Energy & Technology
An Overview of Greenhouse Gas Emissions Verification Issues
Prepared for the Pew Center on Global Climate Change
Christopher P. Loreti, Scot A. Foster, and Jane E. Obbagy
Arthur D. Little, Inc., Cambridge, Massachusetts
Foreword Eileen Claussen, President, Pew Center on Global Climate Change
The need for information on how to count, track, and verify greenhouse gas emissions has never been greater. Many of the world’s nations are working toward international, national, and subnational regimes for reducing emissions. These efforts have been accompanied by a growing number of corporate targets to reduce greenhouse gas emissions, as well as the emergence of a greenhouse gas trading market. To ensure that the numbers on which governments determine compliance, and on which companies stake their finances and reputations, are real, greenhouse gas emissions verification is critical.
In this Pew Center report, authors Christopher Loreti, Scot Foster, and Jane Obbagy of Arthur D. Little, Inc. describe the evolving approaches to corporate greenhouse gas emissions verification. They identify factors that drive verification activities and suggest a number of principles that organizations should consider when verifying greenhouse gas emissions, with an eye toward the experiences of the firms, governments, and non-governmental organizations that have been involved in verification activities.
This report builds on An Overview of Greenhouse Gas Emissions Inventory Issues which the Pew Center released last year, and which offered a set of principles for conducting greenhouse gas inventories. Both of these reports are part of the Solutions series, which is aimed at providing individuals and organizations with tools to evaluate and reduce their contributions to climate change.
The authors and the Pew Center would like to thank the companies featured in this report for sharing their experiences and perspectives, and acknowledge the members of the Center’s Business Environmental Leadership Council, as well as Jean-Bernard Carrasco of the Australian Greenhouse Office, Nick Hughes of BP, and Janet Ranganathan of the World Resources Institute for their review and advice on a previous draft of this report.
The growing number of companies that inventory greenhouse gas (GHG) emissions, implement emissions reductions projects and targets, and trade GHG emissions reductions has generated increasing interest in emissions verification. Stakeholders in the corporate, governmental, and non-governmental sectors recognize the need for complete, credible, and accurate information about GHG emissions and emissions reductions. To address this issue, some government bodies have developed standards for verifying GHG emissions for specific programs. More general approaches to verifying emissions are just beginning to evolve, however, as uniform approaches to inventorying and reporting GHG emissions are not yet fully established.
This paper describes the evolving approaches to corporate GHG emissions verification. The authors discuss the experiences of leading firms that inventory and verify GHG emissions, the approaches to verification embodied in various GHG programs sponsored by governments and non-governmental organizations, and the factors that drive verification. They also review general verification issues, including who should verify, what should be verified, and when verification should occur.
This paper builds on an earlier publication of the Pew Center on Global Climate Change, An Overview of Greenhouse Gas Emissions Inventory Issues (Loreti et al., 2000). Much of the content is the result of discussions with the Pew Center’s Business Environmental Leadership Council, a survey of leading corporations on approaches to GHG emissions verification, a review of the current literature on corporate GHG emissions verification, discussions with representatives from governmental and non-governmental organizations involved in GHG emissions issues, and prior experience of Arthur D. Little, Inc. in environmental auditing and GHG verification.
Just as there are multiple purposes and methods for performing emissions inventories, there are a variety of reasons for verifying emissions inventories and a range of approaches to verification. However, the authors’ review of the work to date on GHG emissions verification suggests several principles for any firm that conducts a GHG emissions inventory:
1. Conduct your inventory as if it is going to be verified, regardless of whether your organization is planning to verify it. Rigorous reporting, emissions estimation, and data management systems will facilitate any future verification. Indeed, these systems will make it possible to conduct third-party verification of today’s emissions in the future should it become necessary, for example, to establish a baseline or obtain credit for early emissions reductions.
2. Be clear on the purpose of verification. Verification can be conducted for many reasons and the results of verification performed for one purpose may not be applicable to another. Be sure that all stakeholders who rely on the verification result will be satisfied with the scope and methods of the verification.
3. Choose your verifiers carefully. Be sure the individuals conducting the verification understand your organization, its type of business, and its emissions. The verifiers’ knowledge and experience are more important than the type of organization they are from. If the verification is performed as part of an established GHG reporting or reduction program, be sure the verifiers you choose have the qualifications that that program requires.
4. Learn from your verification experience. Organizations will maximize the value of the verification if they use it to improve their inventory process, improve the reliability of reported information, and facilitate future verification. When hiring third-party verifiers, be sure that they provide specific recommendations for improving your organization’s GHG inventory.
About the Author
Christopher P. Loreti
Arthur D. Little, Inc., Cambridge, MA
Christopher P. Loreti is a Senior Manager in the Global Environment and Risk practice of Arthur D. Little, Inc., and the author of two Center reports, An Overview of Greenhouse Gas Emissions Inventory Issues, and An Overview of Greenhouse Gas Emissions Verification Issues. Since joining Arthur D. Little in 1985, his work has focused on the assessment of the release, fate, and transport of pollutants in the environment. He has conducted numerous air pollutant emission inventories for conventional and toxic air pollutants and greenhouse gases. He has co-authored reports examining trends in Canadian emissions of selected greenhouse gases and technologies to reduce these emissions, economic instruments for reducing U.S. emissions of carbon dioxide, and the potential for electric vehicles to reduce emissions of greenhouse gases and conventional air pollutants in Hong Kong. Mr. Loreti holds an M.S. in Technology and Human Affairs from the Department of Engineering and Policy at Washington University and B.S. degrees in Chemical Engineering and Environmental Engineering from Northwestern University.
Pew Center Workshop on the Timing of Climate Change Policies
The Westin Grand Hotel, Washington, DC
On October 10-12, 2001, The Pew Center on Global Climate Change held a Workshop on the Timing of Climate Change Policies in Washington, D.C. This workshop brought together leading economists, scientists, policy-makers, business leaders, and others interested in climate change science and policy. The purpose of the workshop was to investigate the appropriate timing of the world's policy response to the challenge of global climate change. The workshop produced a consensus that action on climate change needs to begin now to satisfy a variety of concerns. This volume includes a summary of the workshop proceedings, final texts of peer-reviewed papers commissioned for the workshop, and other presentation materials.
July 2001 | Download the PDF
- Tracking and Reporting Greenhouse Gas Emissions
- Promoting Clean Technologies and Practices
- Securing Emissions Reductions
The United States is the world’s largest emitter of greenhouse gases (GHGs), accounting for roughly 25 percent of global emissions. No strategy to address global climate change can ultimately succeed without substantial and permanent reductions in U.S. emissions. Voluntary efforts in a number of sectors over the past several years have failed to curb the overall growth in U.S. GHG emissions. A number of policy options are available to secure additional emissions reductions. However, to be effective and affordable, a long-term emissions reduction program must couple mandatory GHG reductions with technology development and market mechanisms.
To date, efforts to reduce U.S. GHG emissions have been limited almost exclusively to voluntary activities at the federal, state, local, and corporate level. Many of these efforts were spurred by the United Nations Framework Convention on Climate Change, which set a non-binding target of reducing emissions from industrialized countries to 1990 levels by 2000. Though some voluntary efforts have resulted in significant emissions reductions – some companies, for instance, have cut emissions 10 percent or more – in the aggregate, they have not succeeded in curbing the overall growth in U.S. emissions.1 While technology has improved the energy intensity of products and processes over the last 50 years, this greater efficiency has been outpaced by increased demand driven by economic expansion, population growth, and changing consumer preferences. U.S. emissions rose roughly 12 percent over the past decade, and are projected to continue rising for the foreseeable future.2
Source: U.S. EPA. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-1999. 2010 projections for CO2 are from: U.S. DOE. Annual Energy Outlook 2000. 2010 projections for non-COs gases are from: U.S. EPA. Annual Energy Review (2000).
(See Figure 1.) Voluntary programs can make an important contribution to a domestic climate change program, and can provide valuable experience for designing future efforts, but they cannot stimulate the broad engagement that will be necessary to achieve the level of emissions reductions that will ultimately be required.
Climate change is a long-term challenge that will require sustained global action and investment over many decades. Ideally, a national strategy would be guided by a specific long-term emissions goal. It would also couple short- and long-term measures – and both supply and demand elements – to signal markets to begin the transition toward that ultimate objective. More specifically, short-term measures are needed to improve energy efficiency and encourage the use of lower-carbon fuels; long-term measures are needed to encourage sustained investment in development of the technology and infrastructure needed to facilitate the transition to a low-carbon economy. Further, because energy consumption is an important component of GHG emissions, any domestic energy policy program must be geared toward long-term GHG emissions reductions. (See Figure 2 for chart of emissions by sector in carbon dioxide equivalents [CO2E].)
A domestic strategy ultimately must reflect any international commitments by the United States. However, its design and implementation should proceed now even if the United States is not yet prepared to enter into an international agreement. As domestic and international programs evolve, close coordination between them is critical. This is especially important for companies that operate and compete both domestically and abroad, and for U.S.-based companies that sell products abroad, as they will be subject to rules dealing with climate change in other countries. In addition, coordination is necessary to maximize the effectiveness of emissions trading and other flexibility mechanisms now being developed at the international level.
The cost of meeting a given emissions target can vary by orders of magnitude depending on the approach taken. In general, the most cost-effective approaches allow emitters flexibility in deciding how to meet a target or performance level; provide early direction so targets can be anticipated and factored into major capital and investment decisions; and employ market-based mechanisms such as emissions trading to achieve reductions where they cost the least. To ease the transition and enlist the broadest possible participation, early targets should be realistic and achievable without stranding major capital investments or imposing undue economic hardships. These could be followed over time by more stringent constraints that allow for the turnover of existing capital stock and the development of new breakthrough technologies and innovative measures for reducing GHG emissions. This paper outlines possible elements of a comprehensive domestic strategy that couples short- and long-term measures. The proposed elements – some voluntary, others mandatory – aim to:
- improve the tracking and reporting of greenhouse gas emissions;
- promote new technologies and practices; and,
- provide a foundation upon which to secure long-term emissions reductions.
Source: U.S. EPA. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-1999.
Note: Emissions from electricity produced by industries but sold to the grid is included in the "Industrial" category. Emissions due to other industrial activities as well as residential and commercial use of electricity are included under "Electric Utilities." Excludes emissions from U.S. territories.
While each of these objectives can be pursued in a number of different ways (several options for securing emissions reductions are proposed), an effective strategy must address all three.
No effort to reduce greenhouse gas emissions can succeed without the accurate measuring and tracking of emissions. Improved tracking and reporting of emissions reductions could provide the basis for government assurances that companies will not be penalized for their early reductions under a future climate policy. Public disclosure of emissions data can also serve as a powerful incentive for reductions.
A first step is establishment of a registration program to more accurately and reliably measure, report, and track GHG emissions. This could be done through legislation that builds on current efforts such as the Department of Energy’s 1605(b) program. The current program has limited value because its reporting standards lack rigor, there are no verification requirements, and many companies choose not to report. In an improved registry program, a company would establish a baseline consisting of current aggregate emissions from all major GHG sources under its control in the United States. Gross emissions on an annual basis could be compared to this established baseline. In addition to accounting for emissions from a company’s core operations, an improved registry should over time develop the means to measure, report, and track GHG emissions resulting from: the use of products manufactured by that company; offsets achieved through sequestration projects designed to store carbon in forests, soils, oceans, or underground; and offsets achieved through increased energy efficiency.
A reliable registry would make it possible to provide “baseline protection” for companies taking action now to reduce their emissions. These entities could be assured that – in the event of future controls involving the allocation of emissions allowances or requiring emissions reductions – they would not be penalized for reductions already achieved voluntarily. The improved registry program could also provide a mechanism to recognize the emissions reductions resulting from companies manufacturing more efficient or carbon-saving products. Finally, it could ensure that GHG reductions and sequestration offsets are of sufficient integrity that they can be traded and sustain their value in future years. This registry would include reductions and offsets achieved outside of the United States, in both developed and developing countries. In this manner, both gross and net (reductions and offsets) emissions would be recorded.
An additional step would be to require public disclosure of GHG emissions data for all facilities or companies whose emissions exceed a given threshold. At present, only electric generating sources must report their CO2 emissions and, although publicly available, emissions data are not tabulated and disclosed in a manner that encourages companies to reduce their emissions voluntarily. To address these shortcomings, a mandatory GHG reporting program should apply to all major source categories of GHG emissions and require public disclosure as is now required under the federal Toxics Release Inventory (TRI) program. Disclosure reports would be subject to verification and reporting entities would face enforcement action if emissions were misrepresented. As with the TRI program, reported data would be aggregated and made available on facility-specific, company-wide, and source-category bases. Under the TRI program, such disclosures have encouraged companies to assess potential mitigation opportunities and reduce emissions voluntarily, and the same is likely with a GHG reporting program. Gross emissions from an entity’s U.S. sources as well as net emissions (after considering sequestration activities and trading) would be reported to encourage comprehensive mitigation strategies.
A mandatory GHG reporting obligation (and an improved registry) could be linked to a voluntary program for mitigating GHG emissions. Such linkage would likely increase the effectiveness of each initiative, judging by the success of the voluntary pollution prevention programs that were coordinated with mandatory TRI reporting.3 Following the model used in EPA’s 33/50 (Industrial Toxics) Project, the voluntary program could establish clear performance targets to be achieved by each sector within specified time frames. Although voluntary, participation in the program could be limited to only those companies willing to make corporate-wide commitments to achieve minimum reduction levels from their core business operations or prescribed performance levels for products sold in the United States. Setting minimum standards would likely increase the pressure for companies to step forward with voluntary commitments achieving substantial emissions reductions. The minimum standard approach could also be combined with a graduated scale of incentives for those who make voluntary commitments, rewarding those who exceed their emissions goals with greater financial or other incentives like tax credits.
Finally, improved registries coupled with reporting requirements would also serve as an important foundation for mandatory approaches to reducing GHGs.
The ultimate success of a climate change strategy will hinge on the timely development and deployment of technologies that over time can substantially reduce the carbon intensity of the overall U.S. economy – including industry, the transportation sector, and residential/commercial activity. (See Figure 3 for historic energy use of these sectors.) In the short term, improved technologies can significantly enhance energy efficiency, provide opportunities to store – or sequester – carbon, and expand use of lower-carbon fuels (such as natural gas). In the long term, new technologies will be needed to develop non-fossil energy sources such as biofuels, wind, hydrogen, and solar, and provide opportunities for more permanent forms of sequestration.
Source: U.S. DOE. Energy in the United States: A Brief History and Current Trends (1999).
A successful technology strategy demands sustained, coordinated investments at a very high level from all stakeholders. A variety of incentives and direct investment tools can be used to promote technological innovation, from basic research to deployment:
- Targeted tax credits or low-interest loans can encourage the development and adoption of energy-efficient technologies (such as combined heat and power, and state-of-the-art lighting); clean fuel technologies (including advanced fossil fuel technology, hydrogen, fuel cells, and biofuels); and carbon storage in forests and agricultural soils, using innovative management techniques.
- Investment in basic research may be especially critical in inventing breakthrough technologies that will facilitate the transition to a low-carbon economy.
- Public-private partnerships, such as Industries for the Future and the Partnership for a New Generation of Vehicles, can team government and corporate researchers to accelerate technology gains.
- Basic research and tax credits could accelerate the development and diffusion of climate-friendly alternatives to non-CO2 greenhouse gases or technologies and practices that reduce their emissions.
- Investment in training to improve agricultural practices can decrease the release of methane (CH4) and nitrous oxide (N2O).
- Public education through the use of required labeling and other means can help consumers reduce their contribution to climate change.
- Incentives to builders and landlords can encourage the use of energy-efficient materials and appliances in new construction and rental units.
Finally, improved product efficiency standards – coupled with incentives to exceed minimum requirements – can achieve significant emissions reductions. Under the traditional command-and-control approach, the incentive is to meet, but not exceed, a government-set standard. A combined hybrid standard/incentive approach (e.g., one that combines a minimum efficiency standard with a sliding tax or emissions credit for those who go beyond the standard) would provide incentive to exceed minimum regulatory requirements. This approach should be added to existing product standards as they come up for review and employed for new products for which standards have not yet been set.
An especially critical element of a domestic climate change program will be the design of a market-based GHG emissions management framework to ensure significant long-term reductions in emissions. Also, an effective program ultimately will entail some form of mandatory requirements. The approaches that follow include voluntary activities that could be implemented in advance of, or alongside, mandatory emissions reductions:
Enter into agreements with companies willing to make significant, enforceable commitments to achieve net GHG emissions reductions in lieu of future GHG control requirements.
Securing regulatory certainty may be a powerful incentive for those willing to undertake substantial GHG reduction commitments. By committing to take action yielding specified reductions over an established period of time, a firm could receive a commitment from the government that (as long as its contractual obligations are met) it would not be bound by subsequently developed GHG controls over the same time period. For example, if a company were to commit to significant reductions over a 20-year period (e.g., a 20 percent reduction achieved either through steady declines of 1 percent per year or through a major capital investment at some point during this timeframe), the company could avoid additional mandatory GHG control obligations during the same 20-year period.4 This approach would allow companies to move forward with substantial capital investments that will secure significant emissions reductions.
Under this approach, reductions below company baseline levels (e.g., 1990 GHG emissions) could be achieved through meeting either rate-based or specified net targets. These commitments would provide baseline protection, and shelter firms from additional requirements developed during the term, in exchange for legally binding agreements containing measurement, verification, and reporting requirements. Such an approach would require enabling legislation authorizing the Executive Branch to enter into these agreements. This legislation should include provisions for public notice and comment. Companies also could be allowed to enter into similar agreements with respect to their services or products manufactured and sold in the United States.5
|Ultimately, the ability of the United States to achieve significant long-term GHG reductions depends on our success in the design and implementation of a mandatory program to reduce emissions.|
Additional features could include allowing program participants to trade emissions credits and allowing credit for reductions achieved through sequestration and offsets. In other words, companies that reduce their emissions beyond the levels specified in the agreement would be able to trade these additional emissions reductions with firms that were unable to meet their reduction targets under a future regulatory program. Similarly, credit for real, quantifiable, and verifiable sequestration activities could be granted towards the obligations and, when in excess of specified targets, could be sold in an emissions trading market.
Set voluntary emissions reduction targets for major industry sectors with a trigger mechanism for imposing mandatory requirements if a sector falls short of its targets.
A second approach would establish initial rate-based or specified reduction targets for major industry sectors, but impose stricter controls for sectors that do not meet their initial targets. The program, for example, could call for a sector to stabilize its emissions at year 2000 levels over the 2005-to-2010 period, while providing federal authority to impose stricter mandatory control requirements by a later date if the sector as a whole fails to achieve its reduction target. Similar performance targets could be set for products, such as automobiles and appliances. Companies would receive shelter from the stricter requirements so long as they achieve their proportionate share of the reduction target.
One advantage of this approach is that it would promote immediate action towards the reduction target, even while the details of the mandatory control program are being developed. Another advantage is that it would enable companies to coordinate their emissions control strategies for conventional air pollutants with their carbon dioxide reductions. This would be especially important for those sectors whose near-term control obligations for conventional air pollutants (involving major capital investments) may conflict with a long-term GHG control strategy for that sector.
New legislation would be required to either establish general criteria that apply economy wide or set out design elements specific to individual sectors. In the latter case, for example, the legislation could specify for the power generation sector: (a) the initial and “backstop” reduction levels, (b) the reduction timeframes, (c) allocation of emissions allowances through a generation performance standard, (d) the ability of participants to trade emissions credits, and (e) the flexibility to “bank” allowances for future use.
In addition, if a sector that makes products fails to meet its target, those companies not doing a proportionate share could have tighter efficiency standards imposed.
Allow an opt-in for coverage of carbon dioxide emissions in conjunction with air regulatory programs.
Many companies – particularly utilities – are interested in addressing their CO2 emissions in conjunction with new reduction obligations likely to be enacted for other pollutants. Many studies have documented substantial environmental and economic benefits of harmonizing the timing and reduction levels of multiple air pollutants.6 An “opt-in” approach would permit these companies to consider reduction obligations and goals comprehensively, thereby minimizing the chance of stranding pollution control investments aimed at conventional pollutants without regard for CO2. By providing an opt-in strategy, overall emissions (including GHGs) could be considered simultaneously – avoiding the now-common scenario that control strategies devised for reductions in traditional pollutants have little or no beneficial impact on GHG emissions. (Post-combustion controls aimed at reducing conventional pollutants, in fact, often increase GHG emissions. In contrast, all GHG reduction strategies that reduce fuel consumption – the largest GHG emissions source – also reduce conventional air pollutants.) Harmonizing time frames for achieving reductions could avoid piecemeal and uncoordinated implementation of conventional and GHG emissions.
At the same time, streamlining the existing New Source Review (NSR) program for changes in facilities could enable power plants, refineries, and other major stationary sources to improve their production efficiencies more easily. Such efficiency improvements directly translate into lower CO2 emissions. Companies participating in this “opt-in” could be allowed to implement environmentally beneficial projects without triggering the NSR requirements.
Design and implement an economy-wide domestic emissions program to meet a mandated cap.
Ultimately, the ability of the United States to achieve significant long-term GHG reductions depends on our success in the design and implementation of a mandatory program to reduce emissions. Since such a program will take time to design and administer, the near-term approaches discussed above should be developed in such a way that they are consistent with important design elements of a future mandatory program. The most cost-effective method of obtaining such reductions is likely to come in the form of a domestic emissions trading program that could be integrated with an international trading regime.
Elements of an effective domestic trading program could include:
- allocation of permits to existing and new sources based on historic emissions, output levels, auction, or – preferably – some combination thereof;
- creation of an independent authority to oversee the GHG registry and trading activity;
- providing for a declining cap in permitted GHG levels over time;
- including credit for other GHG emissions on a CO2-equivalent basis;
- establishing a multi-year compliance period for meeting any GHG emissions reduction obligation; and,
- recycling revenues from auctioned permits to reduce other tax burdens, increase R&D, and provide transition assistance to affected workers and communities.
Ideally, a domestic program should be compatible with trading programs in other countries to allow credit for reductions undertaken abroad. Also, with improved confidence in measuring and monitoring sequestration-related activities (both domestically and abroad), credit for carbon storage should be included.
To address global climate change effectively, the United States must actively pursue real reductions in GHG emissions at home and abroad. The steps outlined here chart a course for a sound, credible, and cost-effective domestic program. Starting now on a path to reduce these emissions is necessary both to meet the environmental objective of moderating human interference with the climate system and to avoid the need for more costly measures in the future.
1 A significant investment has been made in a variety of federal programs to encourage voluntary reductions. Such programs include: the U.S. DOE’s Climate Challenge Program for electric utilities; and U.S. EPA programs such as Climate Wise, the Landfill Methane Outreach Program, the Coalbed Methane Outreach Program, Energy Star, and the Green Lights Program, as well as the U.S. Initiative on Joint Implementation. In addition, DOE’s Voluntary Reporting of Greenhouse Gas Program required by Section 1605(b) of the Energy Policy Act of 1992 records the results of voluntary measures to reduce, avoid, or sequester carbon. During 1999, a total of 201 U.S. companies and other organizations reported on 1,715 projects that achieved reductions and sequestration equivalent to 226 million metric tons of carbon dioxide, or about 3.4 percent of total 1999 greenhouse gas emissions. (Voluntary Reporting of Greenhouse Gases, 1999, DOE/EIA – 0608(99), February 2001.)
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2 In the United States, the transportation, industry, and combined residential/commercial sectors are each responsible for roughly one third of overall emissions.
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3 EPA enjoyed considerable success in encouraging substantial voluntary reductions of 17 toxic chemicals by linking the TRI reporting program with a voluntary pollution prevention program. Entitled the 33/50 (Industrial Toxics) Project, this entirely voluntary program established an interim goal of a 33 percent reduction by 1992 and an ultimate goal of a 50 percent reduction by 1995 in aggregate emissions of 17 high-priority toxic chemicals. Individual companies entered into voluntary, non-binding commitments to achieve specific reductions on a company or facility basis. In addition to achieving the ultimate goal in 1994 (one year ahead of schedule), the 33/50 Program enhanced the effectiveness of the TRI reporting program. Most importantly, participating facilities reported substantially more reductions of the 33/50 targeted chemicals than of other TRI chemicals.
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4 Similar relief has been provided for voluntary early reductions in other regulatory contexts. For example, section 112(i)(5) of the Clean Air Act provides a 6-year compliance extension from air toxic control standards set under section 112(d) for achieving early reductions of hazardous air pollutants (HAPs). The 6-year extension applies to those facilities achieving a 90 percent reduction in listed HAPs (95 percent reduction in the case of HAP particulates) before the proposal of the applicable HAP emissions standard(s). The reduction obligation must be federally enforceable and incorporated into the facility’s permit issued under Title V of the Clean Air Act.
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5 In such cases, companies would make binding commitments to improve the performance of their products sold by specified amounts over the term of the agreement. Auto manufacturers, for example, could agree to meet declining GHG emissions budgets reflecting improvements in fuel efficiency of vehicle fleets sold for each model year during the agreement. Appliance manufacturers could commit to improving efficiency of their products by set amounts over a fixed period of time.
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6 See, for example, STAPPA/ALAPCO, Reducing Greenhouse Gases and Air Pollution: A Menu of Harmonized Options (October 1999); and EIA, Analysis of Strategies for Reducing Multiple Emissions from Power Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide (December 2000).
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Oil & Gas Markets and
Climate Change Policy
August 9-10, 2001 - Snowmass, Colorado
On August 9 and 10, 2001, The Pew Center hosted a workshop in conjunction with the Energy Modeling Forum of Stanford University to bring together experts from around the world to discuss the manner in which economic models portray fuel use. Determining future supply and demand of natural gas (NG) is important in determining climate policies since natural gas is a relatively cleaner fuel – in terms of carbon emissions – than are coal and oil. A climate policy based on reducing the carbon content in fuels would presumably favor gas, along with other less carbon-intensive energy sources, thus accelerating its demand.
But economic models that examine the climate change issue show mixed results on this score: many models show the demand for gas increasing relative to more carbon-intensive fuels while others show its demand decreasing at a rate faster than oil (which is explained by gas demand being more responsive to a tax). Without clear information on the true path of natural gas, policy-makers will not be fully informed on how to address the climate change problem. The modelers took first steps towards investigating this problem by determining common definitions for various oil and gas categories and expect to be able to compare results of their various models regarding oil and gas consumption early next year.
Other topics discussed in this workshop included the anticipated supply of various fuels, primarily oil and gas, and the factors that determine the ultimate level of global reserves, the potential for developing a world market in natural gas through liquefaction, and advances in technology which influence the cost of production of oil and gas.
Transportation in Developing Countries: Greenhouse Gas Scenarios for Shanghai, China
Prepared for the Pew Center on Global Climate Change
Hongchang Zhou, Tongji University, Shanghai
Daniel Sperling, Mark Delucchi, and Deborah Salon, Institute of Transportation Studies, University of California, Davis
Eileen Claussen, President, Pew Center on Global Climate Change
The transportation sector is a leading source of greenhouse gas (GHG) emissions worldwide, and one of the most difficult to control. In developing countries, where vehicle ownership rates are considerably below the OECD average, transport sector emissions are poised to soar as income levels rise. This is especially true for China, whose imminent accession to the World Trade Organization will contribute to economic growth and could make consumer credit widely available for the first time. These factors are likely to accelerate automobile purchases, and GHG emissions.
Shanghai is one of China's most dynamic cities. Extremely densely populated, with very low personal vehicle ownership rates for its income level, Shanghai is also home to a nascent Chinese automotive industry. Transportation plans and policies there are designed to achieve broader urban objectives of population decentralization, with an eye to controlling increases in traffic congestion and improving environmental quality. Because Shanghai's transportation system and planning process are so sophisticated, Shanghai may be a 'best case' for controlling transportation sector GHG emissions in the absence of climate change mitigation goals.
This report creates two scenarios of GHG emissions from Shanghais transportation sector in 2020. It finds:
- Greenhouse gas emissions quadruple in the low-GHG scenario; they increase sevenfold in the high scenario. On a passenger-kilometer basis, the estimated increase ranges from 10 to 100 percent.
- Providing an array of high-quality options to travelers can help meet the demand for transportation services while keeping traffic congestion in check and meeting other urban objectives.
- Special lanes and other infrastructure to accommodate vehicles such as buses, minicars, and bicycles can save money and improve traffic circulation.
- Using clean technology and fuels in motorized vehicles lowers the environmental impact of various transportation modes.
- Perfecting the use of 'intelligent' traffic control systems through improved coordination will yield higher returns on capital investments.
Transportation in Developing Countries: Greenhouse Gas Scenarios for Shanghai, China is the second report in a series examining transportation sector GHG emissions in developing countries. The report's findings are based on a Lifecycle Energy Use and Emissions Model developed by the Institute of Transportation Studies at the University of California at Davis, which estimates GHG emissions from the transportation sector.
The Pew Center would like to thank Kebin He of Tsinghua University, Feng An of Argonne National Laboratory, Ralph Gakenheimer of MIT, and Michael Walsh, an independent transportation consultant, for their review of earlier drafts.
Shanghai is experiencing rapid economic growth. Affluence is motivating dramatic and far-ranging changes in urban structure, transportation, and energy use. This report examines two transportation trajectories that Shanghai might follow and how they would affect greenhouse gas (GHG) emissions. Shanghai’s metropolitan population of over 13 million people continues to grow relatively slowly, but its economy is growing rapidly. The average annual per capita income is $4,000, three times higher than the rest of China, and the Shanghai economy is expected to grow at more than 7 percent per year through 2020.
Massive new transport system investments planned for the next two decades are aimed at lowering Shanghai’s extremely high population density, supporting economic growth, and enhancing the quality of life. The list of new investments is impressive: expansion of the new airport, construction of a deep-water harbor, three new bridges and tunnel river crossings, completion of a 200-kilometer modern rapid transit rail system, expansion of suburban highways, and construction of 2,000 kilometers of new and upgraded urban roads. These investments will improve the city's transportation system, but are costly and threaten greater energy use and air pollution.
A central issue in Shanghai’s development is the role of personal vehicles, especially cars. The city currently devotes little land to roads and has only 650,000 cars and trucks — very few of which are privately owned — placing vehicle ownership levels well below virtually all cities of similar income. Even with this small number of vehicles, Shanghai already suffers from serious transport-induced air pollution and traffic congestion.
Shanghai city planners project a quadrupling of cars and trucks in the city by 2020. This projected increase is premised principally on two factors. First is rapid income growth, which will make car ownership possible for a much larger segment of the population. And second is vehicle prices, which are likely to plummet due to China’s imminent accession to the World Trade Organization (WTO). Lower prices will result from increased competition, compulsory reductions in vehicle tariffs, and easier access to consumer credit.
These projected increases in vehicle use are not certain. Even apart from the WTO membership, vehicle ownership and use--and GHG emissions--will be strongly influenced by three interrelated policy debates: industrial policy toward the automotive industry, air quality policy, and transportation and urban growth policy.
The city's decision about vehicle use will be critical in shaping Taiwan's future.
This report addresses the forces about to transform the transportation system of Shanghai, and examines policies and strategies that that direct it toward greater economic, social and environmental sustainability.
The two transportation scenarios draw upon extensive interviews with decision-makers and experts in Shanghai and Beijing. One scenario is premised on rapid motorization, the other on dramatic interventions to restrain car use and energy consumption, resulting in lower GHG emissions. Neither is the "business-as-usual" scenario, since this characterization is meaningless in a time of massive investments and policy shifts. Instead, these scenarios are meant to estimate likely upper and lower bounds of greenhouse gas emissions from Shanghai transport in 2020, taking as given the projected strong economic growth. If the economy grows more slowly, emissions will likely be lower than the scenarios indicate.
The rapid motorization scenario is based on the projected quadrupling of cars by 2020, coupled with a substantial increase in population. It results in a seven-fold increase in GHG emissions. The restrained scenario results in a four fold increase in GHG emissions. In this restrained scenario, almost all emissions growth is due to increase in travel, not increases in energy intensity or GHG intensity of the travel. Emissions per passenger-kilometer increase only about 10 percent the restrained scenario compared to a doubling in the rapid motorization scenario.
Caution is urged in generalizing the findings of this report to other cities in developing nations. Shanghai is not a typical Asian city, given its surging economy and its world-class planning capabilities. However, the conditions for alternative transportation options are more propitious here than perhaps any other megacity in the world. If the city is effective at restraining growth in vehicle use (and GHG emissions), Shanghai may serve as a model for other cities in the developing world.
Transportation in Developing Countries: Greenhouse Gas Scenarios for Delhi, India
Prepared for the Pew Center on Global Climate Change
Ranjan Bose and K.S. Nesamani, Tata Energy Research Institute (TERI)
Geetam Tiwari, Indian Institute of Technology-Delhi
Daniel Sperling, Mark Delucchi, and Lorien Redmond, Institute of Transportation Studies, University of California, Davis
Lee Schipper, International Energy Agency
Eileen Claussen, President, Pew Center on Global Climate Change
Greenhouse gas emissions in developing countries are increasing most rapidly in the transportation sector. Even people with low incomes are meeting their need for mobility, and projected income growth over the next two decades suggests that many more will acquire personal modes of transportation. How this will affect the earth's climate is a great concern.
In Delhi, India, transportation sector greenhouse gas emissions are expected to soar. There are policy and technology choices that could significantly lower the emissions growth rate while increasing mobility, improving air quality, reducing traffic congestion, and lowering transport and energy costs. To realize these benefits, vision, leadership, and political will must be brought to bear. Delhi has high vehicle ownership rates for the city's income level, increasing congestion, poor air quality, poor safety conditions, and insufficient coordination among the responsible government institutions. Travelers in Delhi desire transportation services, reflected by the increasing numbers of inexpensive but highly polluting scooters and motorcycles.
This report creates two scenarios of greenhouse gas emissions from Delhi's transportation sector in 2020. It finds:
- Greenhouse gas emissions quadruple in the high-GHG, or business-as-usual, scenario; but only double in the low scenario.
- Transportation policies are readily available that will not only slow emissions growth, but also significantly improve local environmental, economic, and social conditions.
- Improved technology would maximize the efficiency of automobiles, buses, and other modes of transportation and could play a key role in reducing emission increases.
- Keeping many travel mode options available - including minicars and new efficient scooters and motorcycles - will help individuals at various income levels meet their mobility needs.
- The time to act is now. The issues facing Delhi represent opportunities for improvement, but the longer authorities wait to address transportation inefficiencies, the more difficult and expensive it will be to produce a positive outcome.
Transportation in Developing Countries: Greenhouse Gas Scenarios for Delhi, India is the first report in a five-part series examining transportation sector greenhouse gas emissions in developing countries. The report findings are based on (1) a regression model developed by TERI to forecast future increases in vehicle ownership and travel by different modes and (2) a Lifecycle Energy Use and Emissions Model developed by the Institute of Transportation Studies at U.C.-Davis which estimates greenhouse gas emissions from the transportation sector.
The Pew Center gratefully acknowledges Anita Ahuja of Conserve, Ralph Gakenheimer of MIT, and Michael Walsh, an independent transportation consultant, for their review of earlier drafts.
Delhi, India is a rapidly expanding megacity. Like many other cities its size, Delhi faces urban gridlock and dangerous levels of air pollution. Vehicle ownership is still a fraction of that in industrialized countries, but remarkably high considering the population's relatively low income. Worldwide, energy use is increasing faster in the transport sector than in any other sector, and fastest of all in developing countries. From 1980 to 1997, transportation energy use and associated greenhouse gas (GHG) emissions increased over 5 percent per year in Asia (excluding the former Soviet Union) and 2.6 percent in Latin America, compared to one percent growth in greenhouse gases from all sectors worldwide.
Delhi faces the same transportation, economic, and environmental challenges of other megacities. Population, motor vehicles, pollution, and traffic congestion are all increasing. Air pollution levels greatly exceed national and World Health Organization health-based standards, and transportation is by far the largest source of pollution. In the past 30 years, Delhi's population more than tripled and the number of vehicles increased almost fifteenfold.
By 2000, Delhi had about 2.6 million motor vehicles - 200 for every 1,000 inhabitants, a rate far higher than most cities with similar incomes. Most of these vehicles are small, inexpensive motorcycles and scooters, rather than automobiles. This proliferation of vehicles in a relatively poor city indicates the strong desire for personal transport - a phenomenon observed virtually everywhere. Delhi is an example of how that desire can now be met with relatively low incomes.
Delhi is expected to continue growing at a rapid rate. Its population is expected to surpass 22 million by 2020. Motor vehicles, including cars, trucks, and motorized two- and three-wheelers, are expected to grow at an even faster rate. The domestic auto industry is predicting car sale increases of 10 percent per year. With an extensive network of roads and increasing income, there is every reason to expect vehicle sales and use to continue on a sharp, upward trajectory.
April 17-18, 2001 - Washington, DC
The Pew Center conference on Equity and Global Climate Change will bring together experts from a variety of disciplines and nationalities to explore how best to ensure fair and reasonable actions by all countries in addressing climate change. Given critical differences among nations -- in their economies, their historic and projected emissions, and their vulnerability to climate change impacts -- achieving equitable international commitments is an extraordinary challenge. Speakers and panelists will examine the underlying economic, cultural, and ethical issues and how they influence this crucial debate. Through this conference, the Pew Center hopes to stimulate an ongoing international dialogue leading to the better understanding of equity concerns and solutions that all parties believe are fair.
Approaches to Equity
Equity concerns are at the very core of the climate change debate: Who bears the greatest responsibility for climate change? Who is at greatest risk? Who is best able to act? Even if we agree that equity is a goal, how do we define "equitable"? Many approaches to conceptualizing and addressing equity in the context of climate change have been advanced, including: per capita emission rights; various forms of "grandfathering;" allocating reductions according to ability to pay; sharing costs according to historic emissions; and combinations of these and other critiera. This panel will explore some of these approaches and will ask whether, ultimately, equity is more feasibly addressed through a political bargain than through a given principle or formula.
At the root of many equity concerns are stark economic realities. Countries face widely divergent costs in addressing climate change - both the direct costs of mitigation, and the opportunity costs of diverting scarce capital from other social needs. The stakes of not acting also vary widely; and those facing the greatest costs from flooding, drought and other climate change impacts may be those with the fewest resources to spare. While some developed countries are concerned about competitiveness impacts if other nations do not act, developing countries are reluctant to assume obligations that may jeopardize their economic development. This panel will explore these differing perspectives, and will examine opportunities to address economic inequities through technology transfer, capacity building, clean energy investment, and other climate change strategies.
Ethical, Moral, and Cultural Considerations
Equity concerns are also shaped by differing ethical, religious, and cultural perspectives. Some cultures and traditions place a higher priority on meeting collective needs and those of future generations. Some argue that developed countries must be willing to sacrifice the comforts of an energy-intensive lifestyle. Some hold more strongly than others to the creed of market efficiency. While these differences can exert a powerful influence on national perspectives, they are typically overshadowed by pure economic concerns. This panel will explore how these differences color the climate change debate, and how a better understanding of other cultures and traditions can lead to stronger international cooperation against climate change.
Fair and Reasonable Action: First Steps
The Kyoto Protocol attempts to address equity concerns in at least two respects: it sets binding emissions targets only for developed countries, reflecting broad agreement that it is their obligation to act first; and among developed countries, it sets differentiated targets reflecting differences in national circumstance. How equitable are these decisions? Negotiations over rules to implement Kyoto raise another set of concerns: How is fair representation on the body overseeing the Clean Development Mechanism ensured? What must developed countries do to fulfill their commitments on finance and technology transfer? This panel will examine the underlying rationale for agreed-upon measures such as differentiated targets, and explore ways to resolve other equity issues that arise within the existing climate framework.
Fair and Reasonable Action: The Path Forward
Ultimately, it will be impossible to achieve safe, stable atmospheric concentrations of greenhouse gases by addressing only developed country emissions. There is growing pressure in the United States and elsewhere for developing countries to take stronger action against climate change. Developing countries want greater recognition for efforts already underway and are unwilling to commit to stronger action, insisting that industrial countries first demonstrate real progress toward achieving their emission targets and fulfilling their commitments on finance and technology transfer. This panel will explore differing perspectives on this central issue, and consider when and how a real dialogue on developing country commitments can or should begin.
"Getting It Right: Climate Change Problem Demands Thoughtful Solutions"
By Eileen Claussen, Executive Director for the Pew Center on Global Climate Change
Appeared in the Washington Post
November 14, 2000
Many of the government officials gathering this month for the climate change negotiations in The Hague are hoping to put the finishing touches on rules to implement the Kyoto Protocol. But getting those rules right is more important than getting them all completed.
Still unresolved on the eve of the meeting are a range of very complicated political and technical issues that will play a decisive role in determining whether we achieve our goal of stabilizing the earth's climate system. It is not a stretch to say that how we decide these issues will determine how we are judged by future generations.
Decision-makers in The Hague should remember that the Kyoto Protocol was designed as both a first step in reducing atmospheric concentrations of greenhouse gases and as a framework for long-term, cost-effective action. In other words, this is a treaty that will have to stand the test of time. Short-term political considerations-including the desire to resolve all remaining issues this year-should therefore take a backseat to the goal of creating a global system that is transparent, fair, environmentally effective, economically efficient, and as simple as possible.
The Remaining Issues
Four key sets of issues remain in play as the negotiators come together:
- The Kyoto Mechanisms. The Kyoto mechanisms were designed to allow countries to pursue the most cost-effective means of reducing their emissions-for example, by engaging in international emissions trading. But there are provisions being negotiated that would make the Kyoto mechanisms totally inoperable, and others that would seriously limit their use. If the negotiators are careless in defining the rules, or determined to constrain when and how the mechanisms can be used, this will simply increase the costs of complying with the Protocol. And the result might be a higher level of noncompliance, an outcome that no one should want.
- Carbon Sequestration. The question here is whether and how countries should receive credit toward their emissions reduction targets for using agricultural lands and forests to store carbon. A related question is whether credit should be given for investments in sequestration projects in developing countries. The important role of soil and forest sequestration in stabilizing the global climate system cannot be denied. However, we have not yet defined what types of sequestration activities ought to count-or even how to count them.
- Compliance. Yet another unanswered question is whether the Kyoto Protocol will include binding consequences for noncompliance. In other words, how will we penalize those countries that miss their targets? This is a crucial issue to the Protocol's success. Only by establishing and enforcing significant noncompliance penalties can we create a fair and efficient global system, and one that yields results.
- Assistance to Developing Countries. Developing countries properly argue that the industrialized world is not doing enough to implement provisions of the United Nations Framework Convention on Climate Change. In that precursor agreement to the Kyoto Protocol, the United States and other nations pledged to support developing countries in their efforts to reduce emissions through capacity building, technology transfer, and funding for "adaptation" initiatives. Decision makers in The Hague will have to respond seriously to these concerns at the same time as they are working on the more fractious issues of the Kyoto framework.
As if resolving these immediate questions were not enough of a challenge, everyone concerned with this issue must also give serious thought to the future. After all, the 2008-2012 deadline for achieving the first round of emissions reductions under the Kyoto Protocol is fast approaching. And, even if these initial targets are met (an unlikely prospect), they represent only a first step toward the sustained and significant reductions in emissions that will be necessary to reduce the threat of climate change throughout the 21st century.
A crucial issue for the future, then, is to think about what kind of targets we will have to establish in the years after 2012. At the same time, we need to think about how to involve developing countries in these future global efforts in a more active way. Developing countries are struggling to lift their people to a higher standard of living, and doing so will mean absolute increases in energy use and emissions.
We will accomplish very little, if anything, by requiring developing countries to achieve short-term emissions reductions. The better approach is to craft an equitable and effective framework for future targets for all countries, bearing in mind that we face a common challenge: maximizing the environmental benefits we are able to achieve while minimizing the costs of reducing and limiting our emissions.
Meeting the challenge of global climate change calls for no less than a second industrial revolution. We need to promote new technologies and new investments that will put the entire world on a path to clean economic development. And, in creating the global legal framework to make this happen, we need to make absolutely certain that we get it right.
Press Release: New Report Explores Ways to Encourage Consumers To Buy Energy-Efficient Home Appliances
For Immediate Release:
October 31, 2000
Contact: Katie Mandes, 703-516-4146
Dale Curtis, 202-777-3530
New Report Explores Ways to Encourage Consumers To Buy Energy-Efficient Home Appliances
Washington, DC - Public policies to encourage turnover of aging home appliances and purchases of more efficient models could help reduce the emissions linked to global warming, according to a new report released by the Pew Center on Global Climate Change.
"The economics are generally attractive for consumers to upgrade to energy-efficient models when they replace old or broken appliances," said Eileen Claussen, President of the Pew Center on Global Climate Change. "But without targeted public policies, consumers may be unaware of the potential cost savings and environmental benefits of doing so."
"This important Pew Center report illustrates how the use of energy-efficient appliances can help combat climate change," said Jeff Fettig, President and CEO, Whirlpool Corporation. "At Whirlpool, we believe that sound policy can stimulate companies to produce more energy-efficient products and encourage consumers to buy them."
"At Maytag, the extraordinary consumer acceptance of our Neptune washer provides clear evidence that consumers will purchase environmentally friendly appliances if those products also provide superior performance," said Lawrence J. Blanford, President, Major Appliance Division, Maytag Corporation. "Consumer education programs, such as the recent Boston washer study conducted by the Department of Energy and Maytag, bring the message to consumers that they and the nation benefit when they replace their older, less efficient appliance with a newer, high efficiency model."
The report, entitled "Global Warming and Appliances: Increasing Consumer Participation in Reducing Greenhouse Gases," was written by two leading experts in the field: Everett Shorey of Shorey Consulting, Inc. and Tom Eckman of the Northwest Power Planning Council.
The paper frames the policy issues by identifying the major home appliances that require the most electricity, such as refrigerators, clothes washers, and room air conditioners. Then it analyzes the economic ramifications for consumers of various appliance purchase options. Next it identifies important consumer characteristics to be considered at different stages in the appliance purchase process. Finally, it reviews past attempts to influence consumer choice through public policy initiatives and suggests how new initiatives could be targeted more effectively.
- Well crafted programs including rebates, publicity, and assistance in disposing of old appliances appear to motivate consumers to replace refrigerators before the end of the expected life of the appliance. It is likely that the refrigerator experience can be generalized to other appliances.
- There is little or no evidence that consumer tax credits are effective in influencing a significant number of consumers to change their purchasing behavior.
- Energy labels and the US EPA's Energy Star logo are good indicators of cost-effective and energy-efficient appliances, but the labels in themselves are insufficient to cause substantial change in consumer purchasing practices.
The more successful programs offer insights that should drive the development of any future programs:
- It is much easier to influence consumers who are actively engaged in appliance purchases than to influence the general public.
- Retail appliance salespeople have significant influence on consumer choice. Incentives aimed at the salesperson, coupled with simple sales tools, can steer consumers in the direction of energy-efficient appliances.
- Direct financial incentives for consumers may not be necessary.
The appliance report is the second in a new series of reports aimed at identifying solutions to the challenges presented by climate change. Other Pew Center series focus on domestic and international policy issues, environmental impacts, and the economics of climate change.
A complete copy of these and other Pew Center reports can be accessed from the Pew Center's web site, www.c2es.org.
About the Pew Center: The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is a nonprofit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change. Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs, leads the Pew Center. The Pew Center includes the Business Environmental Leadership Council, a group of large, mostly Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center; it is solely supported by contributions from charitable foundations.
Appliances and Global Climate Change: Increasing Consumer Participation in Reducing Greenhouse Gases
Appliances and Global Climate Change: Increasing Consumer Participation in Reducing Greenhouse Gases
Prepared for the Pew Center on Global Climate Change
Everett Shorey, Shorey Consulting, Inc.
Tom Eckman, Northwest Power Planning Council
Eileen Claussen, President, Pew Center on Global Climate Change
It makes a big difference which home appliances U.S. consumers buy. Residential electricity consumption -- much of it from major home appliances -- accounts for about one fifth of U.S. energy-related greenhouse gas emissions. New energy-efficient appliance models that use as little as half of the energy as their predecessors are available on the market.
Yet previous studies have shown little consumer response to the marketing of energy-efficient appliances. Although consumers stand to save money over time from smart appliance choices, energy-efficient products and programs to encourage their use have had limited success in the marketplace. This report prepared by Everett Shorey of Shorey Consulting, Inc. and Tom Eckman of the Northwest Power Planning Council takes a look at how consumers decide which major home appliances to buy, and suggests ways in which policy makers could encourage the use of energy-efficient products.
The authors draw upon previous experience from government and utility-run programs aimed at influencing consumers to purchase energy-efficient products. In doing so, they highlight the strengths and weaknesses of various approaches and analyze the economic and environmental ramifications of consumer purchases of appliances such as washers, refrigerators, and air conditioners. The authors find that a program's effect depends upon the particular consumer choice in question. The consumer may be considering an upgrade, early replacement, or retirement of an appliance. Each of these involves different economic tradeoffs, and thus different opportunities for policy intervention. The efficacy of a policy also depends upon where the consumer is in the process of purchasing an appliance. Different kinds of programs are required to get the attention of a consumer who is not even thinking about buying an appliance, as opposed to one who is doing research in Consumer Reports, or already out shopping in appliance stores. The authors find that future public policy and incentive programs will be most effective if they avoid a "one size fits all" approach, and instead adopt messages and communications mechanisms targeted at different categories of consumers, and different kinds of decisions.
This report is the second in a series aimed at identifying practical solutions to address climate change. The Solutions series provides individuals and organizations with tools to evaluate and reduce their contributions to climate change.
The authors and the Center would like to thank the members of the Center's Business Environmental Leadership Council and David Goldstein of the Natural Resources Defense Council for their review and advice on previous drafts of this report. In addition, we acknowledge the input from appliance manufacturers, retailers, utilities, and government programs that contributed information and insights to this study.
Consumer purchases of major home appliances are an important aspect of the discussion about greenhouse gas reduction and global climate change for two reasons. First, major home appliances account for approximately one third of residential electricity consumption, a principal source of greenhouse gases. Second, appliance purchases give consumers a direct opportunity to affect greenhouse gas emissions. Absent other intervening factors, most consumers would probably wish to purchase appliances which save energy and money, and which are environmentally friendly. The questions for policy-makers revolve around what choices are available to consumers now, how consumers make their current choices, and how might it be practical to influence consumer choice.
This paper frames the policy issues by first focusing attention on the appliance categories that are purchased directly by consumers and that are significant consumers of electricity. Second, it analyzes the economic ramifications for consumers of their appliance purchase options. Finally, it reviews past attempts to influence consumer choice through public policy initiatives and suggests how new initiatives could be targeted more effectively. Further research is necessary in order to project how much energy would be conserved through any specific policy initiative.
The three areas of consumer choice that are potentially addressed through policy initiatives are upgrades to more efficient models of appliances when a consumer has already decided to make an appliance purchase; retirements of duplicate appliances; and early replacements of functioning appliances by newer and therefore more efficient ones. The first two of these consumer choices generally leave consumers economically better off if they purchase more efficient models. The economic and societal energy saving benefits of earlier than normal appliance replacements are generally positive as long as the consumer purchases an Energy Star® or higher-efficiency appliance or one meeting energy efficiency standards that are coming into effect in the next two or three years.
In the process of making any appliance purchase, individual consumers use different sources of information and have different interests, depending upon where they are in the purchasing process. Some consumers are actively engaged in researching and assessing appliances and intend to make an immediate purchase (Buyers), others may be researching appliances but are hesitating over when to purchase (Considerers), and still others are not interested in or receptive to information about appliances (Satisfieds). The differences between these groups both create opportunities and present challenges to policy-makers and program designers who are attempting to alter consumer appliance purchasing behavior.
Past public policy and incentive programs have not differentiated their approaches and messages by where consumers are in the appliance purchase process. Future programs will be more effective if they adopt more targeted messages and communications mechanisms. Experience from these past programs has demonstrated several key issues:
- Well crafted programs including rebates, publicity, and assistance in disposing of old appliances appear to cause consumers to replace refrigerators before the end of the expected life of the appliance. It is likely that the refrigerator experience can be generalized to other appliances.
- There is little or no evidence that consumer tax credits are effective in influencing a significant number of consumers to change their purchasing behavior.
- Consumers seek information on appliances from many sources before they make a purchase and Consumer Reports is the most trusted source of information.
- Energy labels and the Energy Star® logo are, in themselves, insufficient to cause substantial change in consumer purchasing practices.
Recent programs in the Pacific Northwest and in the Northeast to promote the use of high-efficiency washing machines are providing an interesting model of success in influencing consumer behavior. These recent programs demonstrate several factors that should drive the development of any new consumer-oriented initiatives:
- It remains substantially easier to influence consumers who are actively engaged in appliance purchases (Buyers and some Considerers) than to influence the general public (Satisfieds).
- Retail appliance sales representatives have substantial influence on consumer choice. Incentives oriented to the retail sales representative coupled with simple sales tools can cause the sales representatives to influence consumer product selections.
- Direct financial incentives for consumers may not be necessary, especially when the consumer is already intending to purchase an appliance and the goal is to get the consumer to upgrade by purchasing a more efficient model.
Policy-makers must also craft any incentive programs in congruence with other public policy initiatives, especially minimum appliance energy efficiency standards. First, the minimum energy efficiency standard programs are the major public policy influence on manufacturers to raise the level of energy efficiency for their products. Without consideration of manufacturer intentions, it is possible that there will be no supply of more efficient products to meet any changes in demand caused by consumer-oriented public policy programs. Secondly, accelerating consumer purchases immediately in advance of a change in minimum standards could have the unintended effect of raising rather than lowering total societal energy consumption.
Based on these considerations, public policy programs could target each major appliance purchase decision using approaches and methods that have been successful in the past:
|Decision||Target Group||Major Program Elements|
|Upgrade to More Efficient Appliance||Buyers|
|Avoid Postponement of Appliance Replacement||Considerers|
|Early Replacement||Considerers Satisfieds|
|Appliance Retirement||All households|