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Climate Check Canarie Workshop March4

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Climate Check Canarie Workshop March4

  1. 1. The Background to GHG Revenues Understanding GHG Programs, Accounting Protocols and Rules for Generating GHG Revenues Presented By: Tom Baumann CEO ClimateCHECK Director GHG Management Institute Presented To: CANARIE Green IT Ottawa Workshop March 4, 2009 Climate CHECK SET THE STANDARD TM Copyright © Climate Check Corporation. All Rights Reserved.
  2. 2. Tom Baumann, P.Eng. CEO ClimateCHECK and Director GHG Management Institute <ul><li>GHG survey findings -> 83.2% believe moderate to high risk of an “ Enron ” in GHG markets (negligence, lack of credibility) </li></ul><ul><li>Lead Author of ISO 14064-2 GHG Project Standard </li></ul><ul><li>Over 300 climate change and clean technology projects since 1998 </li></ul><ul><li>Past Chair Canadian Advisory Committee on Climate Change (ISO 14064) </li></ul><ul><li>Chair, IEEE Climate Change Technology Subcommittee </li></ul><ul><li>Carbon Disclosure Standards Board </li></ul><ul><li>Training SCC, RGGI, UNFCCC (verifier accreditation) </li></ul>
  3. 3. KEY MARKET METRICS $2 trillion to $3 trillion – value of carbon markets by 2015 $500 billion - Value of low-carbon energy markets by 2050 $100 billion - Demand for projects generating GHG emissions credits by 2030 $100 billion - Worldwide investment in clean energy by 2009 $84 billion - Cumulative net savings from energy efficiency in US by 2012 Global carbon market expected to grow 58% in 2008 to $92 billion Voluntary carbon market expected to grow to $5 billion by 2013 $57 trillion - Carbon Disclosure Project signatories, 1000s of companies participating, expanding to supply chain accounting SOURCES: Thomson Reuters, Stern Report, The Climate Group, Deutsche Bank, CDP, Ecosystem Marketplace ClimateCHECK – Set the Standard TM Copyright © Climate Check Corporation. All Rights Reserved.
  4. 4. Business Recognizing Climate Change Opportunity Bigger than IT <ul><li>“ The need to run climate through your business today is comparable to what running the Internet through your business was a few years ago: an indispensable, and potentially landscape-altering redefinition of how work is done.” </li></ul><ul><li>Conference Board </li></ul><ul><li>“ Our way of life will change radically, not only over the next 50 years but over the next 10 years. In my mind, those changes are a bigger business opportunity than the Internet ever was.” </li></ul><ul><li>Thomson Reuters </li></ul>
  5. 5. Presentation Overview <ul><li>GHG Policy Key Tools </li></ul><ul><li>GHG Regulations, Programs, Registries </li></ul><ul><li>Facing the Challenges </li></ul><ul><li>GHG Management Process </li></ul><ul><li>GHG Standards and Protocols </li></ul><ul><li>GHG Accounting for Inventories (permits) </li></ul><ul><li>GHG Accounting for Project Reductions (credits) </li></ul>
  6. 6. GHG Policy Key Tools Carbon Taxes, Cap and Trade, Offsets <ul><li>Carbon Taxes (and tax credits) </li></ul><ul><ul><li>Point of application (producer, consumer) </li></ul></ul><ul><ul><li>Not economically efficient, but administratively easier </li></ul></ul><ul><li>Cap and Trade (closed system of permits/allocations) </li></ul><ul><ul><li>Allocation formula critical </li></ul></ul><ul><ul><li>Regulated entities (25kt, 100kt, etc.) </li></ul></ul><ul><ul><li>Scope of application (70%+ of economy) </li></ul></ul><ul><li>Offset System (open system of credits) </li></ul><ul><ul><li>Baseline, additionality </li></ul></ul>
  7. 7. GHG Regulations Regulated Emission Trading Systems <ul><li>Examples of emission trading systems include: </li></ul><ul><li>UNFCCC Kyoto Protocol CDM/JI – Clean Development Mechanism and Joint Implementation </li></ul><ul><li>EU ETS – European Union Emission Trading Scheme </li></ul><ul><li>Alberta SGER – Alberta’s Specified Gas Emission Regulations </li></ul><ul><li>RGGI – Regional Greenhouse Gas Initiative (US NE States) </li></ul><ul><li>AB 32 – Assembly Bill 32 in California </li></ul><ul><li>WCI – Western Climate Initiative </li></ul>
  8. 8. GHG Registries <ul><li>A GHG registry receives GHG reports/data for corporate inventories and GHG reduction projects, even credits or allowances, and compiles into an inventory/database. </li></ul><ul><li>Examples of existing GHG registries: </li></ul><ul><ul><li>California Climate Action Registry (CCAR) – now The Climate Registry </li></ul></ul><ul><ul><li>Environmental Resources Trust (ERT) – now The American Climate Registry </li></ul></ul><ul><ul><li>World Economic Forum Register (WEF) </li></ul></ul>
  9. 9. GHG Programs <ul><li>GHG programs can involve several activities: </li></ul><ul><ul><li>Baseline of historic GHG emissions and performance </li></ul></ul><ul><ul><li>Future GHG reduction targets </li></ul></ul><ul><ul><li>GHG information available to stakeholders </li></ul></ul><ul><ul><li>Trading in GHG allowances or credits/offsets </li></ul></ul><ul><li>Examples of GHG programs include: </li></ul><ul><ul><li>Chicago Climate Exchange </li></ul></ul><ul><ul><li>US EPA Climate Leaders </li></ul></ul><ul><ul><li>US DOE 1605(b) </li></ul></ul>
  10. 10. GHG Market Challenges Macro and Micro <ul><li>GHG markets are fragmented (provincial, national, standards) </li></ul><ul><li>GHG commodity generation & transaction is expensive and time consuming (credits after 2-3 years) </li></ul><ul><li>Insufficient experts, many new entrants with lack of knowledge </li></ul><ul><li>Underperformance of projects (unrealized credits) </li></ul><ul><li>Insufficient market infrastructure & tools to enable market fluidity/credibility necessary to transform economy and meet environmental objectives </li></ul>
  11. 11. Clean Technologies and Climate Change Transforming the Economy <ul><li>Status Quo -> Climate Change and Clean Tech have been separate areas of focus </li></ul><ul><li>Climate change focusing on regulatory and economic instruments (regulations, carbon taxes, credits, emission trading) </li></ul><ul><li>Clean technology focusing on business opportunities, revitalizing industry and the economy, jobs, exports </li></ul><ul><li>Align policy and business objectives/actions (top down and bottom up approaches) to accelerate and sustain economic transformation to achieve objectives </li></ul>
  12. 12. GHG Management Process New Era of Corporate Restructuring Time ROI Strategic Assessment Execution Plan Act and Engage Markets Lead and Set the Standard Inventory Management Commitment, SWOT Analysis, Gap Analysis Supply Chain Carbon footprint Internal GHG Management Team Workshops and Training Internal Actions Carbon Offsets Portfolio and Business Unit Carbon Responsible Products and Programs Energy Efficiency, Renewable Energy GHG Management Systems Branding, Market Share, Shareholder Returns Clean Technologies
  13. 13. GHG Standards and Protocols WRI-WBCSD GHG Protocol and ISO 14064 <ul><li>There are currently two “base” standards for accounting and reporting inventory or project GHG emissions: </li></ul><ul><ul><li>De facto - WRI/WBCSD GHG Protocol </li></ul></ul><ul><ul><li>De jure – ISO 14064 GHG Standards </li></ul></ul><ul><li>These two standards are compatible. </li></ul><ul><li>The GHG Protocol provides more “how to do it” guidance. </li></ul><ul><li>ISO is more focused on “what to do” verifiability. </li></ul>
  14. 14. Overview of GHG Emissions Inventory <ul><li>GHG emission inventory </li></ul><ul><ul><li>quantifies and documents GHG emissions based on accepted standards and protocols </li></ul></ul><ul><ul><li>attributes emissions to a facility, company or other organizational unit. </li></ul></ul><ul><li>GHG emission inventory generally is characterized by the following factors: </li></ul><ul><ul><li>Geographic area covered </li></ul></ul><ul><ul><li>Entities covered </li></ul></ul><ul><ul><li>Time period covered </li></ul></ul><ul><ul><li>Types of emission sources/activities covered </li></ul></ul>
  15. 15. Defining Organizational Boundaries <ul><li>Organizational boundaries are important to define because organizations are sometimes complicated systems </li></ul><ul><li>For example, many companies consist of subsidiaries, joint ventures, franchises </li></ul><ul><li>Organizational boundaries establish a consistent method – similar to financial accounting – for accounting for the GHG emissions from all parts of a company. </li></ul><ul><ul><li>Equity share approach </li></ul></ul><ul><ul><li>Control approach – financial or operational </li></ul></ul>
  16. 16. Defining Operational Boundaries <ul><li>Classify GHG emission sources/activities to define which are included in the GHG emission inventory. </li></ul><ul><li>Setting operational boundaries involves: </li></ul><ul><ul><li>Identifying sources/activities causing GHG emissions </li></ul></ul><ul><ul><li>Classifying these as direct or indirect GHG emissions and assigning the “Scope” for GHG emissions accounting </li></ul></ul><ul><ul><li>Scope 1 (direct – onsite) </li></ul></ul><ul><ul><li>Scope 2 (indirect – offsite energy emissions – e.g. Power) </li></ul></ul><ul><ul><li>Scope 3 (indirect – everything else) </li></ul></ul>
  17. 17. Classifying GHG emissions Direct and Indirect – Scope 1, 2, 3 Figure Copyright WRI-WBCSD
  18. 18. Overview of ISO GHG Standards Verification Process GHG Inventory Documentation and Reports GHG Project Documentation and Reports Validation and Verification Process Level of assurance consistent with needs of intended user Verification of the GHG Assertion Validation and/or Verification of the GHG Assertion Figure Copyright ISO - modified Part 1 – ISO 14064 Design and Develop Organizational GHG Inventories Part 3 – ISO 14064 ISO 14065 Specifications for Validation or Verification Bodies Part 2 – ISO 14064 Design and Implement GHG Projects <ul><li>Conformance with applicable: </li></ul><ul><li>GHG Program(s) – TCR, GHGS, Alberta </li></ul><ul><li>Legislation – federal, state/provincial, local </li></ul><ul><li>Protocols/Standards – WBCSD/WRI GHG Protocol, industry guidance (API, INGAA, IPIECA, etc.), CDM AMs, technical and safety standards/ codes, etc. </li></ul>
  19. 19. Overview of ISO GHG Standards Life Cycle Framework of ISO 14064-2 Offsite Emission Sources Affected by the Project by Economic Changes (e.g. activity shifting or market transformation, i.e. “leakage”) Onsite Emission Sources Owned/Controlled by the Project Offsite Emission Sources Downstream During the Project Related by Energy or Material Flows (e.g. transportation, product use) Offsite Emission Sources Upstream During the Project Related by Energy or Material Flows (e.g. raw material extraction, transportation) Offsite Emission Sources Upstream Before Project Starts Related to the Project by Energy or Material Flows (e.g., construction, transportation) Offsite Emission Sources Downstream After Project Ends Related to the Project by Energy or Material Flows (e.g. end of life, waste management)
  20. 20. Overview of ISO GHG Standards Benefits of ISO 14064-2 -> Standard for Post Kyoto <ul><li>Modular “building block” structure of ISO standard more easily accommodates new technology – thereby saving time and costs. </li></ul><ul><li>Versatility to bridge initial investment decisions of new technologies and products with more reliable estimates of revenues from GHG markets. </li></ul><ul><li>GHG revenues accelerate technology innovation thereby improving environmental and business returns. </li></ul><ul><li>LCA approach good for consumers that do not tolerate “green washing”. </li></ul>
  21. 21. Case Study – Renewable Powered Data Center Can GHG commodities/benefits and revenues be created? <ul><li>GHG regulations or voluntary markets </li></ul><ul><li>Type of GHG commodity to be traded – allowances or offsets/credits </li></ul><ul><li>Ownership claims </li></ul><ul><li>GHG standards, protocols and methodologies </li></ul><ul><li>Availability, completeness, accuracy and transparency of data to support GHG assertions </li></ul><ul><li>Market price of carbon and cost of goods sold </li></ul>
  22. 22. Case Study – Renewable Powered Data Center Scenarios and Issues <ul><li>Business as usual electricity consumption from onsite or offsite generation? </li></ul><ul><li>Proposed project renewable electricity consumption from onsite or offsite generation? </li></ul><ul><li>GHG Regulations? </li></ul><ul><li>Regulated entity with cap and trade allowances program? </li></ul><ul><li>Regulated (but voluntary participation) offset/credit system? </li></ul>
  23. 23. Case Study – Renewable Powered Data Center With GHG Regulations (Entity Emissions Regulated) BASELINE/BASE YEAR Non-renewable PROJECT/ ACTION Renewable Onsite Offsite Onsite Excess permits (if baseline back off, no power export) Offsite not regulated for entity. Depending on allocation rules, might get “set aside” permits. Offsite Excess permits (if baseline back off, no power export)
  24. 24. Case Study – Renewable Powered Data Center Without GHG Regulations BASELINE/BASE YEAR Non-renewable PROJECT/ ACTION Renewable Onsite Offsite Onsite Voluntary offsets Voluntary offsets Offsite More difficult to get voluntary offsets More difficult to get voluntary offsets
  25. 25. Canarie Pilot – Green IT Zero Carbon Internet <ul><li>Complicated GHG scenarios -> different types of reductions (whether permits or credits), for example: </li></ul><ul><ul><li>Fuel switch (high carbon to low carbon RE, or Ag AD, etc.) </li></ul></ul><ul><ul><li>Efficiency improvement (better resource use efficiency optimization, load balancing, packet switching because data center sized for peak) </li></ul></ul><ul><ul><li>Avoid T&D losses (whether relocating power or IT) </li></ul></ul>
  26. 26. Canarie Pilot – Green IT Zero Carbon Internet Linking different GHG accounting <ul><li>Entity inventory (company, university, government, etc. permits/allowances) </li></ul><ul><li>Project reductions (credits) </li></ul><ul><li>Products (labelling) </li></ul><ul><li>ISO (Audit) GHG Protocol (Guidance) </li></ul><ul><li>14064-1 -> Corporate </li></ul><ul><li>14064-2 -> Project </li></ul><ul><li>14064-3 </li></ul><ul><li>14067 -> Product (new) </li></ul><ul><li>RE standards and baseline grid standard (NRCan and IEEE) </li></ul><ul><li>EE standard (EVO/IPMVP and IEA) </li></ul>

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