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Newsfront: Global warming: On the front Burner  

| By Suzanne Shelley



The heat-trapping potential of CO2 and the other major greenhouse gases (GHG)1 in the Earth’s atmosphere, while once hotly debated, is now undisputed, according to the U.S. Environmental Protection Agency (EPA; Washington, D.C.; and a growing list of international scientists and business leaders (see Box, below: Thin ice).

With 165 countries having ratified the Kyoto Protocol to date, nearly half the world’s economy (48% of world GDP) is now committed to making mandatory reductions in GHG emissions by 2012. In the U.S., the Bush Administration has steadfastly refused to ratify Kyoto, and several bills aimed at regulating GHG emissions to address global warming have been defeated in the Senate. In the absence of federal regulation on GHG emissions, a variety of state-level and regional initiatives are under development. However, they offer no overarching federal mandates.

Despite the absence of decisive action by Uncle Sam, a growing number of companies are undertaking aggressive, voluntary programs to reduce their GHG emissions in the U.S. “Voluntary efforts are clearly beneficial to the environment, but there’s also a business opportunity here — it’s not pure altruism,” says Mark Proegler, director of the Emissions Markets Group for BP (Houston, Tex.;

Reducing flare use and undertaking a variety of energy-efficiency projects have helped BP to meet its goal of reducing GHG emissions by 10% from 1990 levels. BP is now working to stabilize GHG output while growing its business. The efforts to meet the earlier goal yielded savings worth $650 million in net present value, says Proegler.

“By working through their emissions inventories and examining their energy-use patterns, most companies are able to uncover a range of emissions-reduction and energy-efficiency projects they were never aware of before,” says Mark Kenber, policy director of The Climate Group (Surrey, U.K.; “These should be viewed as opportunities, not as a burden or a cost.”


CO2 reduction has many faces

When DuPont (Wilmington, Del.; set out to reduce its carbon footprint, it first volunteered to reduce CO2 levels by 40% between 1994 and 2000. Once it reached that milestone, the company pledged to achieve a 65% reduction from 1994 levels by 2010, and achieved that goal by 2003.

“There has been a strong business case for what we have done,” said DuPont CEO Chad Holliday, in a September 2005 speech. According to Holliday, DuPont’s voluntary GHG reductions have helped the company to “achieve more than $2 billion in avoided costs due to energy-conservation activities — and that was before the significant energy price increases of the last few years.”

One project undertaken by DuPont consists of using landfill gas to replace 90% of the natural gas required to fuel the boilers at its Solae soy protein facility in Memphis, Tenn. The firm claims that this project cut annual GHG output by an amount equal to removing 70,000 cars from the road — while saving the company $4 million/yr.

Worldwide, Shell International (London; has set voluntary targets that mirror Kyoto — to reduce GHGs to 5% below 1990 levels by 2010, although different Shell facilities around the world are impacted by a mix of regulatory requirements and voluntary commitments.

Shell Canada (Calgary, Alta.;, for instance, has pledged to reduce overall GHG output to 6% below 1990 levels by 2008, across all of its refining, exploration, production and commercial businesses. However, seeing “an incredible opportunity,” Shell Canada pledged to “drastically reduce the carbon footprint of our oil sands operations, cutting GHGs by 50% by 2010,” says Rob Seeley, general manager of sustainable development for Shell Canada. “People were asking me, ‘Are you out of your mind?’” he adds, saying: “But as an oil company, we’re part of the problem, so we need to be part of the solution.”

To achieve that 50% reduction, Shell first established that the 1997 design emissions baseline for its oil sands operations was 4.8 million tons/yr CO2. “Knowing we could do better than that, we went back to the drawing board,” says Seeley. Several projects, including increased use of more-efficient combined-cycle cogeneration systems during both the oil sands extraction and upgrading, have helped Shell Canada to reduce the design baseline from 4.8 to 3.5 million tons/yr CO2 by 2003. Now, the company is working to cut that new baseline in half by 2010, using a variety of energy-efficiency and optimization processes, and by capturing CO2 for enhanced oil recovery in the aging oilfields of Northern Alberta.

Meanwhile, through an ingenious “industrial synergy project,” Shell Canada was able to partner with a Dow Chemical Co. (Midland, Mich.; ethylene cracker in a neighboring industrial park, to capture a waste hydrogen stream produced there and use it to significantly reduce the size (and energy requirements) of a steam methane reformer used during the upgrading process. “These are the types of ideas that come with innovation,” says Seeley.

From 1996 to 2005, Dow reduced its consumption of fossil fuels per pound of product by more than 20%. Dow’s 2015 goals call for an additional 25% improvement in energy efficiency over the next decade. Dow is also working to achieve a 2.5%/yr reduction in “GHG emissions intensity” 2006 and 2015.

“Some have said our industry’s intense appetite for fossil fuels disqualifies us somehow from being part of the solution,” said Dow CEO Andrew Liveris, in a speech last month. “On the contrary, no one in the world is more intensely aware of the need, ultimately to reinvent our dependency on oil and natural gas than we are. We will lead the way on energy transformation because we have to.”

For BASF (Ludwigshafen, Germany;, the installation of two combined-cycle gas turbine plants at Ludwigshafen is helping to generate 3.5 times more electricity per m.t. of steam compared to conventional cogeneration, while cutting CO2 emissions by more than 500,000 m.t./yr. In another project, an improved catalyst system that significantly increased yield of acrylic acid (a precursor for superabsorbents) has helped BASF to cut CO2 by 230,000 m.t./yr (the annual electricity used by 140,000 households). These and other projects helped BASF to cut its global GHG emissions by 38% from 1990 to 2002. The firm is now working to achieve an additional 10% cut (from 2002 levels) by 2012.

“Voluntary efforts provide a valuable opportunity for ‘learning by doing’ where failure doesn’t produce regulatory compliance penalties,” says Mark Brownstein, managing director of business partnerships for Environmental Defense (New York, N.Y.; “It gives businesses the space to experiment.”


Getting started

Today, a variety of initiatives and formalized protocols are available for companies interested in reducing their GHG emissions. For instance, the California Climate Action Registry (Los Angeles; — which, despite its name, is not limited to California-based companies — helps participating companies to develop and validate entity-wide GHG inventories, and offers an online calculation tool to automate the process. “Our members routinely find that after going through this vigorous exercise, they are able to uncover opportunities for improvement and cost savings,” says Robyn Camp, program director.

Meanwhile, EPA’s Climate Leaders program is helping it 86 participants (so far) — including such players as 3M, General Electric, IBM, Johnson & Johnson, Pfizer, and United Technologies Corp. — to develop a comprehensive baseline inventory of GHG emissions (using EPA’s GHG Inventory Protocol). Participants then work with the Agency to set aggressive, company-wide GHG-reduction goals for the next five to ten years, says James Sullivan, Climate Leaders program manager.

Other voluntary protocols include ISO 14064, released in March by ISO (Geneva;, the DOE 1605(b) Registration Program offered by U.S. Dept. of Energy (DOE; Washington, D.C.;, and the GHG Protocol Initiative from the World Resources Institute (Washington, D.C.; and the World Business Council for Sustainable Development (Geneva;

“Distinguishing among the different voluntary protocols remains a huge challenge and nobody seems to have a single answer as to how it can best be done,” says Mark Friedrichs, an analyst with DOE’s Office of Policy and International Affairs. “However, because there’s such strong consensus among industry observers that a federal program is inevitable, at the end of the day, all of these voluntary programs have value for their participants.”

In terms of emissions trading related to CO2, the 150 companies that are members of the Chicago Climate Exchange (CCX; Chicago; — among them, Bayer, Dow, DuPont, Corning, Waste Management, IBM, Roanoke Electric Steel, and American Electric Power — have established their own voluntary but legally binding cap-and-trade program, modeled after the SO2 trading program (see Box, below: SO2, the mother of all trading programs, can model for CO2). For instance, CCX members have set a GHG emissions cap for themselves, having agreed, first, to reduce GHG emissions by 4% below a baseline (average emissions over 1998-2001), and then, by 2010, to achieve GHG reductions equal to 6% below the baseline. Companies that don’t meet their voluntary annual goal must buy excess CO2 offsets from another member of the exchange. To make it all valid, CCX requires third-party verification of all reductions, and an annual reconciliation, during which allowances equal to actual emissions must be surrendered by each member.


Making it mandatory

With the proliferation of voluntary GHG-related methodologies and protocols, many U.S. business leaders say there is an urgent need for harmonization and for overarching federal requirements. “Government-set emissions caps — a key element of an emissions trading program — provide a level playing field for all sources in a given sector,” says Proegler of BP. “In the absence of that, competitive pressures are likely to keep many companies from acting on their own.”

“As a utility, we love certainty, because we have to plan these things for years in advance,” adds Gary Hart, manager of emissions trading and environmental issues for Southern Company (Birmingham, Ala.;, the U.S.’s third largest electric utility. “Give me a set of rules we can work with. Multiple sets of rules and uncertainty only compound the problem and make it harder for all of us to plan.”

“Both the U.S. and Canadian governments have struggled with elements of Kyoto, but it’s just a matter of time before they enact some type of overarching regulation on GHG emissions,” adds Seeley of Shell Canada.

“Voluntary reductions did not achieve the remarkable acid rain and ozone improvements we’ve seen relative to SO2 and NOx reductions,” says Brownstein of Environmental Defense. “In each and every case, regulations were required to achieve these outcomes. Pleas to conscience, personal virtue and voluntary corporate efforts alone won’t achieve what we need for GHG — not by a long shot.”


‘No good deed goes unpunished’?

“Corporate leaders who are pushing for participation in voluntary programs are heroic and should be applauded,” says Wiley Barbour, Executive Director of the non-profit group Environmental Resources Trust, Inc. (Washington, D.C.; However, some worry that those brave enough to stick their necks out early risk getting their heads cut off. “Many operators are concerned that if they make a huge reduction to their emissions profile, they will set a really low starting baseline for future mandated reductions — and ultimately be penalized later, should regulations be enacted,” says Seeley of Shell Canada, who notes that operators embarking on a voluntary program should carefully document both their baseline emissions and all reductions to protect themselves, and keep an open dialog with regulators as policies are being developed.

With early actors reporting demonstrable payback from their voluntary energy-efficiency and GHG-reduction initiatives (especially in the face of escalating fossil fuel costs), their efforts give dual meaning to the term “being green,” by allowing forward-looking business leaders to realize both environmental and financial rewards while aggressively reducing their companies’ carbon footprints.

Note: Several of the sources quoted in this article were speakers at 4th Annual Green T Forum for Voluntary Environmental Credit Markets, May 1-2, 2006, New York City (


Thin ice

While the science of global warming has been debated in the past, “the climate change controversy isn’t really controversial at all to the scientific community,” says Patrick Zimmerman, director of the Institute of Atmospheric Sciences at South Dakota School of Mines and Technology (Rapid City, S.D.; For instance, acknowledging the deleterious effects of rising levels of CO2 and other greenhouse gas (GHG) emissions in the Earth’s atmosphere, the national science academies of the G8 nations, plus Brazil, China and India, signed a joint statement in 2005 stating the need for a global response to climate change.

According to EPA, rising levels of GHG in the atmosphere are directly related to industrial and transportation activities that involve the burning of fossil fuels and deforestation. And, because GHG emissions are easily dispersed, well-mixed and long-lived in the atmosphere, a ton of a given GHG has the same effect on atmospheric concentration — and thus on climate change —whether it emanates from New York or New Dehli.

“With regard to global warming and its potential for climate change, we believe that the science is sufficiently compelling to take prudent action, and we have,” said Chad Holliday, chairman and CEO of DuPont (Wilmington, Del.;, in a March 2006 press statement.

According to EPA, CO2 levels in Earth’s atmosphere have risen from 280 ppm since the start of the Industrial Revolution in 1750, to nearly 380 ppm today. And, overall U.S. GHG emissions rose by 16% between 1990 and 2004.

Over the past century, the Earth’s surface temperature has risen by 1 degree Fahrenheit, according to the National Academy of Sciences (Washington, D.C.; Meanwhile, the ten warmest years on record (since modern records began in 1861) have occurred since 1990, with 1998 and 2005 being the two warmest, according to NASA’s Goddard Institute (New York, N.Y.;

On a global basis, these changes are contributing to well-documented, rapid melting of the ice caps in the polar regions, a rise in sea level (already up by 4-8 in. over the past century, says EPA) and unusually severe weather, from extended drought conditions in some regions to frequent flooding in others.

“What we’re seeing in the physical world is exactly what the models predicted – it’s just happening at a much faster rate than we originally thought,” says Mark Brownstein, managing director of business partnerships for Environmental Defense (New York;

SO2, The mother of all trading programs, can model for CO2

The U.S.’s cap-and-trade program for SO2, enacted as part of the Title IV Acid Rain Provisions of the 1990 Clean Air Act Amendments (, and the concurrent, regional NOx-trading program (, confirmed what economists had long theorized —that by assigning monetary value to pollution, the use of emissions trading would give regulated sources the freedom and incentive to seek the most innovative, low-cost abatement opportunities. Now, after more than a dozen years in operation, the success of the SO2 program is well-established, says EPA: It has achieved mandated SO2 reductions faster, and at lower cost, than would have been possible using command-and-control regulation.

Under the two-phase program, now in Phase II, EPA established a nationwide cap of 8.9 million tons/yr of SO2 emissions for all U.S. coal-fired power plants (half of 1980 levels), and then distributed annual allocations — each representing the right to emit one ton/yr of SO2 — to regulated facilities on a prorated basis. During Phase I, sources were required to meet limits of 2.5 lb SO2/million Btu heat input (based on fossil fuel consumption). Since 2000, stricter Phase II limits of 1.2 lb SO2/million Btu have been in effect.


Freedom to choose

The hallmark of any cap-and-trade program is that control requirements are not specified for sources. Instead, each source must measure and report all emissions, and surrender the same number of allowances to cover its emissions at the end of the compliance period (without violating the limits specified in its state operating plan). In most cases, EPA’s annual allotment of SO2 allowances will not be enough to cover a given facility’s emissions.

“By allowing operators to meet their site-specific requirements by switching to lower-sulfur coal or natural gas, installing wet scrubbers, or buying allowances from others that were able to ‘over-reduce’ their SO2 emissions, the program gives us enormous flexibility to choose the most cost-effective and technically feasible option,” explains Gary Hart, manager of emissions trading and environmental issues for Southern Company (Birmingham, Ala.;, one of the U.S.’s three largest utilities.

The rationale of any cap-and-trade program is that no matter who does what, the buying and selling of a fixed number of annual allowances (which declines over time) produces the desired end result: A nationwide cap on output of the capped pollutant, while still giving individual sources the flexibility to forge the most-cost-effective way to get there.

“The program gave us a strong incentive to overcomply with the less-stringent SO2 restrictions of Phase I by switching to lower-sulfur coal, and bank those excess allowances for using during Phase II,” says Hart. “This helped us to reduce pollution sooner, and defer capital expenditures until fluegas desulfurization technology had a chance to mature and become more cost-competitive.”

At this point, Southern Company is gearing up to spend $7.5 billion over the next decade to install wet scrubbers to reduce SO2, says Hart. This will put the company in good stead when several recently enacted EPA cap-and-trade programs — namely, the Clean Air Interstate Rule (CAIR;, Clean Air Mercury Rule (CAMR;, and Clean Air Visability Rule (CAVR; — take effect (Figure).


Trading GHG emissions

In its most ambitious incarnation to date, emissions trading — once a uniquely American proposition — made its debut on the world stage in January 2005, as the trading of CO2 allowances began under the European Union Emissions Trading System (EU ETS), in accordance with the Kyoto Protocol. A variety of parallel domestic programs are also under development in other countries. Cap-and-trade programs are thought to be especially attractive for controlling GHGs because their warming effects are the same regardless of where they come from, and the marginal abatement costs vary widely by source and by industry. “With any mandatory cap-and-trade program, the government sets the emissions cap, but leaves it to businesses to figure out how to best achieve that goal,” says Mark Proegler, director of the Emissions Markets Group for BP (Houston, Tex.; “As we’ve seen with the long-standing SO2- and NOx- trading programs, this leads to innovation that no one could have predicted.”

“Should a mandated CO2-trading program ever come into effect to curb GHG emissions in the U.S., we already have a lot of excellent expertise and experience with the SO2 program,” says Hart. “We know how to make emissions trading work so it benefits both operators and the environment, although CO2 is a bigger challenge, affecting more than just the utility sector.”