Global Climate ChangeBreaking Down the Carbon Issue

Shirin Belur, Brooke Golden, Elizabeth Lombardi, Jennifer Malkin, Iris Rave

Climate Change: Causes

• Over the past century, the Earth has increased in temperature by about .5 degrees Celsius

• Scientists believe this is because of an increase in concentration of the main greenhouse gases: carbon dioxide, methane, nitrous oxide, and fluorocarbons

• Carbon dioxide is undoubtedly the most important greenhouse gas in the atmosphere

The Climate Change Debate: Carbon

U.S. greenhouse gas emissions come mostly from energy use.

Fossil fuels such as oil, coal and natural gas supply most of the energy needed for industries & households.

Energy-related carbon dioxide emissions, resulting from petroleum and natural gas, represent 82 percent of total U.S. human-made greenhouse gas emissions.

The Climate Change Debate: Carbon

U.S. greenhouse gas emissions come mostly from energy use.

Fossil fuels such as oil, coal and natural gas supply most of the energy needed for industries & households.

Energy-related carbon dioxide emissions represent

82 % of total U.S. human-made greenhouse gas emissions.

Greenhouse Gas Emissions by Sector

Largest Contributors:

1. Power stations

2. Industrial Processes

3. Transportation Fuels

Key Stakeholder Groups• Advocacy

– For: Conservation Fund– Against: Carbon Trading Watch

• Trading Markets– CCX, EU

• Offset Providers– Non-Profit: Carbonfund.org– For-Profit: Climate Care

• Business– Highly Regulated: Energy– Voluntary: Food & Retail

• Government– International, U.S., State

• Consumers– Engaging in offsets of personal

behavior• Impacted Communities

– Offset programs built in the community (wind, solar and reforestation)

Advocacy

Trading Markets

ImpactedCommunities

Offset Providers

Business

Government

Consumers

CARBON OFFSETS

Ways to Reduce Carbon

• Constrain use (efficiency)

• Carbon offsetting

• Use of renewable energy sources as substitutes in operations

What are Carbon Offsets?

The process of reducing a ton of carbon dioxide emissions in another location for the emissions you cause in either your home, office, commute, travel or other activities that use energy and cause emissions.

Enable anyone to reduce their climate footprint by supporting projects, typically energy efficiency, renewable energy, sequestration, biomass, etc. that reduce carbon dioxide emissions to offset one’s own climate footprint.

Power Pool

Generic Electricity Purchase

Households/ Businesses

PA Biomass Marketing PartnersProgram sponsor, marketing support; no purchase obligations

GreenTags – EmissionsReductions Rights $ payment

to project for Green Tag futures

$ TaxDeduction

$ to purchaseCO2 offsets forhousehold emissions

Non-Profit Accepts Green Tag Donations

& Retires Emission Reductions

DonatedGreen Tags

BROKERS:Contracts for Green Tags, providesprogram design & fulfillment & certification

$

Offsets- How they Work

Carbon Trading

Carbon Emissions Trading is the trading of permits to emit carbon dioxide

– Provides an incentive for firms to reduce emissions: they profit from selling credits to less efficient firms

World’s only mandatory trading program is European Union Emissions Trading Scheme, (Kyoto Protocol) which caps emissions that EU countries can emit.

Trading has increased by nearly 300% in recent years

Carbon Trading- How it works

1. A country caps emissions at a certain level

2. Issues permits to firms and industries to emit a stated amount of carbon dioxide over a time period

3. Firms trade these credits in a free market.

4. Firms whose emissions exceed the amount of credits they possess are heavily penalized.

The Debate: Pros and ConsPros

– Helps to maintain current or slowly reduce GHG emissions to historic levels.

– Forestry projects can have additional socio-economic and environmental benefits, such as biodiversity.

– Promotes voluntary enactment (by states and cities) of the Kyoto Protocol.

– Raises visibility of Climate Change issue.

Cons– Does not promote energy

conservation, allows companies and individuals to take a “business as usual” approach.

– Key offenders profiting most from trading scheme

– Not scientifically possible to equate the atmospheric absorption CO2 by trees with CO2 emissions from fossil fuels.

• And, trees may burn or be destroyed, thereby releasing CO2 back into the atmosphere.

– Lack of regulations for voluntary offset programs, no systemic framework or guidelines to ensure programs are credible.

Role of Business on this Issue

Businesses of all sizes and types play a role in climate change.

More than a quarter of U.S. GHG emissions are from transportation, a component to nearly all businesses.

According to the U.S. Department of Energy, office buildings account for 19% of all commercial energy consumption.

In the U.S., about two-thirds of electricity results from the burning of emissions producing fossil fuels.

Operational Exposure & Brand Value at Risk Due to Climate Change by Sector

Greenhouse Gas Emissions Linked Directly to Sector Operations

HIGH Carbon Sectors

Airline– International aviation emissions are currently not covered by the Kyoto Protocol– Despite their high exposure to climate change, their tangible value at risk

depends on the format and timing of future regulation– Fuel is high cost (represents 15% of revenues), but maximizing engine efficiency

doesn’t necessarily mean minimizing CO2 emissions– No airline has sought to take leadership position on carbon responsibility– Brand value at potential risk from climate change is 50% of market value

Oil & Gas– Energy intensive manufacturing sector– Shell and BP are well known for embracing climate change as CSR issue– Little consumer interest in company’s own emissions– Brand value at potential risk from climate change is 2-3% of market value

HIGH Carbon Sector Case Study: Oil & Gas

BP– Leads energy sector with its commitment to climate change

– Pursuing efficiency in our own operations through wind and solar projects

– Creating cleaner products for customers

– Contributing to an informed debate through policy initiatives

– Innovative internal carbon trading scheme that resulted in a 20% emissions reduction between 1998-2001

– BP Global Choice scheme in Australia – customers can purchase offsets for their vehicle fuel use

MEDIUM Carbon Sectors

Food & Beverage Production– Long term potential supply chain risk due to weather disruptions

– Brand value at potential risk from climate change is 50% of market value

Food Retail– Exposed to rising costs of transportation and heating, refrigerating and lighting

their premises

– Growth in demand for fresh and exotic products all year round requires increased refrigeration of the supply chain and greater proportion of products being flown in from abroad

– Brand value at potential risk from climate change is 5% of market value

MEDIUM Carbon Sector Case Study: Food Retail

Whole Foods– Largest wind energy credit purchase in the history of the United States and

Canada

– Only Fortune 500 Company purchasing wind energy credits to offset 100% of its electricity use

– Purchasing more than 458,000 megawatt-hours (MWh) of renewable energy credits from wind farms. This purchase will avoid more than 700 million pounds

of carbon dioxide pollution this year.

Our Recommendations1. Companies should take an industry-relevant approach to carbon offsets.

• High: Risk mitigation through legitimate/aggressive offset targets and active participation in policy development.

• Medium: “Push” strategy to raise overall level of awareness and provide critical mass for climate among key stakeholders.

• Low: Remain active in carbon offset discussion, critically review operations for other areas of risk-exposure.

2. Companies need to take a three-pronged approach (Efficiency, Offset, Renewables).

• Carbon offsets cannot be a stand-alone strategy for Climate Change.

3. Increased regulation around regulatory and voluntary offset programs.

• Universal guidelines, improved traceability

• Validate reforestation credibility and offset value.

Where is the Debate Headed…

• Climate change will become a mainstream consumer issue by 2010 (purchasing decisions)

– Drivers: Severe weather, regulatory impact, politics, commercial adaptation

• Carbon and environmental impact will become a standard in CSR reporting

• Companies in high carbon industries will gain by leading on this issue and integrating into their operations and reporting structures

Key Facts

A ton of CO2e is Emitted When you:

- Travel 2,000 miles in an airplane

- Drive 1,350 miles in a large SUV

- Drive 1,900 miles in a mid-sized car

- Drive 6,000 miles in a hybrid car

- Run an average US household for 60 days