fleet. PHEVs contribute to lowering our carbon footprint, cut fuel use and test the value of this clean technology in densely populated Northern Virginia.
- Two hybrid aerial lift trucks are in service in Northern Virginia, where they are used to work on power lines. Tests have produced fuel savings of up to 60 percent relative to their diesel-powered counterparts. In addition to the environmental benefits, the hybrid vehicle technology offers potentially lower maintenance costs, less noise at service calls, and healthier work conditions for our line crews.
- Dominion has teamed up with General Motors and eight other utilities to test the Chevrolet Volt Extended Range Electric Vehicle and the supporting charging infrastructure. Dominion installed two charging stations on Interstate 64 in New Kent County, VA, that are available to the public and free of charge.
- In October 2010, Dominion and Ford Motor Company announced plans to coordinate efforts to help prepare Virginia for the operation of EVs. Our two companies are working together to develop consumer outreach and EV educational programs, as well as share information on charging needs and requirements to ensure the power grid can support the necessary electrical demand.
- The collaboration between Ford and Dominion also involves working with state and local governments on the most efficient ways to bring EVs to Virginia. Government support for infrastructure and a simple charging station permitting process are thought to be two key prerequisites for EV acceptance in Virginia and across the country.
- In July 2011, Dominion launched an EV pilot program to collect data on customer adoption of EVs, battery charging patterns and the effects of EV charging on the power grid. It offers two different voluntary time-of-use pricing options to encourage customers to charge their EVs at times when electric demand – and costs – are lower (off-peak).
- Dominion Energy currently employs more than 300 natural gas vehicles (NGVs), primarily light- and medium-duty pickup trucks, at 22 locations in Ohio. The compressed natural gas (CNG) fueling these vehicles displaces the equivalent of 360,000 gallons of gasoline a year. CNG usage in light-duty pickup trucks typically requires 87 percent less gasoline than regular, gasoline-fueled light-duty pickup trucks. Over the past decade, we estimate that our NGV fleet has displaced a total of about 2.4 million gallons of gasoline.
- Dominion began testing B20 biodiesel fuel in our Dominion Virginia Power fleet in 2007. Since then, Dominion has used 4 million gallons of B20 at 32 locations in Virginia and North Carolina. More than 1,000 Dominion service vehicles currently operate on biodiesel fuel every day.
- Dow Automotive Systems is helping manufacturers reduce vehicle weight – and, in turn, improve energy efficiency and reduce environmental impact.
- Duke Energy collaborates with manufacturers of vehicles, batteries and charging stations to promote the long-term adoption of plug-in electric vehicles. It is also a board member of the Electric Drive Transportation Association and helped launch www.GoElectricDrive.com in 2010, which offers information on advancements in electric vehicle technologies, purchase incentives and environmental benefits.
- Duke Energy will provide eligible residential customers with electric vehicle charging stations as part of pilot programs in Indiana and the Carolinas. Duke Energy will install charging stations, as well as service the technology for the duration of the programs. When the pilot ends, participants will have the option of purchasing the charging stations at significant savings
- Duke Energy has set a goal to only purchase electric and hybrid vehicles by 2020
- Pioneer Hi-Bred International, Inc., a DuPont company, the world's leading developer and supplier of agricultural seeds, operates a significant portion its fleet of farm and transportation equipment on biofuels such as ethanol and bio-diesel, offsetting CO2 emissions from fossil fuels.
- Biodiesel and Hybrid Vehicle Program
- ComEd continues to be a major voluntary user of B-20 biodiesel blended product, with 2004 consumption surpassing the 2 million gallon mark. For 2004, this consumption level reduced particulate emissions by more than 340 tons and displaced the need to purchase more than 400,000 gallons of petroleum-based diesel. ComEd is recognized as the largest regional consumer of biodiesel and ranks in the top 5 percent of biodiesel consumers nationwide.
- In 2005, Exelon purchased 50 Ford Escape Hybrids, the first production hybrid sport-utility vehicle (SUV). These now comprise about 25 percent of the company’s overall SUV fleet. The combination gasoline and electric Ford Escape operates in electric-only mode when the vehicles travel at low speeds or idle at a stop. As a result, the hybrid Escapes provide an estimated 50 percent improvement in city/highway fuel economy when compared to the conventional Escape.
- In 2004, Exelon also joined the Hybrid Truck Users Forum (HTUF), a project of the U.S. Army and WestStart. The forum coordinated specifications and a request for proposal (RFP) for the prototype of a medium-duty hybrid utility truck. Exelon’s fleet-supply team had the opportunity to drive the prototype, named the Validator, in January 2005. The truck offers specific benefits for the utility business, such as an immediate source of 25 kilowatts (kW) of exportable power that can be supplied to specific customer locations that have lost power, thereby introducing the possibility of reducing the Customer Average Interruption Duration Index (CAIDI). In 2005, Exelon procured two preproduction hybrid trucks from International Truck and Engine Corporation, one each for PECO and ComEd operations. The combination diesel and electric powered trucks are expected to improve fuel economy up to 60 percent compared to diesel-only fueled trucks. The new hybrid truck will also allow the operator to shut off the diesel engine and operate the bucket on an electric motor for up to two hours before the engine has to come back on to briefly charge the battery. As a result, considerably less fuel is burned and noise is reduced. About two-thirds of the fuel savings result from the engine being shut off at the work site.
- Donated CNG station for airport transit buses
- Partnering with the Greater Philadelphia Clean Cities Program (GPCCP), PECO helped move the Philadelphia International Airport (PIA) one step closer toward procurement of compressed natural gas (CNG) transit buses. A recent study, funded by the U.S. Department of Energy (DOE) through a GPCCP grant, determined that significant reductions in emissions are possible through adoption of alternative fuel vehicles, most notably CNG fueled vehicles.
- In 2004, the decision was made by PECO to close the CNG station located at the King of Prussia service area on the Pennsylvania Turnpike. Declining patronage and increasing operations and maintenance (O&M) expenses were the main drivers. Since the major expense in decommissioning the station was removal and site restoration, PECO offered the station to GPCCP and PIA in hopes that it could be re-commissioned to support an anticipated procurement of CNG transit buses.
- In November, the station was moved from the turnpike service area to a temporary location at PIA, awaiting installation and commissioning at the airport in mid-2005. This move eliminated the O&M expense and demonstrated PECO’s environmental commitment by facilitating future use of this asset in a manner certain to improve air quality at the airport. In addition, PECO made a $20,000 cash gift to GPCCP for funding the relocation and site restoration
- Throughout GM's vehicle brands, it has 13 vehicle models that achieve at least a 30 mpg highway rating or higher for the 2010 model year. GM has made its vehicles more efficient through the use of a variety of technologies such as Active Fuel Management, six-speed transmissions, variable valve timing, and direct injection. It also offers five hybrid vehicles – Chevrolet Tahoe, Chevrolet Silverado, GMC Yukon, GMC Sierra and Cadillac Escalade.
Hp's projects to improve transport efficiency reduced GHG emissions by 54,000 tonnes CO2e. Switching transport of HP Visual Collaboration studios from air to ocean and optimizing shipping container size saved 880 tonnes CO2e per shipment
- In 2004, Hewlett-Packard was ranked in the top twenty FORTUNE 500 companies participating in the public-private sector voluntary program Best Workplaces for Commuters.SM Best Workplaces for CommutersSM was established by the DOT and EPA to publicly recognize employers whose commuter benefits address parking, congestion, and environmental impacts associated with driving-alone commuting. Seventy percent of HP's employees telecommute on a full-time, regular, or occasional basis. HP’s Bay Area work sites also have electric vehicle recharging stations onsite and offer transit subsidies to employees. HP work sites in Georgia also offer transit subsidies, hold quarterly meetings to discuss commuter issues, and subsidize all vanpool expenses beyond the cost of gas.
- In 2004, IBM was ranked in the top twenty FORTUNE 500 companies participating in the public-private sector voluntary program Best Workplaces for Commuters®. Best Workplaces for Commuters® was established by the DOT and EPA to publicly recognize employers whose commuter benefits address parking, congestion, and environmental impacts associated with driving-alone commuting. Commuter programs particularly telecommuting, not only benefit the environment by reducing traffic congestion, but also benefit IBM employees by providing them with greater flexibility, and benefit the company by enhancing the productivity of its work force. IBM has currently more than 20,000 employees participating in telework arrangements in the U.S. Many IBM locations around the country also encourage employees to take public transportation, carpool, vanpool, use bikes, etc. in order to reduce traffic congestion and its resulting air pollution. At these multiple locations, IBM provides commuter assistance programs which provide employees with guidance on using alternative modes of transportation and Emergency Ride Home programs. Some of these IBM locations provide employees with various benefits including but not limited to transit subsidies, discounted transit passes, internal carpool ride-matching service, access to onsite amenities such as cafeterias, credit unions, ATM's, medical center, commuter information kiosks, common telework stations, bike racks, showers, etc.
- In 2004, Intel was ranked number one among FORTUNE 500 participating companies in the public-private sector voluntary program Best Workplaces for CommutersSM. Best Workplaces for Commuterssm was established by the DOT and EPA to publicly recognize employers whose commuter benefits address parking, congestion, and environmental impacts associated with driving-alone commuting. In 2003, 44 percent of Intel’s 48,600-plus U.S.-based employees were able to take advantage of telecommute options, while other staffers participated in flextime, compressed workweeks, part-time hours, and job-share programs. Intel offers commuter benefits to more than 90 percent of its work force including a universal vanpool and transit subsidy program and Emergency Ride Home services. In addition, Intel provides on-site fitness centers, food cafes, dry cleaning, and photo development for its employees at major work sites.
- PowerFrame is our patented, precision-stamped grid technology in lead-acid batteries. Its optimized grid design and sturdy outer frame delivers significantly improved durability, performance and reliability and extends the battery’s lifecycle. The PowerFrame manufacturing process utilizes 20 percent less energy, emits 20 percent fewer greenhouse gases and is virtually waste-free because all excess stamping materials are recycled. The PowerFrame grid technology process is used at all Johnson Controls manufacturing sites in the United States and is being implemented at the company’s battery production facilities in Mexico and Europe.
- Johnson Controls has developed seating frames that are 30 percent lighter than current frames and help reduce overall vehicle weight. This new frame will beavailable to Japanese car makers for production in 2012.
- Johnson Controls. through its joint venture, Johnson Controls-Saft-Saft, was the first to market lithium-ion batteries for production automobiles, supplying the Mercedes S-Class and BMW 7 Series hybrid vehicles. It established the first U.S. automotive lithium-ion battery production facility in Holland, Michigan, in 2010. Battery pack assembly began at this facility this year, with cell production to begin in 2011. The plant supports production contracts with Ford, Daimler, BMW and Azure Dynamics.
- Florida Power & Light, a subsidiary of NextEra Energy, Inc. has updated its vehicle fleet with hybrid-electric and biodiesel vehicles. It converted one-third of its 2,400 company cars to hybrids by the end of 2010.
In 2010, NRG launched eVgo, the nation’s first comprehensive, privately funded electric vehicle charging ecosystem. Starting in Houston and expanding to Dallas-Fort Worth and additional markets, eVgo delivers an unlimited miles “home-and-away” charging service for a low monthly fee, making EV ownership easier and more affordable. This will help pave the way to an electric vehicle revolution that has the potential to not only break America’s addiction to foreign oil, but also significantly reduce greenhouse gases and other harmful air emissions by fueling vehicles with lower emission electricity instead of gasoline.
- PG&E Corporation began its Clean Air Transportation program in 1988 and currently has more than 650 natural gas vehicles in its fleet.
- PG&E is conducting a PEV (Plug-in Electric Vehicle) "smart charging" pilot project with the Electric Power Research Institute (EPRI), technology companies and automakers to evaluate load management technologies that will minimize the impacts to the grid from charging electric vehicles.
- PG&E is helping to develop the underlying codes and standards for electric vehicles, working with national and international organizations to ensure that electric vehicles charge and communicate in similar ways. This will reduce costs for utilities, car companies and, ultimately, consumers. For example, as chair of EPRI's National Infrastructure Working Council, PG&E was instrumental in securing agreement across the electric vehicle industry to adopt the J1772 physical plug standard. This standard means that all electric cars will have the same plug for charging vehicle batteries.
- Last year, PG&E added the nation’s first all-electric bucket truck to the fleet. The Smith Electric Vehicle joins the PHEV and hybrid diesel-electric bucket trucks already in service. PG&E also continued to evaluate and test numerous electric passenger vehicles, including the Mitsubishi i-Miev and AC Propulsion's eBox, and have incorporated Ford Escape PHEVs and two Toyota Prius PHEVs into PG&E’s fleet.
- The company also maintain a network of 35 CNG and one liquefied natural gas (LNG) stations, most of which are open to the public.
PG&E has partnered with General Motors to take delivery of more than 100 dual-mode hybrid pickup trucks, joining more than 50 Ford Escape hybrids already in the fleet. PG&E will also add 10 Chevrolet Volt extended-range electric vehicles once they are available. To support these new vehicles, PG&E has installed more than 20 new electric vehicle charging stations at seven locations, with plans to add more as new vehicles come into the fleet. We are also adopting energy-efficient LED vehicle lighting as the standard for our fleet in 2010 to reduce overall electricity use.
- Rio Tinto subsidiary US Borax is participating with Millenium Cell in the further development and possible commercialization of a process that generates pure hydrogen or electricity from environmentally friendly raw materials such as borates. In the Hydrogen on Demand™ process, the energy potential of hydrogen is carried in the chemical bonds of sodium borohydride, which in the presence of a catalyst either releases hydrogen or produces electricity.
- In August 2010 Royal Dutch/Shell signed a binding agreement with Cosan to form a joint venture for producing ethanol from sugar cane in Brazil. Following regulatory approval this would mark Shell’s first move into the production of biofuels.
- Royal Dutch/Shell works with Iogen Energy, a Canadian company, to develop the processing technology that enables ethanol to be made from straw using enzymes. Iogen opened a demonstration plant in Ottawa, Canada, in 2004.
- With US company Virent Energy Systems we also have a joint technology development programme to convert plant sugars directly into a range of high performance liquid transport fuels. In 2010 Virent opened a demonstration plant to convert plant sugars directly into petrol.
- Royal Dutch/Shell is part of the California Fuel Cell Partnership, a unique collaboration of auto manufacturers, energy companies, fuel cell companies, and government agencies. The partnership’s goal is to advance and evaluate new automobile technology that can move the world toward practical and affordable environmental solutions. The organization was formed in April 1999 and placed over 40 fuel cell vehicles—cars and buses—on the road between 2000 and 2003.
- Royal Dutch/Shell’s Shell Hydrogen was established in early 1999 to pursue and develop global business opportunities related to hydrogen and fuel cells. Shell Hydrogen is involved, through Icelandic New England Ltd, in a pioneering project that may bring about a complete transition to a hydrogen economy in the coming decades in Iceland.
- In December 2009, Toyota launched the 2010 Prius Plug-in Hybrid Vehicle (PHV) demonstration program. The Prius PHV is based on the third-generation Prius, expanding Toyota’s Hybrid Synergy Drive® technology with the introduction of a first generation lithium-ion (Li-ion) drive battery that enables all-electric operation at higher speeds and longer distances than the conventional Prius hybrid.
- Toyota plans to bring the new RAV4 battery electric vehicle to market in 2012.
- Both the US EPA's Fuel Economy Guide and the Natural Resources Canada Fuel Consumption Guide for model year 2010 list the Toyota Prius as the most fuel-efficient vehicle available for sale in both countries.
- Toyota's low viscosity SAE (formerly known as the Society of Automotive Engineers) 0W-20 multigrade gasoline engine oil enables increased fuel economy performance over higher viscosity oils by reducing friction while maintaining necessary lubrication in the engine.
- Toyota is committed to bringing hydrogen-powered vehicles to global markets in 2015, and it sees FCHVs (Fuel Cell Hybrid Vehicles) as yet another critical element in its progression toward sustainable mobility.
- Toyota's Green Wave Advisor enables traffic signals to communicate directly with the vehicle. The signals send information to the vehicle that is translated and displayed for the driver as a suggested range of speeds. If followed, this information will allow the driver to pass through a series of green lights for a more efficientjourney.
- Over the past decade, Toyota’s new automobile fleets have consistently achieved higher fleet average fuel economy than both the industry standard and the Corporate Average Fuel Economy (CAFE) standard required by U.S. law - for both car and non-passenger (light truck and SUV) fleets.
- Toyota is exploring ways to accelerate the research and development needed to commercialize bio?hydrocarbon fuels.
- Toyota is part of the California Fuel Cell Partnership, a unique collaboration of auto manufacturers, energy companies, fuel cell companies, and government agencies. The partnership’s goal is to advance and evaluate new automobile technology that can move the world toward practical and affordable environmental solutions. The organization was formed in April 1999 and placed over 40 fuel cell vehicles—cars and buses—on the road between 2000 and 2003. In addition to facilitating the placement of up to 300 vehicles in fleet demonstrations between 2004 and 2007, partnership members will build demonstration hydrogen fuel stations, act to facilitate a path towards commercialization of hydrogen, and enhance public awareness and support.
- Toyota is also part of the Canadian Transportation Fuel Cell Alliance (CTFCA) a public/private initiative to demonstrate and analyze fuel cell fueling options for fuel cell vehicles in Canada.
- In February 2008, Chevron and Weyerhaeuser announced the creation of a 50-50 joint- venture company focused on developing the next generation of renewable transportation fuels from nonfood sources. The joint venture, Catchlight Energy LLC, will research and develop technology for converting cellulose-based biomass into economical, low-carbon biofuels.
Carbon Sequestration and Offsets Solutions
The following is a brief overview of carbon sequestration and offsets solutions undertaken by members of C2ES's Business Environmental Leadership Council (BELC).
For more information on each of these companies efforts to address climate change, please see the Businesses Leading The Way section of this Web site.
Air Products is a technology developer and provider for the CO2 Capture Project (CCP), which is an international effort by seven of the world’s leading energy companies. This project seeks to develop new technologies to reduce the cost of capturing CO2 from combustion sources and safely storing it underground. It is a collaborative effort involving partnerships with governments, industry, NGO’s and other stakeholders.
Under the CCP, Air Products and Chemicals, Inc. has directly contributed to projects, including early development of sorption enhanced water gas shift process and advancing the feasibility study of retrofitting boilers and fired heaters with oxy-fuel burner systems.
Air Products and Chemicals, Inc. is also participating as a partner in the CANMET programs exploring means to increase efficiency in energy-intensive industries, develop more efficient hydrocarbon conversion processes, and reduce emissions, including CO2, from fossil fuel combustion.
Alcoa plants thousands of trees annually near their operations and service areas, sequestering thousands of tons of CO2 every year.
In 2003, Alcoa employees fulfilled a goal to plant one million trees around the world in ten years—and did so in half the time. A new company goal is for employees to plant 10 million trees by the year 2020.
BP is a member of the CO2 Capture Research Project (CCP), an international effort by seven of the world’s leading energy companies. BP is learning from its CO2 geologic storage facility in Algeria, where it will be storing around one million tons of CO2 a year beginning in 2004.
B P is working with the MIT Energy Laboratory as part of a consortium researching the environmental impacts, technological approaches, and economic issues associated with carbon sequestration. The MIT research focuses on efforts to better understand and reduce the cost of carbon separation and sequestration.
BP is contributing to the development of a Blue Chip Standard, as part of the Climate and Biodiversity Alliance, for demonstrating the contribution of forestry projects to the goal of atmospheric greenhouse gas stabilization. This standard will support the creation of carbon sequestration credits that are generally recognized and therefore tradable.
BP’s Global Choice program allows Australian business customers to offset the greenhouse gas emissions from their fuel consumption. Participation in the program is free for companies purchasing BP Ultimate or bp autogas and only 1-2 cents per liter to offset regular unleaded or diesel fuels. The offsets are independently audited and certified by the Australian Federal Government’s Australian Greenhouse Office (AGO). Since November 2001, over 6,500 customers have offset 626,095 tonnes of greenhouse gases.
Delta was the first U.S. airline to offer carbon offsets to its customers through a partnership with The Nature Conservancy. Proceeds benefit a forest conservation, reforestation and wildlife habitat restoration project in Louisiana’s Tensas River Basin. In 2010 Delta, together with its customers, contributed more than $75,000 towards this project, the equivalent of offsetting the CO2 emissions of ten 747 flights from Tokyo to Detroit.
Dominion has supported a number of research projects designed to commercialize carbon capture and storage (CCS) technologies. For example, the company contributed $500,000 to the Virginia Center for Coal & Energy Research at Virginia Tech where scientists are studying carbon dioxide storage in the unmineable coal seams of Central Appalachia.
Some of the most promising sites for carbon storage are in Virginia’s coalfield region near the company’s new Virginia City Hybrid Energy Center, which Dominion designed to accommodate CCS technology once it is becomes available.
DTE Energy seeks opportunities to sequester carbon dioxide and capture methane escaping from landfills. Since 1995, DTE Energy has planted 20 million trees in Michigan alone and DTE Biomass landfill projects have captured the equivalent of nearly 20 million tons of CO2.
DTE Energy is a participating member of the UtiliTree Carbon Company. UtiliTree is a consortium of 41 utilities organized by the Edison Electric Institute to invest in a portfolio of forestry projects that manage GHG emissions, particularly CO2. A $3.2 million investment in eight domestic and two international projects will capture over 3 million tons of CO2 over the life of these projects.
DTE is a founding member of PowerTree Carbon Company, LLC, a voluntary carbon sequestration initiative. PowerTree, which has 25 member companies, will invest $3.4 million for reforestation of over 3,800 acres of bottomland hardwood projects in Arkansas, Mississippi, and Louisiana. The project will sequester over 2 million tons of CO2 over the 100-year project term.
- In 2010, Duke Energy and ENN Group, one Duke's Chinese partners, conducted a joint study to test the ability of various strains of algae to remove carbon dioxide(CO2) from coal-fi red power plant emissions. This was the first study to use CO2 from power-plant flue gas instead of pure CO2. The team of scientists found thatseveral strains of algae grew just as well using flue gas instead of pure CO2, an important indicator that these strains could be a good fi t for potential CO2 mitigation
Entergy plants thousands of trees annually on their landholdings, sequestering thousands of tons of CO2 every year.
Entergy in partnership with Trust for Public Land and the U.S. Fish and Wildlife Service (USFWS), is acquiring 1,600 acres of land adjacent to the Tensas River Wildlife Refuge, restoring bottom land hardwood habitat on marginal croplands and donating the improved land to USFWS who will manage the property. This will sequester 640,000 tons of CO2 over the next 70 years.
Entergy in partnership with the Conservation Fund, USFWS and Friends of the Red River, dedicated the Red River Wildlife Refuge in Natchitoches, Louisiana, and established a 600 acre sequestration site that will create 225,000 tons of CO2 offset credits over the next 70 years.
Entergy has leased 30,000 tons of CO2 offset credits from the Pacific Northwest Direct Seed Association (PNDSA). Credits are generated by growers who have agreed to use direct seed agriculture methods for at least 10 years. Direct seed cultivation avoids soil losses from oxidation associated with traditional farming techniques and also reduces the growers’ fuel use and soil erosion.
In December 2003, Entergy became the first U.S. utility to purchase carbon emissions credits from geological sequestration projects. These projects capture CO2 vent gases that would otherwise be released into the atmosphere and then place them into oil-bearing geologic formations for use in enhanced domestic oil recovery. Under this program, Entergy plans to purchase over 2,800,000 metric tons of CO2e emission reduction credits by the end of 2005.
Entergy is a participating member of the UtiliTree Carbon Company. UtiliTree is a consortium of 41 utilities organized by the Edison Electric Institute to invest in a portfolio of forestry projects that manage GHG emissions, particularly CO2. A $3.2 million investment in eight domestic and two international projects will capture over 3 million tons of CO2 over the life of these projects.
PECO and Exelon have committed $150,000 to TreeVitalize, an aggressive four-year, $8 million partnership to plant more than 20,000 shade trees and restore 1,000 acres of forested riparian buffers in southeastern Pennsylvania. Tree cover (percent of land covered by trees and shrubs) has been decreasing in the five-county Greater Philadelphia region due mainly to the combined impacts of suburban sprawl and urban decay. In response to a study highlighting the loss of tree cover, the Pennsylvania Department of Conservation and Natural Resources launched TreeVitalize.
Planting alone is not sufficient to address the loss of tree cover. Both existing and new trees need better care. TreeVitalize will work with municipalities to identify tools to promote improved tree care. TreeVitalize will also collaborate with community groups to nurture volunteers by providing training for 2,000 citizens in proper tree care techniques.
For more info, visit the TreeVitalize website at http://www.treevitalize.net/.
Working in partnership to restore prairie grass
Exelon has restored more than 110 acres of natural prairie habitat on buffer lands and rights of way in Illinois since the initiative’s beginning in 1994. This effort is helping to sequester CO2, restore wildlife habitat, prevent runoff and improve water quality.
In 2004, restoration work continued on several significant Illinois projects. We partnered with the Forest Preserve District of DuPage County to manage transmission rights of way in conjunction with a larger restoration project. An ecosystem lease was signed for the county to manage our property, which was a first for Exelon. And in Will County, we restored four acres along a transmission right of way adjacent to a larger restoration project. Another six acres of prairie were restored adjacent to a Forest Preserve District of Will County restoration project along the DuPage River.
Exelon is currently evaluating 10 to 15 additional acres of company rights of way and buffer lands for possible restoration.
Capturing CO2 emissions through tree plantings
During 2004, Exelon maintained its participation in PowerTree Carbon Company, LLC, an initiative formed in 2003 by 25 U.S. power generators as part of a voluntary industry response to climate change. Member companies committed more than $3 million for reforestation in the Lower Mississippi Alluvial Valley. The projects will remove from the atmosphere and store more than 2 million tons of CO2 over their projected 100-year lifetimes. Exelon will be entitled to claim approximately 3 percent of the sequestered CO2.
As of December 31, 2004, PowerTree Carbon Company had planted in excess of 2,000 acres of seedlings, using native tree species. Projects typically involve planting on a 12- by 12-foot spacing for an initial tree density Periodic monitoring using peer-reviewed methodologies measures above- and below-ground carbon stores.
The Lower Mississippi Alluvial Valley once contained nearly 22 million acres of bottomland hardwoods that have been reduced to approximately 4 million acres as a result of decades of flood control measures and conversion of forestlands to marginal farmland. Benefits from PowerTree Carbon Company, LLC projects beyond carbon sequestration include restoration of habitat for birds and other wildlife, reduction of fertilizer inputs to water bodies and increased soil stabilization. This initiative will help to advance the science behind carbon sequestration as a GHG mitigation option.
For more info, visit the PowerTree website at http://www.powertreecarboncompany.com/.
Managing trees along rights of way
Exelon maintains almost 56,000 miles of overhead electric lines in its distribution system and more than 6,000 miles of transmission rights of way. Our vegetation management program uses safe, reliable and cost-effective methods, including tree trimming, removal and herbicide application. These methods follow the standards set by the American National Standards Institute, the Occupational Safety and Health Administration (OSHA) and the International Society of Arboriculture.
PECO maintains its 12,150 miles of distribution lines on a five-year cycle, ComEd its 43,700 miles on a four-year cycle. Our transmission rights of way on state, local and federal lands – through prairies, wetlands, woods, agricultural land, suburban and urban areas and along highways and railroad corridors – are maintained on a five-year cycle, with annual comprehensive surveys of conditions.
ComEd is converting sections of transmission rights of way to native grasses and to date has converted 110 acres. Through the Municipal Tree Restoration Program, PECO encourages customers to plant the right tree in the right place to help minimize contact with wires. Both PECO and ComEd support municipalities by funding the removal and replacement of diseased, weakened or tall-growing trees under our overhead conductors. ComEd and PECO support National Arbor Day by working with school groups, municipalities and civic organizations to supply trees and planting training. ComEd is a five-year recipient of the National Arbor Day Foundation’s Tree Line USA Award.
For more info on tree plantings near power lines visit PECO's Compatible Trees for Planting Under or Near Power Lines.
As part of NRG's aggressive effort to transition to a low-carbon economy, it is currently exploring a variety of carbon capture and sequestration (CCS) projects including post-combustion technologies to capture CO2 from the flue gas of a power plant and place it in safe geological formations for permanent sequestration.
NRG's post-combustion CCS demonstration project at WA Parish near Houston, Texas, will be among the first of its kind and is expected to begin operating in 2013. The project will process flue gas from the plant equal in quantity to that of a 60 MW unit, a level that can prove the technology's viability on a larger scale, and then deliver that captured CO2 for use in enhanced oil recovery in nearby oil fields. This commercial-scale demonstration is designed to capture approximately 90 percent (or just under half a million tons) of CO2 in the flue gas annually.
NRG Energy has invested in a 680 net megawatt (MW) IGCC plant with carbon capture and sequestration in Tonawanda, NY. IGCC technology removes more than 90% of nitrogen oxide (NOX), 99% of sulfur dioxide (SO2), and 95% of mercury emissions, compared to conventional coal-fueled plants. Additionally, our IGCC plant will capture 65% of CO2 emissions, with a potential of up to 90% over time.
NRG Energy created and maintains the Oxbow Reforestation Project in Shreveport, La. The project features one of the largest single reforestation efforts on private land in the southeastern United States and is supported by the U.S. Fish and Wildlife Service. The site includes 60 acres of shallow water wetlands and nearly 2,000 acres of bottomland hardwood forest.
The Restore America's Estuaries Nation Conference was held in Galveston in 2010. NRG was the conference's climate sponsor, offsetting 1,500 metric tons of carbon for the weeklong event. Wetland plants from NRG Energy's EcoCenter were donated and planted by conference participants during the Restore Galveston Bay field session
Pacific Gas and Electric Company has submitted a proposal to the California Public Utilities Commission (CPUC) for a new and innovative environmental program that will allow interested customers to contribute toward a cleaner California. This voluntary program would be available to most of PG&E’s residential and business customers.
Through the Climate Protection Program, customers can choose to sign up and pay a small premium on their monthly utility bill which will fund independent environmental projects aimed at removing carbon dioxide from the air. To read more about this program, click here. (pdf)
Rio Tinto Aluminium (RTA) partnered with The Carbon Pool Pty Ltd. In the “Minding the Carbon Store (MTCS)” project to abate approximately 1 million tons of CO2 emissions through avoided deforestation. The project, verified and approved under the Australian government’s Greenhouse Gas Friendly initiative, provided payments to landowners to forego permits to clear native vegetation, avoiding the release of GHG emissions over a period of 120 years from land clearing of 12,000 hectares of native vegetation.
Rio Tinto’s Luzenac America subsidiary purchased green tags from the Bonneville Environmental Foundation to offset 100 percent of the GHG emissions associated with energy used at its Yellowstone Talc mine near Cameron, Montana.
Royal Dutch/Shell is a member of the CO2 capture project CO2 Capture Research Project, an international effort by seven of the world’s leading energy companies.
Shell leads the CO2Sink project at Ketzin in Germany, which is the first onshore project in Europe to inject CO2 underground. From 2008 - 2010, the project will store up to 60,000 tonnes of CO2 in saltwater rock layers, showing how effectively CO2 is absorbed and its movement over time. Shell is leading this project, providing technical expertise and helping find the most cost-effective ways to store CO2 in saltwater formations. Governments will also use findings to help design effective safety regulations.
- Project Pioneer was announced in April 2008, when TransAlta, along with partner and technology developer Alstom Canada, announced intent to build a large-scale, pre-commercial CCS facility in Alberta. The project is expected to be complete in 2013. Results of the pilot are sure to influence practices across our industry as well as others.
TransAlta is a participating member of the UtiliTree Carbon Company. UtiliTree is a consortium of 41 utilities organized by the Edison Electric Institute to invest in a portfolio of forestry projects that manage GHG emissions, particularly CO2. A $3.2 million investment in eight domestic and two international projects will capture over 3 million tons of CO2 over the life of these projects.
TransAlta, in concert with a coalition of governments and industry, will research commercially viable technology to eliminate CO2 from coal-burning power plants. The coalition plans to construct and operate a demonstration plant by 2007 to test the technology’s technical, environmental, and economic viability.
TransAlta is part of the Greenhouse Emissions Management Consortium, a non-profit Canadian corporation formed by ten Canadian Energy Companies that invests in emissions offsets. Among other offsets, the consortium has purchased 6 million metric tons of carbon emission reduction credits from Iowa farmers who use minimum-till and no-till farming practices, cropland retirement, buffer strips, afforestation, reforestation, improved timber management, power generation from biomass, and methane abatement from livestock waste to reduce emissions.
- In 2008, Weyerhaeuser sequestered 8.4 million metric tons of greenhouse gases in our forests and products, meaning the company sequestered about five times more carbon dioxide than we directly emitted.
At the close of 2004, Weyerhaeuser owned, licensed, or leased 37.9 million acres of forests worldwide. The company uses intensive silvicultural practices on the highly productive forests it owns to achieve the natural biological potential. In other areas it uses less intensive practices to emulate natural forest structure. In both cases, these sustainably managed forests sequester large pools of CO2 inherent in the trees. Weyerhaeuser invests in afforestation ventures in South America to sustainably sequester additional tons of CO2 and uses recycled fibers in products to extend the time that CO2 removed from the atmosphere during the tree-growing stage is stored in products.
In 2004 Weyerhaeuser improved its process for inventorying GHG emissions and the carbon stored in its forests and products. The company’s operations sequestered approximately 26 million metric tons of carbon dioxide equivalents and emitted approximately 7 million tons from the use of fossil fuels and other activities. This effectively sequestered 19 million metric tons of carbon dioxide equivalent or 0.5 metric tons of carbon equivalents per ton of production, an improvement of approximately 18% over 2003.