2007 ARIPPA Annual Tech Convention Managing Greenhouse Gas Emissions

2007 ARIPPA Annual Tech ConventionManaging Greenhouse Gas Emissions

Arun KanchanPrincipal Consultant

Trinity Consultants – Somerset, New Jersey

[email protected]

August 29, 2007Harrisburg, Pennsylvania

trinityconsultants.com

Presentation Objective

Brief Background on Greenhouse Gas (GhG) emissions

Domestic and international policy developments regarding global climate change

Best practices in greenhouse gas inventorying

Background

Assumed Advances In• Fossil Fuels

• Energy intensity• Nuclear

• Renewables

The “Gap”Gap

technologies• E.g. CCS

Source: Jae Edmonds, PNNL/Univ MD

Stabilizing CO2 Base Case and “Gap” Technologies

1.9

20552005

14

7

Billion of Tons of Carbon Emitted per Year

19550

Currently

projected

pathFlat path

Historical emissions

2105

14 GtC/y

7 GtC/y

Seven “wedges”

O

Source: Robert Socolw, www.princeton.edu/~cmi

“Wedges”

Adapted from:

Robert Socolw, www.princeton.edu/~cmi

Energy Efficiency

Coal-based Synfuels with CCS

Wind power

Reforestation

Mass transit

Stabilization Triangle

2004 20547 GtC/y

14 GtC/y

Carbon Capture & Storage

Biofuels

Fill the Stabilization Triangle with Seven Wedges

Sources of Greenhouse Gases

Greenhouse Gas

Source(s)

CO2 Combustion

CH4 Landfills, coal mines, oil and gas production, agriculture

N20 Combustion, fertilizers, nitric/adipic acid plants

Hydrofluorocarbons Semiconductor, refrigeration, fire protection

Perfluorocarbons Semiconductor, refrigeration, fire protection

Sulfur Hexafluoride Electric power - circuit breakers, gas-insulated

substations, and switchgear

Climate Change Basics:The “Greenhouse Gases”

(per the Second Assessment Report)

Greenhouse Gas

100-Year Global Warming Potential

CO2 1

CH4 21

N20 310

Hydrofluorocarbons 140-11,700

Perfluorocarbons 6,500-9,200

Sulfur Hexafluoride 23,900

Calculating CO2e

CO2e is carbon dioxide equivalent CO2e reflects the global warming

potential of each greenhouse gas relative to carbon dioxide, which has a GWP of 1

Emission rate = 400 tpy CH4

CH4 GWP = 21

400 tpy CH4x 21=8,400 tpy CO2e

10,000 metric tons of CO2e Energy Source

Quantity Heat Equivalent

Assumption

Electricity 3,000 MWh - - - - - -

Natural gas 38,000,000 scf 38,000 MMBtu

1,000 Btu/scf

Diesel fuel 200,000 gallons 27,700 MMBtu

140,000 Btu/gal

Coal 1,100 tons

27,500 MMBtu

12,500 Btu/lb

All info from The New Zealand Herald, 11/1/03, quoting the New Zealand Climate Change Office

How do the U.S. and China Compare with Other Countries on GhG Emissions

Climate Change Basics:Emissions per Capita (2003)

24

1012

23

119

0

5

10

15

20

25

30

From Energy Information Administration, World Population, 1980-20032005

Met

ric

Ton

s C

O2

Eq

uiv

alen

t

Domestic and International Policy

Bush Administration Report (2004)

CO2 “is the largest single forcing agent of climate change”

CO2 and CH4 “have been increasing for about two centuries as a result of human activities”

“approximately three-quarters of present-day anthropogenic [carbon dioxide] emissions are due to fossil fuel combustion.”

The Kyoto Protocol:Early Backlash in the United States

Senate Resolution 98 (1998): Developing countries must

be included Must not harm the U.S.

economy Passed by a vote of 95-0

Emission Trends in the United States:Moving Opposite Kyoto Targets

6128 5987 6108 6211 6345 6483 66716749 6750 6823 6994

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Mil

lio

n M

etri

c T

on

s C

O2

Eq

uiv

alen

t

Kyoto Allocation: 5,699 MMT CO2 Equivalent per Year

2000 Gap: 1,295 MMT CO2 Equivalent – 18.5% of Emissions

Domestic Legislation S280 - Climate Stewardship and Innovation

Act of 2007 Limit GHG sources with emissions of

greater than 10,000 tCO2e per year from the following sectors:

Power generation Transportation Refiners Producers or importers of HFCs,

PFCs, SF6 “Other industry”

Emission targets: Decrease to 2004 levels in 2012 Decrease to 1990 levels by 2020 Decrease to 1/3 of 2000 levels by 2050

John McCain,R-AZ

Joseph LiebermanI-CT

Domestic LegislationS280 - Climate Stewardship and Innovation

Act of 2007 Compliance achieved by cap and trade 6 GHGs 30% of reduction requirements can be satisfied by

submitting allowances from another nation’s market or by a net increase in sequestration

Penalty for noncompliance is 3x the market value of a ton of GHG per ton of excess GHG emissions

In 2003, defeated 53 to 45 Reintroduced in 109th Congress, defeated 60-38 Introduced in 110th Congress

Domestic LegislationS.1766 The Low Carbon Economy Act of

2007 Formally introduced to 110th Congress on July

11, 2007 Emission Targets

Reduce emissions to 2006 levels by 2020 Reduce emissions to 1990 levels by 2030 60% reduction of emissions from 2006 levels by 2050

Regulated entities include: Regulated fuel distributors (natural gas pipelines,

petroleum refineries, regulated coal facilities, natural gas processing plants, and fuel importers)

Non-fuel regulated entities (producers or importers of HFCs, PFCs, SF6, or N2O; adipic and nitric acid manufacturers; aluminum smelters; HCFC-22 producers, and various other non-fuel-related emitters)

Domestic Legislation S.1766 The Low Carbon Economy Act of

2007 Cost reducing features

Safety valve mechanisms set at $12/metric tonne of CO2e

14% of allowances auctioned for technology, adaptation, and assistance programs

53% of allowances allocated to various industrial sectors

23% of allowances will be reserved for a set-aside program supporting agricultural sequestration, early reduction, carbon sequestration, and individual state reduction

Domestic Legislation S.1766 The Low Carbon Economy Act of

2007 Initial allocation period set to start

on January 1, 2012 In January 2007, the Energy

Information Administration (EIA) released an analysis of a similar proposal by Bingaman, finding that it would cost 0.1% of GDP through 2030

Other Domestic LegislationSuggested by Type Scope Target Level Price Cap Offset

Boxer Cap and Trade N/A 1990 levels by 2020 and 80 percent below 1990 levels by 2050

N/A N/A

Bingaman/Specter Intensity target with trading mechanisms

Fuel producers, manufacturers, importers, and emitters of non-fuel GHGs

2013 levels by 2020 (2.4 percent below business as usual intensity)

$7/ton (+5 percent annually)

Domestic credits, including sequestration, up to 3 percent international credits

Feinstein/Carper Cap and Trade Large stationary sources, including utilities, oil and gas and transportation facilities

2006 levels in 2010, 92.75 percent of 2006 levels in 2020

N/A 25 percent, domestic and international, including farming and afforestation

Waxman (Safe Climate Act of 2006)

Cap and Trade Large emitters Stabilization at 2000 levels, 2 percent annual reduction from 2010 to 2020

N/A

Source: Point Carbon, Carbon Market Analyst, “Carbon Trading in the US: The Hibernating Giant,” September 13, 2006

Domestic Legislation

Source: Wall Street Journal, June 20, 2005 and National Center on Energy Policy

State/EPA Litigation

Lawsuit filed against EPA in June 2003 for failure to regulate carbon dioxide under the Clean Air Act

Litigants: Commonwealth of Massachusetts State of Connecticut State of Maine

State/EPA Litigation No indication that Congress intended to regulate

in the area of climate change in the 1990 CAAA CAA is missing a regulatory regime for

addressing climate change (as exists for stratospheric ozone depletion)

Cites FDA v. Brown & Williamson Tobacco Corp. (2000) which states that an administrative agency awaits congressional direction on a fundamental policy issue such as climate change instead of searching for authority in existing statutes, which were not designed to deal with the issue

Regional Greenhouse Gas Initiative

Regional Greenhouse Gas Initiative (RGGI)

8 Northeastern and Mid-Atlantic States (CT, DE, ME, NH, NJ, NY, VT, and recently MD)

Mandatory CO2 cap and trade program to reach state-specific targets For CO2 only, from utilities (electric generating units with a nameplate

capacity 25 MW) Program will begin January 1, 2009 and will cap regional GHG emissions

at 1990 levels by 2014, 10% below 1990 levels by 2018 Memorandum of Understanding (MOU) issued on December 20, 2005 Draft model rule issued on March 23, 2006 Final model rule issued August 15, 2006, and will be basis for state

legislation

Program Adoption Launch date of January 1, 2009 State-level implementing legislation must

be in place by December 31, 2008 Regional emissions cap

Annual budget of 121,253,550 short tons For 2009 to 2014, annual budget remains

static; in 2015, budget will decline 2.5% per year


Landfill gas capture/combustion

SF6 capture and recycling

Afforestation End-use efficiency

for natural gas, propane and heating oil

Methane capture from farming operations

Projects to reduce fugitive methane emissions from natural gas transmission and distribution (deleted from final model rule)

Types of Offset Projects:


Offset Projects Reductions realized on or after the date of the MOU One allowance per ton of CO2e reductions inside signatory states One allowance per two tons CO2e reductions outside signatory

states Source may only cover up to 3.3% of reported emission with

offset allowances


Offset Trigger and Reset If after market settling period, average

regional spot price exceeds $7.00 (2005$) per ton for twelve months on rolling average Offsets may be awarded to projects located

anywhere in North America Offset allowances will be awarded on 1:1 basis Offset allowance coverage will be increased to

up to 5% of reported emissions for compliance period


Safety Valve Offsets Trigger If a Safety Valve Trigger Event occurs twice

in two consecutive 12-month periods Offsets may be awarded to projects located

anywhere in North America or from international trading programs

Offset allowances will be awarded on 1:1 basis

Coverage will be increased to up to 5% of reported emissions for first three years of compliance period and 20% of reported emissions for fourth year of compliance period


Allocation of Allowances Each state may allocate allowances from

their budget 25% of allowances will be allocated for

consumer benefit or strategic energy purposes Promote energy efficiency, mitigate ratepayer

impacts, promote renewables, stimulate investment in carbon abatement technologies, and/or to fund program administration


PA Energy Department Authority Funding

Governor Rendell is making $10 million in grants available for the fourth round of Pennsylvania Energy Development Authority funding.

PEDA was brought back to life by the governor after years of inactivity and it has directed $21 million in grants and loans for 57 clean energy projects that are leveraging another $240 million in private investment. The projects will create 975 permanent and construction jobs.

Applicants for PEDA financing can seek grant assistance for capital costs for a variety of innovative, advanced energy projects. Eligible PEDA projects may include solar energy; wind; low-impact hydropower; geothermal; biologically derived methane gas, including landfill gas; biomass; fuel cells; coal-mine methane; waste coal; integrated gasification combined cycle; demand management measures, including recycled energy and energy recovery, energy efficiency and load management; and clean, alternative fuels for transportation. PEDA particularly encourages applicants with projects related to distributed generation for critical public infrastructure to apply.

PEDA financing is available to organizations operating in Pennsylvania and to those businesses interested in locating their advanced energy operations in Pennsylvania.

US EPA / DOE Programs:

Energy Star (DOE) Energy efficient products Energy efficient homes Energy efficient buildings http://www.energystar.gov/

Natural Gas Star (EPA) Reduce methane emissions Focus on profitable investments 90 partner companies http://www.epa.gov/gasstar/

Other Voluntary Initiatives


EPA Climate Leaders’ Program Company Commitments:

Inventory corporate-wide GHG emissions Set aggressive emissions reduction goal Annually report emissions and progress toward goal Publicize their participation

EPA Commitments: Technical assistance for GHG inventories GHG Protocol

http://climatebiz.com/


American Electric Power (AEP)Baxter International Inc.City of ChicagoDuPontEquity Office Properties TrustFord Motor CompanyInternational PaperManitoba HydroMeadWestvaco CorporationMotorola, Inc.STMicroelectronicsStora Enso North AmericaTemple-Inland Inc. Waste Management, Inc.

Chicago Climate Exchange Voluntary cap-and-trade program for

reducing and trading greenhouse gas emissions.

Phase I - 1% GHG reduction each year for 4 years: 2003 through 2006 (baseline is determined from average of 1998-2001 emissions)

Phase II - 6% below baseline through 2012

Trading approximately 2.5 million metric tons/month (~$3.50/ton)

Now approximately $4 to $4.20/ton US, Canada, Mexico, Brazil


State registries are being developed for “baseline protection” California Climate Action Registry Eastern Climate Registry LADCO Registry WRAP Registry …..Multi-State Registry

US and Kyoto? US reductions cannot be transacted

under Kyoto mechanisms, as the US has not ratified the Kyoto Protocol

Under Kyoto rules, US companies can participate in CDM projects in both developing country parties (through unilateral CDM) and Annex B parties (through JI)

Los Angeles

Price and volume ECX CFI Futures Contracts606 million tons (Mt) traded YTD 2007

Source: European Climate Exchange

ECX CFI Futures Contracts: Price and Volume

0

2

4

6

8

10

12

VO

LUM

E (m

illio

n to

nnes

CO

2)

€0

€5

€10

€15

€20

€25

€30

€35

Pri

ce p

er to

nne

(EU

R)

Total VolumeDec07 SettDec08 Sett

August 27, 2007 Conversion, I Euro = 1.3645 USD

Iron and Steel also shows advantage in options costing less than 10$

　

Emission Reduction

Achieved by Options

costing less than 5 US$

in 2020 (MMT)

Share in Sectoral Emission Reduction Potential

Emission Reduction

Achieved by Options costing

less than 10 US$

in 2020 (MMT)

Share in Sectoral Emission Reduction Potential

Electricity 43.7 10% 98.5 22%

Iron and Steel 12.7 9% 80.9 58%

Cement 192.4 82% 231.2 98%

Transport 205.5 95% 205.5 95%

TOTAL 454.3 　 616.1 　

Share in Total Reduction Potential In

Advanced Options Scenario in 2020

44% 　 59% 　

GHG Inventory Best Practices

Overview of Sources

Source: The Greenhouse Gas Protocol – A corporate reporting and accounting standard (revised edition), www.ghgprotocol.org

Calculating Emissions

Step 1: Identify GHG Source Scope 1: Direct emissions from

stationary combustion, mobile combustion, processing and fugitives

Scope 2: Indirect emissions from purchased electricity, heat, or steam

Scope 3: Indirect emissions from transportation, contract manufacturing, and product use

Emissions Sources – Power Utility Direct Emissions

Stack CO2, CH4, N2O emissions from fuel combustion SF6 from transmission and distribution equipment SO2 Scrubbers - CO2 released from the reaction of

calcium carbonate with sulfur dioxide SNCR/SCR - Potential N2O emissions from the

control of NOX through SNCR/SCR. Fugitive CH4 from coal storage piles Blackstart engines Cogeneration

Example – Power Utility

Indirect Emissions System losses from transmission

and distribution (T&D) – the amount that is truly “consumed” by the system (difference between amount produced at facility and amount delivered to user)

Electricity usage for office buildings

Strategies for Streamlining GHG Inventories

1. Set a deminimis threshold for sources and document

2. Establish a base year or baseline3. Set a threshold for adjusting the

baseline and document4. Calculate and document distinct

GHG emission reduction projects5. Pursue third party verification

Items for consideration for an internal GHG protocol

US Developments and Crystal Ball

Strong possibility that the US may have mandatory CO2 limits in the near future (3 to 5 years) – highly dependent on political climate

State (and regional) initiatives/mandates will increase (will companies pressure EPA for federal regulation if states are too active?)

EPA/DOE will continue to pursue voluntary initiatives (Climate Leaders, Natural Gas Star, 1605b, etc.)

Domestic litigation will continue Shareholder pressures will escalate Pressure will mount for US to address climate change with

Kyoto entry into force and EU ETS maturation Northeast and CA will have carbon caps on electric

generating units and CA will have emission caps on additional sources

Questions?

Documents

2007 ARIPPA Annual Tech Convention Managing Greenhouse Gas Emissions