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Chinese Launch Voluntary Carbon Standard

We have blogged a number of times that if the world is going to make meaningful inroads to the global reduction of emissions, the discussions at Copenhagen in December will have to include real contribution from developing nations, specifically India and China.

China had an interesting announcement today. The Chinese government announced that China will launch a framework for voluntary emissions trading in the global voluntary carbon market. The China-Bejing Environmental Exchange will be a government backed platform for trading carbon in the Chinese voluntary carbon market.

China is the world's top producer of greenhouse gas emissions, in terms of total emissions, although its per capita emissions are far below that of the United States. In previous months, China has been pretty steadfast in its opposition to a global cap on greenhouse gas emissions, excusing itself in the name of opportunity and advancement, much like India has done. Nevertheless, voluntary carbon standards are a step in the right general direction.

According to Reuters, "[t]rade in the global voluntary market, mostly driven by companies looking to reduce their carbon footprints ahead of expected emissions rules, more than doubled last year to more than $700 million". Voluntary carbon standards provide a framework for polluters to get emissions cuts verified and for the creation of credits that can be sold in voluntary carbon markets.

The announcement today comes on the heels of China's assertion on September 22 that it would tie emisions reductions to economic growth. Given these recent announcements and the fact that China seems to be ramping UP to Copenhagen and not down, we'll have to keep a close eye on Chinese climate change policy in the coming months to see how their policy might drive how Copenhagen discussions unfold. More importantly, are these Chinese announcements the real thing or is the Great Wall really just a Great Hype? More tomorrow.

U.S. Senators Pen Letter of Warning on American Climate Bill

Ten Democratic Senators sent a letter to President Barack Obama on Thursday last week (August 6) advising that they would not support a climate bill which did not contain provisions to maintain a level playing field for American manufacturing.

Does the letter call the potential success of the U.S. climate bill into question?

The Senators represent midwestern coal producing states. According to the New York Times, without the support of these Democratic Senators, "it is unlikely that the Senate can pass a major climate change bill". As we've reported to you before, the American climate change bill narrowly passed through the U.S. House of Representatives at the end of June. The bill is now moving slowly through the Senate, which is also preoccupied with debates about health reform.

The Senators, Evan Bayh of Indiana; Sherrod Brown of Ohio; Robert C. Byrd and John D. Rockefeller IV of West Virginia; Bob Casey and Arlen Specter of Pennsylvania; Russ Feingold of Wisconsin; Al Franken of Minnesota; and Carl Levin and Debbie Stabenow of Michigan, warn:

"It is essential that any clean energy legislation not only address the crisis of climate change, but include strong provisions to ensure the strength and viability of domestic manufacturing. Further, any climate change legislation must prevent the export of jobs and related greenhouse gas emissions to countries that fail to take actions to combat the threat of global warming comparable to those taken by the United States....In addition a longer term border adjustment mechanism is a vital part of this package to prevent the relocation of carbon emissions and industries if other major emitting carbon countries fail to commit to an international agreement requiring commensurate action on climate change. "

The letter continues to focus on the "border adjustment mechanism" (read: tariff) and suggests that the mechanism could spur countries to reach a global accord in Copenhagen in December "by eliminating the competitive benefit of not acting to address this global problem". The letter concludes "[w]e would find it extremely difficult to support a final measure that does not effectively deal with these important measures. We look forward to working with you and your Administration to ensure that climate change legislation does not produce an international race to the bottom".

Does this letter spell p-r-o-t-e-c-t-i-o-n-i-s-m? Certainly sounds like it. In fact, President Obama confirmed that he was concerned about the letter, calling the tariff provision "potentially protectionist".

This is a serious situation for the President, who has pleged to lead the world to a new treaty in Copenhagen. The newly elected President shot out of the proverbial climate change gate early in his term passing energy efficency and conservation reforms and promising aggressive domestic legislation. The problem is "to get the legislation passed will require compromises aimed at protecting the economies of manufacturing and coal states".

Are countries, such as India and China, faced with a "border measurement adjustment" going to be in a negotiating mood in Copenhagen? Can't imagine they will. Will other Senators whose interests differ from those 10 who penned the letter have their own demands? Can't imagine they won't.

How does this affect Canada?

We know that the Canadian federal government is already closely monitoring the progress of the U.S. climate bill for evidence of protectionist policy. Canada has vowed that its climate change policy will align (although not mirror) that of its largest trading partner. If these Senators have their way and protectionism of the nature they are suggesting is introduced into the U.S. climate bill, Canada's response is going to have to be carefully crafted.

Stay tuned. We'll keep you posted.

US Congress Passes Climate Change Bill

The U.S. House of Representatives passed what is being called "historic" climate change legislation on Friday. The Waxman-Markey bill passed through Congress by a vote of 219-212. Eight Republicans voted in favour of the bill; forty-four Democrats voted against it.

The Waxman-Markey bill went through countless revisions before it was passed on Friday. In its final form in Congress, the Bill contained over 1300 pages and according to the New York Times, "the bill's sponsors were making deals on the House floor right up until the time of the vote".

Proponents of the bill are hearlding its passage as "a staggering achievement" and one which will pave the way for "an international deal in Copenhagen this December - as well as a bilateral deal with China, hopefully sooner". Detractors on the other hand, called the bill "a national energy tax and predicted that those who voted for the measure would pay a heavy price at the polls next year".

At the heart of the bill is a cap and trade system which sets an overall limit on greenhouse gas emissions, but allows industry to trade emissions permits among themselves. The cap would grow tighter over the years, pushing up the price of emissions and ideally, driving industry to renewable and other clean sources of energy.

The legislation is "a patchwork of compromises" and certainly not what was originally envisaged by its sponsors. In its final form, the bill has a goal of 17% reductions in emissions relative to 2005 levels by 2020 and 83% by 2050. These numbers were loosened in order to woo fence-sitting Representatives in the weeks and days before the vote. In comparison, Canada has set a goal of 20 by 2020 relative to 2006 levels and 60 - 70 by 2050. If the US targets remain the same and the bill becomes law, Canada's targets may eventually align with the US levels.

Interestingly, but perhaps not surprisingly, it appears that the Democrats who voted against the bill were motivated by policy and economics and not by ideology. These representatives are primarily from areas dependent on coal for electricity and heavy industry for jobs and economy. You can see an interative map of the Congressional vote here. In contrast, the Republican supporters of the bill came from California, Delaware, New Jersey and New York.

It looks like the closeness of the vote, with 44 people from the majority Democrats voting AGAINST the bill, means the hard work is really yet to come for the President and the bill's sponsors. It is not certain what the legislation may look like in its final form - if we had a crystal ball, we'd love to be able to tell you. However, what is clear is that the discussion is not over. The bill goes to the Senate next before it lands in its final form on the President's desk.

Watch for our bulletin on the Waxman-Markey bill and our analysis of what the bill may mean for us in Canada in the next day or so.

Alberta's Climate Change Compliance

As we blogged yesterday, the Alberta Environment reported a reduction in greenhouse gas emissions in Alberta. The emissions reductions come as a result of facilities compliance under the Climate Change and Emissions Management Act (the "Act").

"Alberta is building a strong foundation of experience as we take action to balance the environment, energy and the economy," said Premier Ed Stelmach. "As the only jurisdiction taking this kind of concrete action, we have valuable insight into how we can work with our national and international partners to make real and lasting emission reductions without harming the economy or threatening energy security."

The Act and the associated Specified Gas Emitters Regulation, require that facilities which emit more than 100,000 tonnes of "specified gases" must improve their emissions performance by 12 percent relative to an established baseline rate. Facilities may achieve compliance by reducing their emissions, purchasing emissions offsets in the Alberta offset system or pay $15.00 per tonne over their target into the Climate Change and Emissions Management Fund ("Fund").

In its press release, Alberta Environment also announced that $82.3 million was collected into the Fund in the 2008 compliance year (which ended March 31, 2009), bringing the total paid to $122.4 million. A detailed report will be released later in the year when the industry audits are complete. We'll keep our eyes out for it and keep you updated.

Ottawa's GHG offset system to include a "fast track" project approval system for first 6 months

submitted by Grant Boyle

On August 9 the federal government published a draft Guide for Protocol Developers for Canada’s Offset System for Greenhouse Gases. The draft Guide will undergo a 60 day consultation period before a final Guide is published. The Guide is intended to provide details on the requirements to complete an Offset System Quantification Protocol and the steps that must be followed to create offset credits under the federal GHG emissions framework.

Projects must take place in Canada, must have started on or after January 1, 2000, must be surplus to all legal requirements (federal, provincial/territorial and regional) and go beyond what is expected from the receipt of other climate change incentives (federal, provincial/territorial). Credits may be issued for reductions achieved after January 1, 2008.

The quantification requirements in the Guide are based on the ISO 14064 standard. The Guide does not provide or recommend an approach to quantify GHG reductions from specific project types and will rely on project proponents to develop and submit their own protocols to Environment Canada for approval, unless the protocol type has already been approved by the Ministry. The approvals process is expected to take 5-8 months.

During the first six months of the operation of the Offset System, Environment Canada will implement a modified and accelerated process to review and approve Offset System Quantification Protocols that are derived from a list of 40 “external protocols” from other systems, including: the Clean Development Mechanism, Alberta’s Specified Gas Emitters Regulation, the California Climate Action Registry, the Greenhouse Gas Abatement Scheme in New South Wales, France’s Offset System, and the Regional Greenhouse Gas Initiative. The Guide includes a proposed list of external protocols for “fast track” approval:

Agriculture
*Including Edible Oils in Cattle Feeding Regimes (Alberta)
*Reducing Days on Feed of Cattle (Alberta)
*Reducing the Slaughter Age of Cattle (Alberta)
*Anaerobic Decomposition of Agricultural Materials (Alberta)
*Livestock Project Reporting Protocol Capturing And Combusting Methane From *Manure Management Systems (California)
*GHG Emission Reductions From Manure Management Systems (CDM)
*Innovative Feeding Of Swine and Storing and Spreading of Swine Manure (Alberta)
*Tillage System Management (Alberta)

Energy Efficiency
*Waste Gas Or Waste Heat Or Waste Pressure Based Energy Systems (CDM)
*Residential Buildings (Alberta)
*Commercial Buildings(Alberta)
*Waste Heat Recovery Projects (Alberta)
*Waste Heat Recovery Project - Streamlined(Alberta)
*Energy Efficiency Projects (Alberta)

Forestry
*Afforestation Projects (Alberta)
*Forest Management (California)

Fossil Fuels
*Industrial Fuel Switching From Coal Or Petroleum Fuels To Natural Gas (CDM)
*Switching From Coal And/Or Petroleum Fuels To Natural Gas In Existing Power Plants For Electricity Generation (CDM)

Geological Sequestration
*Acid Gas Injection (Alberta)
*Enhanced Oil Recovery (Alberta)

Methane
*Landfill Gas Capture And Combustion (Alberta)
*Landfill Project Reporting Protocol Collecting And Combusting Methane From Landfills (California)
*Landfill Gas Project Activities (CDM)
*Coal Bed Methane, Coal Mine Methane And Ventilation Air Methane Capture And Use For Power (Electrical Or Motive) And Heat And/Or Destruction By Flaring Or Catalytic Oxidation (CDM)
*Aerobic Composting (Alberta)
*Aerobic Landfill Bioreactor Projects (Alberta)
*Coalmine Methane and Abandoned Mine Methane Capture and Destruction Projects (General Electric AES)
*Waste Water Treatment Methane Capture and Destruction Projects (General Electric AES)

Renewable Energy
*Biomass to Energy from Biomass Combustion Facilities (Alberta)
*Electricity Generation From Biomass Residues (CDM)
*Run Of River Power Generation (Alberta)
*Solar Power Generation (Alberta)
*Wind Power Generation (Alberta)
*Introduction Of A New Primary District Heating System (CDM)
*Grid Connected Electricity Generation From Renewable Sources (CDM)

Transportation
*For Gravel And Lightly Surfaced Road Re-Surfacing Projects (Alberta)
*For Freight Modal Shifting (Alberta)

Waste
*Recovery & Utilization Of Gas From Oil Wells That Would Otherwise Be Flared (CDM)
*Non-Incineration Thermal Waste Management (Alberta)

Other
*Biofuels Productions And Usage (Alberta)
*Catalytic Reductions Ofn2o Inside The Ammonia Burner Of Nitric Acid Plants (CDM)

WCI Draft Cap and Trade Design Prioritizes Forestry, Agriculture and Waste Management Offsets

Submitted by Grant Boyle

WCI’s July 2008 draft design recommendations suggest capped emitters will be able to use offset credits to meet 10% of compliance obligations.

Project types under “priority” consideration include: Agriculture (soil sequestration and manure management); Forestry (afforestation/reforestation, forest management, forest preservation/conservation, forest products); and Waste management (landfill gas and wastewater management).

According to the proposal, project types that reduce emissions covered by the cap-and-trade system ( such as electricity projects) would not be eligible to create offsets.

Starting in 2009 WCI Partners will coordinate to develop and approve standard protocols for the project types.

WCI Partners may approve and certify offset projects located throughout Canada, the United States, and Mexico, where projects are subject to comparably rigorous oversight, validation, verification and enforcement as those located within the WCI jurisdictions.

In the case of offset credits under the Kyoto Protocol's Clean Development Mechanism (CDM) and Joint Implementation (JI), the WCI Partners may establish “added criteria to ensure similar rigor to WCI approved/certified offset projects or other requirements”. The WCI Partners are also considering a method that restricts the use of offsets from projects located outside WCI jurisdictions for compliance purposes in the WCI.

Carbon markets boom

Posted by Andrew Lord

The voluntary market for carbon credits more than tripled in 2007 to USD $331 million, while the much larger regulated market more than doubled to USD $64 billion. Those are the conclusions of two significant carbon reports released last week.

Ecosystem Marketplace and New Carbon Finance released State of the Voluntary Carbon Markets 2008 last week. The report notes that the volume of credits traded increased from 25 million tonnes CO2 equivalent (tCO2e) in 2006 to 65 million tCO2e in 2007. The average price of a tonne of CO2 jumped by $2 to $6.10. However the price remained very volatile in 2007, ranging from $1.62 per tCO2e to about $300 per tCO2e. That volatility is a reflection of the perceived problems with the quality of some credits, a perception that the market tried to address by introducing a number of voluntary credit standards during the year.

Also released last week was the World Bank's State and Trends of the Carbon Market 2008. This report focuses on the regulated carbon market, particularly the allowance market under the EU Emissions Trading Scheme and the project market under the Kyoto flexibility mechansms (Clean Development Mechanism and Joint Implementation). The value EU ETS trades, which comprised 78% of the overall regulated market, more than doubled to $50.4 billion, with the average price creeping up from just over $22 per tCO2e in 2006 to around $24.30 in 2007. In the project market, the big story in 2007 was the emergence of a strong secondary market for CERs. The value of trades in the secondary market increased by a factor of over 10 to $7.4 billion. The secondary market was largely occupied by aggregators who purchased a portfolio of CERs and sold guaranteed CERs backed by the portfolio and, in some case, credit-enhanced through the aggregators' banks. At about 28%, growth in the value of trades in the primary CDM market was strong, but not as vibrant as that in the secondary market.

Dole's carbon neutral banana

Long able to attract eco-tourists, Costa Rica is now positioning itself as a destination for environmentally conscious businesses.

On June 7, Costa Rican President Oscar Arias pledged that Costa Rica will be a carbon neutral country by 2021. To help achieve that goal, the country is developing a voluntary “C-Neutral” certification. To be certified, businesses will be able to pay a voluntary “tax” of about US$10 per metric tonne of carbon dioxide emissions. Funds generated from the scheme will help fund conservation, reforestation, and research. The government is also working directly with businesses to help them reduce their net emissions, as evidenced by a major corporate announcement just 2 months after President Arias’ pledge.

Dole Food Company Inc., the world’s largest producer of fresh fruits and vegetables, announced August 9 that it will go carbon neutral in Costa Rica. Dole’s local subsidiary, Standard Fruit de Costa Rica, currently produces and ships about 44 million boxes of bananas and pineapples annually from Costa Rica to markets in North America and Europe. Working with the Ministry of Environment and Energy of Costa Rica and the Fondo Nacional de Financiamento Forestal, Dole has committed to make its entire Costa Rican supply chain carbon neutral.

The magnitude and timing of the initiative is not yet clear. The company has yet to calculate the total emissions from the supply chain and has not finalized the details of the program. However, the undertaking will likely require Standard Fruit both to reduce emissions in transportation and agricultural practices as well as to offset emissions by partnering with local preservation and reforestation programs.

-Post by Andrew Lord, Student-at-Law