What do I mean by infrastructure in this context? I mean those things that enable implementation of policy in all sectors and at all levels. I include in this list:

1. The scientific knowledge necessary to understand the problem and the technologies to address it
2. The legal and regulatory systems to manage the problem
3. In this era of information technology, the information management and decision support systems necessary to address a global problem that is pervasive in its implications
4. The technical standards (i.e., rules, codes, etc.) that facilitate industry and other actors to coordinate and act cost-effectively with high degrees of quality assurance
5. Adequate quantity and quality of human resources to address the problem and educational systems to supply well-training professionals

There is much work yet to be done to develop the legal and regulatory infrastructure necessary to mitigate GHG emissions. However, as we all are aware, further progress on this front awaits an expanded political consensus.

Significant investment is going into new information technology systems designed to manage GHG emissions in anticipation of future policy and emission markets. Yet, the quality of products available varies widely and poorly understood. By offering substantive third-party testing the Institute has begun working to address this opacity.

Globally the body of standards that will need to be developed to support the range of policies, technologies, and markets is still in its infancy. GHG standards to-date are for the most part overly broad and non-specific. The engineering and scientific communities have yet to heavily engage and support the development of more detailed and rigorous standards along the lines of what we see in other industries. Standards development has been systemically hamstrung by the expense and time existing approaches and processes require. However, when you consider the speed and scale at which standards must be developed to keep pace with the demands of a carbon constrained the question of whether existing processes are up to the task emerges. (We will discuss this issue in greater depth in a future blog post detailing the work the GHG Management Institute is undertaking to revolutionize the development of standards, methodologies, protocols, and codes.)

And clearly, the Institute is strongly focused on training and education: building the GHG measurement and management workforce of the future. This has been a key focus since the Institute was founded, and is visible in range of initiatives from our courses to our developing professional certification program, even our workforce survey.

But, in this blog post, I want to focus on the first of these infrastructure components: scientific knowledge. The Institute is not a research organization, so our role here is not to generate new science. But as a convening organization we network GHG professionals from around the world, providing the for a for the emerging discipline of GHG professionals and researchers to develop the intellectual foundation of the field. One of the key ways we are doing this is with the new peer-reviewed scholarly journal we have launched with Earthscan. The journal’s title is Greenhouse Gas Measurement and Management, and it is unique in its focus on the intellectual infrastructure we will need to go beyond just policy debate and design and move onto the serious work of IMPLEMENTATION.

We encourage you to spread the word about this new important journal and to even consider submitting a paper yourself.

The aims and scope of the journal are as follows:

Greenhouse Gas Measurement & Management (GHGMM) is a scholarly peer-reviewed journal that aims to provide reliable and up-to-date research and information on a broad range of issues relating to greenhouse gases (GHGs) to the growing community of professionals dealing with climate change.

As the old saying goes “you cannot manage what you do not measure.” GHGMM covers the application of science, engineering, and economic principles to improve the way society mitigates the anthropogenic causes of global climate change. This includes developing and providing reliable performance metrics related to GHG emissions and removals and managing activities that reduce GHG emissions to and/or increase their removals from the atmosphere.

GHGMM is relevant to a variety of emission and removal accounting frameworks (i.e., system boundaries), each of which define the metrics that support particular mitigation policies and activities, such as those resulting from international treaties, domestic regulations, industrial efforts, or consumer actions. These GHG accounting frameworks (levels) include:

• global;
• national;
• sectoral, program, and policy;
• technology, product, life cycle, and supply-chain;
• entity (e.g., corporate emissions inventory);
• facility (i.e., installation); and
• project (e.g., offsets).

To mitigate GHGs, it is essential to ensure the availability of reliable data regarding their emissions and removals, which is achieved through the design and application of regulatory and compliance-relevant Measurement, Reporting and Verification (MRV) systems. These systems and rules for GHG emission and removal metrics must take into account the context of policy developments and industry practices. Specifically, the measurement of GHGs includes the following issues:

• Metering and sensors – collecting primary data of direct GHG emissions and relevant proxy data with which emissions or removals can be monitored and estimated;
• GHG protocols, standards, methodologies, emission inventories, accounting and metrics – designing, applying, and understanding the limitations of different approaches used for measuring, estimating, reporting and verifying GHG emissions and removals (including issues such as boundaries, additionality, baselines, leakage, and permanence); and using different technologies for various accounting frameworks and sectors (e.g., fuel combustion, agriculture, forestry, waste management, etc.);
• Uncertainty – understanding and managing uncertainty in the measurement and estimation of GHG emissions, removals and storage;
• Quality Assurance/Quality Control (QA/QC) – establishing and enhancing QA/QC and auditing processes, including validation of approaches and verification of GHG emissions, removals and storage;
• Information and communication technologies (ICTs) – developing and using software and other tools for the measurement and estimation of GHG emissions, removals and storage.

Managing GHG emissions involves: the use of performance metrics, systems engineering, and economic analyses to identify mitigation activities, as well as planning, organizing, staffing, directing, and controlling the implementation of these activities. Specifically, the management of GHGs includes the following issues:

• Mitigation analysis – understanding, identifying, assessing and selecting appropriate policies (including economic and market-based instruments), measures, technologies and business strategies that aim to mitigate GHGs;
• Mitigation implementation – understanding the behavioral and technological options for reducing emissions and enhancing removals in a given context and managing the implementation of selected mitigation activities;
• Performance management – accounting for, and measuring, the effectiveness of implemented mitigation activities and technologies at all levels and using metrics to improve performance;
• Emissions analysis – predicting and modeling the effects of specific mitigation activities, products or technologies on GHG emissions and removals;
• Information and communication technologies (ICTs) – developing and using software and other tools for the management of GHGs;
• Adaptation and pollutant emissions – identifying synergies and co-benefits between activities that reduce GHGs, adaptation to the impacts of climate change, and emissions of other pollutants;
• Social issues – understanding the social, economic, and political factors, risks, opportunities, and governance issues relating to the management of GHGs (e.g., corporate disclosure, community right to know).

GHGMM will be open to different types of articles, including:

• Original research papers (for example, on topics relating to: theoretical and practical developments on GHGs, concepts and methods, empirical analysis, policy assessments)
• Short communications/Case studies
• Invited reviews
• Opinion pieces/Commentaries
• Book reviews
• Meeting reports

I would venture to guess that many of you are unaware that most GHG emission inventories and offset project methodologies underestimate actual emissions from fugitive emissions of methane. This is the case because these methodologies systemically forget to include an emissions category: “indirect CO₂ from the atmospheric oxidation of CH₄.”

The fact is that when methane is anthropogenically emitted, methane is oxidized in the atmosphere a decade or two later. Once oxidized, the carbon in each methane molecule is converted to CO₂, which then stays in the atmosphere as CO₂ for another century or more. So really, when methane is emitted, you get a double whammy: first from the methane itself followed by the CO₂ that results from atmospheric oxidization.

Many of you may assume that the GWP of methane would account for this oxidization, right? Wrong! This effect is not included in the GWP of methane, and it should not be included. Why? Simply stated, the effect depends on the origin of the methane. We have to treat methane from biogenic sources (such as livestock and rice paddies) different from fossil sources (such as coal mines and natural gas leaks), as only methane from fossil fuels result in a net addition of CO₂ to the atmosphere following atmospheric oxidation.

Because of this difference, we cannot simply change the GWP value. If we did we would be in the confusing position of having two different GWP values for the same gas, with this variation in accounting tied to where the methane came from.

Indirect CO₂ emissions from the atmospheric oxidation of CH₄ was basically forgotten about by the IPCC when the original guidelines for GHG emission inventories were developed. However the IPCC has recently targeted the issue and is slowly moving to address it in future work.

What is the magnitude of this accounting discrepancy, you ask? Well, it is just under a percent of global emissions (on a GWP-weighted basis), which is not large. But, it is larger than a lot of other source categories we spend a lot of time worrying about. And, for countries with a larger share of fossil methane emissions it can be closer to 2%. More significantly, offset methodologies that fail to account for the effect in coal mine and natural gas projects may produce estimates that are off by 13%.

If you are interested in reading more on this subject, I wrote an academic paper a couple of years ago on it. The abstract is below as well as the link for the full article:

Gillenwater, Michael, “Forgotten carbon: Indirect CO₂ in greenhouse gas emission inventories” Environmental Science and Policy, volume 11, issue 3, May 2008, Pages 195-203.

If you don’t have a subscription to the journal, you can download the pre-publication “discussion paper” version below:

Gillenwater, M., 2007. “Forgotten carbon: Indirect CO₂ in greenhouse gas emission inventories“, [Discussion paper] Science Technology and Environmental Policy Program. Princeton University, Princeton, NJ.

I’m going to skip over the underlying physics and chemistry, because it is not necessary to engage at that level of scientific technicality to be an intelligent user of GWP values.  (If you want to dig into the science more, you can refer to the latest IPCC assessment report published in 2007 — see Chapter 2 of the Working Group I report.)

Global Warming Potentials (GWPs) are a quantified measure of the globally averaged relative radiative forcing impacts of a particular greenhouse gas. It is defined as the cumulative radiative forcing – both direct and indirect effects – integrated over a period of time from the emission of a unit mass of gas relative to some reference gas (IPCC 1996). Carbon dioxide (CO₂) was chosen by the IPCC as this reference gas and its GWP is set equal to one (1).

So to be clear, GWP values are applied to units of mass (e.g., kilograms, pounds, metric tons, etc.) not to units of volume (e.g., cubic meters, cubic feet, liters).

There are three key factors that determine the GWP value of a GHG:

• the gases absorption of infrared radiation,
• where along the electromagnetic spectrum (i.e., what wavelengths) the gas absorbs radiation, and
• the atmospheric lifetime of the gas

We typically only use GWP values for gases that have a long atmospheric lifetime (i.e., in years).  Because only these gases last long enough in the atmosphere to mix evenly and spread throughout the atmosphere to form a relatively uniform concentration. GWP values are meant to be “global,” as the name implies. So if a gas is short-lived and does not have a global concentration because it is destroyed quickly and emitted in different amounts in different places, then it can’t really have a GWP.

Specifically, the gases with relatively long atmospheric lifetimes that tend to be evenly distributed throughout the atmosphere, and therefore have global average concentrations, are CO₂, CH₄, N₂O, HFCs, PFCs, and SF₆. The short-lived gases such as water vapor, carbon monoxide, tropospheric ozone, other ambient air pollutants (e.g., NO_x, and NMVOCs), and tropospheric aerosols (e.g., SO₂ products and black carbon) vary spatially, and consequently it is difficult to quantify their global radiative forcing impacts.

Some GWP values may also account for indirect as well as direct effects. Indirect radiative forcing occurs when chemical transformations involving the original gas produce a gas(es) that is/are also a greenhouse gas, or when a gas influences other radiatively important processes such as the atmospheric lifetimes of other gases.

In sum, the higher the GWP value the more infrared radiation the gas will tend to absorb over its lifetime in the atmosphere. Now, there are three more complications to this story.

The first is that gases will absorb certain wavelengths of radiation. GHGs each absorb in a given “window” of the spectrum. The more that window is filled up, the less there is to absorb. So, as concentrations of certain gases increase they can saturate that wavelength, leaving no more radiation for additional concentrations of gas in the atmosphere to absorb.

The second complication is one that occasionally trips people up. Remember above when we defined GWP by saying “cumulative radiative forcing…integrated over a period of time”? Well, that means that we have to define a time period for the integration to occur. You have to know what the integration period is to make sure you are using the correct GWP. The typical periods that the IPCC publishes are 20, 100, and 500 years.

Now, to be clear, everyone pretty much universally uses 100 year GWP values, so you often never see the time period even cited. But occasionally, someone will use something different, not realizing that they are breaking convention. It is also possible to compute an infinite time horizon GWP value, which would basically mean that accounted for every bit of radiative forcing of every molecule of gas as long as it existed in the atmosphere.

The last complication relates to the fact that the IPCC keeps updating its GWP values with each of its major scientific assessment reports. It makes sense to update GWP values as our scientific understanding improves. However, the problem is that people are using and making commitments based on GWP values while these revisions are taking place. So, say a company or a country says it will reduce its emissions by 10% and achieves that goal. Then all of a sudden GWP values change and now they no longer make the goal if new GWP values are used (due to the mix of different GHGs they emit and reduce). It would be like moving the net after you already kicked the ball towards the goal.

For this reason, the Kyoto Protocol fixed the use of GWP values published by the IPCC in 1996 in its Second Assessment Report. Since then the IPCC has updated its GWP values twice, once in 2001, and again in 2007.  The result has been a proliferation of GWP values out there that leads to a lot of confusion.

Specifically, the Parties to the UNFCCC said:

In addition to communicating emissions in units of mass, Parties may choose also to use global warming potentials (GWPs) to reflect their inventories and projections in carbon dioxide-equivalent terms, using information provided by the Intergovernmental Panel on Climate Change (IPCC) in its Second Assessment Report. Any use of GWPs should be based on the effects of the greenhouse gases over a 100-year time horizon. In addition, Parties may also use other time horizons. (FCCC/CP/1996/15/Add.1)

The major causes for the IPCC’s updates to GWP values involved new laboratory or radiative transfer results, improved atmospheric lifetime estimates, and improved calculations of CO₂ radiative forcing and CO₂ response function. When the radiative forcing of CO₂ is updated, then the GWPs of the other gases relative to CO₂ also change.

The result of the varying time periods and the regular updates by the IPCC is a complicated state of affairs. This table presents GWP values for the most common GHGs (there are many more if we listed all the HFCs, PFCs and other trace gases). As you can see in this table, each gas has number of GWP values that you could chose.

But the truth is, contrary to what a lay person might expect, we typically only use values over a 100 year time period, even though some gases have lifetimes of thousands of years. And we use the old 1995 values, so all the climate change programs and policies around the world, including the Kyoto Protocol, are consistent in their emissions accounting (these GWP values are highlighted in red in the table).

Table: Global Warming Potential Values from the IPCC for some key GHGs

Row 1: 2007 IPCC AR4 (See Chapter 2 of Working Group I report)

Row 2: 2001 IPCC TAR (See Chapter 6 of Working Group I report)

Row 3: 1996 IPCC SAR (See Chapter 2 of the Working Group I report)

To wrap things up for the sake of being thorough, the relationship between mass of a gas and mass of CO₂ Eq. can be expressed as follows:

  mass CO₂ Eq. = (mass of gas) x (GWP)

Where:

  mass CO₂ Eq. = mass (e.g., metric tons) of Carbon Dioxide Equivalents

  GWP = Global Warming Potential

So the calculation is easy. Just multiply the mass of your gas by its GWP value to get CO₂ equivalent emissions. Be sure to label the resulting emissions not as CO₂, but as “CO₂-equivalents.”

And in case you were wondering, according to the IPCC, GWPs typically have an uncertainty of roughly ±35 percent, though some GWPs have larger uncertainty than others.

Previous post in this series.

Back when I was in charge of developing and authoring the official U.S. Inventory of GHG emissions for the U.S. government, I wrote a section for that report on describing GHGs.  To save me some hassle and ensure the background to my later blog posts is provided, I am crimping from the latest U.S. EPA national inventory report.  The text is essentially unchanged since I wrote it several years ago, although the statistics have been updated.

[The following excerpt is taken, with some editing, from the Inventory of U.S. Greenhouse Gas Emissions and Sinks.]

Although the Earth’s atmosphere consists mainly of oxygen and nitrogen, neither plays a significant role in enhancing the greenhouse effect because both are essentially transparent to terrestrial radiation.  The greenhouse effect is primarily a function of the concentration of water vapor, carbon dioxide, and other trace gases in the atmosphere that absorb the terrestrial radiation leaving the surface of the Earth (IPCC 1996).

Changes in the atmospheric concentrations of these greenhouse gases can alter the balance of energy transfers between the atmosphere, space, land, and the oceans.  A gauge of these changes is called radiative forcing, which is a simple measure of changes in the energy available to the Earth-atmosphere system (IPCC 1996).  Holding everything else constant, increases in greenhouse gas concentrations in the atmosphere will produce positive radiative forcing (i.e., a net increase in the absorption of energy by the Earth).

Climate change can be driven by changes in the atmospheric concentrations of a number of radiatively active gases and aerosols.  We have clear evidence that human activities have affected concentrations, distributions and life cycles of these gases (IPCC 1996).

Naturally occurring greenhouse gases include water vapor, carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), and ozone (O₃).  Several classes of halogenated substances that contain fluorine, chlorine, or bromine are also greenhouse gases, but they are, for the most part, solely a product of industrial activities.  Chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs) are halocarbons that contain chlorine, while halocarbons that contain bromine are referred to as bromofluorocarbons (i.e., halons).  Because CFCs, HCFCs, and halons are stratospheric ozone depleting substances, they are covered under the Montreal Protocol on Substances that Deplete the Ozone Layer.  The UNFCCC defers to this earlier international treaty; consequently these gases are not included in national greenhouse gas inventories.   Some other fluorine containing halogenated substances—hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF₆)—do not deplete stratospheric ozone but are potent greenhouse gases.  These latter substances are addressed by the UNFCCC and accounted for in national greenhouse gas inventories.

There are also several gases that, although they do not have a commonly agreed upon direct radiative forcing effect, do influence the global radiation budget.  These tropospheric gases—referred to as ambient air pollutants—include carbon monoxide (CO), nitrogen dioxide (NO₂), sulfur dioxide (SO₂), and tropospheric (ground level) ozone (O₃).  Tropospheric ozone is formed by two precursor pollutants, volatile organic compounds (VOCs) and nitrogen oxides (NO_x) in the presence of ultraviolet light (sunlight).  Aerosols—extremely small particles or liquid droplets—often composed of sulfur compounds, carbonaceous combustion products, crustal materials and other human induced pollutants—can affect the absorptive characteristics of the atmosphere.  However, the level of scientific understanding of aerosols is still very low (IPCC 2001).

Carbon dioxide, methane, and nitrous oxide are continuously emitted to and removed from the atmosphere by natural processes on Earth.  Anthropogenic activities, however, can cause additional quantities of these and other greenhouse gases to be emitted or sequestered, thereby changing their global average atmospheric concentrations.  Natural activities such as respiration by plants or animals and seasonal cycles of plant growth and decay are examples of processes that only cycle carbon or nitrogen between the atmosphere and organic biomass.  Such processes—except when directly or indirectly perturbed out of equilibrium by anthropogenic activities—generally do not alter average atmospheric greenhouse gas concentrations over decadal timeframes.  Climatic changes resulting from anthropogenic activities, however, could have positive or negative feedback effects on these natural systems.

Water Vapor (H₂O). Overall, the most abundant and dominant greenhouse gas in the atmosphere is water vapor. Water vapor is neither long-lived nor well mixed in the atmosphere, varying spatially from 0 to 2 percent (IPCC 1996). In addition, atmospheric water can exist in several physical states including gaseous, liquid, and solid. Human activities are not believed to affect directly the average global concentration of water vapor, but the radiative forcing produced by the increased concentrations of other greenhouse gases may indirectly affect the hydrologic cycle. While a warmer atmosphere has an increased water holding capacity, increased concentrations of water vapor affects the formation of clouds, which can both absorb and reflect solar and terrestrial radiation. Aircraft contrails, which consist of water vapor and other aircraft emittants, are similar to clouds in their radiative forcing effects (IPCC 1999).

Carbon Dioxide (CO₂). In nature, carbon is cycled between various atmospheric, oceanic, land biotic, marine biotic, and mineral reservoirs. The largest fluxes occur between the atmosphere and terrestrial biota, and between the atmosphere and surface water of the oceans. In the atmosphere, carbon predominantly exists in its oxidized form as CO₂. Atmospheric CO₂ is part of this global carbon cycle, and therefore its fate is a complex function of geochemical and biological processes. CO₂ concentrations in the atmosphere increased from approximately 280 parts per million by volume (ppmv) in pre-industrial times to 379 ppmv in 2005, a 35 percent increase (IPCC 2007 and Hofmann 2004). The IPCC definitively states that “the present atmospheric CO₂ increase is caused by anthropogenic emissions of CO₂” (IPCC 2001). The predominant source of anthropogenic CO2 emissions is the combustion of fossil fuels. Forest clearing, other biomass burning, and some non-energy production processes (e.g., cement production) also emit notable quantities of CO₂.

In its second assessment, the IPCC also stated that “[t]he increased amount of CO₂ [in the atmosphere] is leading to climate change and will produce, on average, a global warming of the earth’s surface because of its enhanced greenhouse effect—although the magnitude and significance of the effects are not fully resolved” (IPCC 1996).

Methane (CH₄). CH₄ is primarily produced through anaerobic decomposition of organic matter in biological systems. Agricultural processes such as wetland rice cultivation, enteric fermentation in animals, and the decomposition of animal wastes emit CH₄, as does the decomposition of municipal solid wastes. CH₄ is also emitted during the production and distribution of natural gas and petroleum, and is released as a byproduct of coal mining and incomplete fossil fuel combustion. Atmospheric concentrations of CH₄ have increased by about 143 percent since 1750, from a pre-industrial value of about 722 ppb to 1,774 ppb in 2005, although the rate of increase has been declining. The IPCC has estimated that slightly more than half of the current CH₄ flux to the atmosphere is anthropogenic, from human activities such as agriculture, fossil fuel use, and waste disposal (IPCC 2007).

CH₄ is removed from the atmosphere through a reaction with the hydroxyl radical (OH) and is ultimately converted to CO₂. Minor removal processes also include reaction with chlorine in the marine boundary layer, a soil sink, and stratospheric reactions. Increasing emissions of CH₄ reduce the concentration of OH, a feedback that may increase the atmospheric lifetime of CH₄ (IPCC 2001).

Nitrous Oxide (N₂O). Anthropogenic sources of N₂O emissions include agricultural soils, especially production of nitrogen-fixing crops and forages, the use of synthetic and manure fertilizers, and manure deposition by livestock; fossil fuel combustion, especially from mobile combustion; adipic (nylon) and nitric acid production; wastewater treatment and waste combustion; and biomass burning. The atmospheric concentration of N₂O has increased by 18 percent since 1750, from a pre-industrial value of about 270 ppb to 319 ppb in 2005, a concentration that has not been exceeded during the last thousand years. N₂O is primarily removed from the atmosphere by the photolytic action of sunlight in the stratosphere (IPCC 2007).

Ozone. Ozone is present in both the upper stratosphere, where it shields the Earth from harmful levels of ultraviolet radiation, and at lower concentrations in the troposphere, where it is the main component of anthropogenic photochemical “smog.” During the last two decades, emissions of anthropogenic chlorine and bromine-containing halocarbons, such as CFCs, have depleted stratospheric ozone concentrations. This loss of ozone in the stratosphere has resulted in negative radiative forcing, representing an indirect effect of anthropogenic emissions of chlorine and bromine compounds (IPCC 1996). The depletion of stratospheric ozone and its radiative forcing was expected to reach a maximum in about 2000 before starting to recover, with detection of such recovery not expected to occur much before 2010 (IPCC 2001).

The past increase in tropospheric ozone, which is also a greenhouse gas, is estimated to provide the third largest increase in direct radiative forcing since the pre-industrial era, behind CO₂ and CH₄. Tropospheric ozone is produced from complex chemical reactions of volatile organic compounds mixing with NO_x in the presence of sunlight. The tropospheric concentrations of ozone and these other pollutants are short-lived and, therefore, spatially variable (IPCC 2001).

Halocarbons, Perfluorocarbons, and Sulfur Hexafluoride (SF₆). Halocarbons are, for the most part, man-made chemicals that have both direct and indirect radiative forcing effects. Halocarbons that contain chlorine (CFCs, HCFCs, methyl chloroform, and carbon tetrachloride) and bromine (halons, methyl bromide, and hydrobromofluorocarbons [HBFCs]) result in stratospheric ozone depletion and are therefore controlled under the Montreal Protocol on Substances that Deplete the Ozone Layer. Although CFCs and HCFCs include potent global warming gases, their net radiative forcing effect on the atmosphere is reduced because they cause stratospheric ozone depletion, which itself is an important greenhouse gas in addition to shielding the earth from harmful levels of ultraviolet radiation. Ozone depleting gases are covered under the Montreal Protocol and its Amendments and are not covered by the UNFCCC.

HFCs, PFCs, and SF₆ are not ozone depleting substances, and therefore are not covered under the Montreal Protocol. They are, however, powerful greenhouse gases. HFCs are primarily used as replacements for ozone depleting substances but also emitted as a byproduct of the HCFC-22 manufacturing process. Currently, they have a small aggregate radiative forcing impact, but it is anticipated that their contribution to overall radiative forcing will increase (IPCC 2001). PFCs and SF₆ are predominantly emitted from various industrial processes including aluminum smelting, semiconductor manufacturing, electric power transmission and distribution, and magnesium casting. Currently, the radiative forcing impact of PFCs and SF₆ is also small, but they have a significant growth rate, extremely long atmospheric lifetimes, and are strong absorbers of infrared radiation, and therefore have the potential to influence climate far into the future (IPCC 2001).

Carbon Monoxide (CO). Carbon monoxide has an indirect radiative forcing effect by elevating concentrations of CH₄ and tropospheric ozone through chemical reactions with other atmospheric constituents (e.g., the hydroxyl radical, OH) that would otherwise assist in destroying CH₄ and tropospheric ozone. Carbon monoxide is created when carbon-containing fuels are burned incompletely. Through natural processes in the atmosphere, it is eventually oxidized to CO₂. Carbon monoxide concentrations are both short-lived in the atmosphere and spatially variable.

Nitrogen Oxides (NO_x). The primary climate change effects of nitrogen oxides (i.e., NO and NO₂) are indirect and result from their role in promoting the formation of ozone in the troposphere and, to a lesser degree, lower stratosphere, where it has positive radiative forcing effects. Additionally, NO_x emissions from aircraft are likely to decrease CH₄ concentrations, thus having a negative radiative forcing effect (IPCC 1999). Nitrogen oxides are created from lightning, soil microbial activity, biomass burning (both natural and anthropogenic fires), fuel combustion, and, in the stratosphere, from the photo-degradation of N₂O. Concentrations of NO_x are both relatively short-lived in the atmosphere and spatially variable.

Nonmethane Volatile Organic Compounds (NMVOCs). Non-CH₄ volatile organic compounds include substances such as propane, butane, and ethane. These compounds participate, along with NO_x, in the formation of tropospheric ozone and other photochemical oxidants. NMVOCs are emitted primarily from transportation and industrial processes, as well as biomass burning and non-industrial consumption of organic solvents. Concentrations of NMVOCs tend to be both short-lived in the atmosphere and spatially variable.

Aerosols. Aerosols are extremely small particles or liquid droplets found in the atmosphere. They can be produced by natural events such as dust storms and volcanic activity, or by anthropogenic processes such as fuel combustion and biomass burning. Aerosols affect radiative forcing differently than greenhouse gases, and their radiative effects occur through direct and indirect mechanisms: directly by scattering and absorbing solar radiation; and indirectly by increasing droplet counts that modify the formation, precipitation efficiency, and radiative properties of clouds. Aerosols are removed from the atmosphere relatively rapidly by precipitation. Because aerosols generally have short atmospheric lifetimes, and have concentrations and compositions that vary regionally, spatially, and temporally, their contributions to radiative forcing are difficult to quantify (IPCC 2001).

The indirect radiative forcing from aerosols is typically divided into two effects. The first effect involves decreased droplet size and increased droplet concentration resulting from an increase in airborne aerosols. The second effect involves an increase in the water content and lifetime of clouds due to the effect of reduced droplet size on precipitation efficiency (IPCC 2001). Recent research has placed a greater focus on the second indirect radiative forcing effect of aerosols.

Various categories of aerosols exist, including naturally produced aerosols such as soil dust, sea salt, biogenic aerosols, sulfates, and volcanic aerosols, and anthropogenically manufactured aerosols such as industrial dust and carbonaceous aerosols (e.g., black carbon, organic carbon) from transportation, coal combustion, cement production, waste incineration, and biomass burning.

The net effect of aerosols on radiative forcing is believed to be negative (i.e., net cooling effect on the climate), although because they remain in the atmosphere for only days to weeks, their concentrations respond rapidly to changes in emissions. Locally, the negative radiative forcing effects of aerosols can offset the positive forcing of greenhouse gases (IPCC 1996). “However, the aerosol effects do not cancel the global-scale effects of the much longer-lived greenhouse gases, and significant climate changes can still result” (IPCC 1996).

The IPCC’s Third Assessment Report notes that “the indirect radiative effect of aerosols is now understood to also encompass effects on ice and mixed-phase clouds, but the magnitude of any such indirect effect is not known, although it is likely to be positive” (IPCC 2001). Additionally, current research suggests that another constituent of aerosols, black carbon, may have a positive radiative forcing (Jacobson 2001). The primary anthropogenic emission sources of black carbon include diesel exhaust and open biomass burning.

i) programs or initiatives that attempt to overcome problems of incomplete information by those making investment decisions (e.g., EPA’s Green Lights program),

ii) a related category, eco-labeling, provides information as well as other “warm glow” benefits of a credence good [1],

iii) voluntary emissions reporting and commitment programs (e.g., EPA Climate Leaders),

iv) opt-in provisions for uncapped entities to take on an obligation under a cap-and-trade emissions trading system [2],

v) markets where credit buyers face a scarcity due to an emissions cap but may offset their emissions by purchasing credits from emission reduction projects outside the cap’s boundaries, and

vi) voluntary emission offset markets that do not involve caps on the buying or selling entities and where trading only occurs via emission reduction credits that are calculated relative to an agreed baseline.

As I pointed out before, when we talk about voluntary carbon markets, most people are really referring to category “vi.” So then in my Part 1 post on this question I went on to talk about all the categories except “vi.”

Well, now I return to category “vi,” which is what you probably wanted to hear about in the first place.

This category is typically what people refer to when you or I (or more typically some company) purchases offsets for retirement so they can make claims regarding their own emissions. By purchasing and retiring offsets we intend to compensate for our own emissions.  Effectively, we are paying someone else to reduce in our stead.

Examples of this market include anyone participating in the retirement of credits certified under “voluntary standards” such as the Climate Action Reserve, the Voluntary Carbon Standard, or the Gold Standard.

The concept here is that both the buyers and sellers in the transaction enter the market entirely voluntarily.  There is no regulatory driver creating demand for voluntary market offsets.  Project developers voluntarily develop projects and sell offset credits (this characteristic is common to all offset markets, whether they are part of a “voluntary carbon market” or not) and offset buyers voluntarily purchase them.

The key question for differentiating different types of offset markets is what creates the demand for the credits?  In the case of category “vi,” it is simply a desire to provide a public good to society, which we typically refer to as charity [3].  What is truly interesting about category “vi” offset markets is that they have done something rather unique.  They have commoditized charitable giving in a way that attempts to directly measure a public good, meaning they measure a uniform unit improvement in the public welfare.

Other environmental commodities have been created and trade voluntarily, like Renewable Energy Certificates (RECs), but they typically do not actually represent a unit change in a public good.  Instead they represent a unit of activity occurring that we assume or hope produces a public good. Specifically, in the case of RECs, all we know is that a mega-watt hour of electricity was generated by someone.  We don’t know whether the commodity we bought and retired (i.e., the REC) produced a change for the better.  It could have had no effect on anything the renewable generator did [4] [5]. As many of you know, what I am getting at is the issue of additionality.

When you stop to think about it, there is a powerful lesson here.  What other areas of charity could we create commodities for?  Vaccinations?  Calories for the starving?  Education (e.g., in the form of improved test score results) for the disadvantaged?

A powerful idea, that goes beyond just environmental economics.

Endnotes:

[1] Baksi, S. and P. Bose (2007). “Credence Goods, Efficient Labeling Policies, and Regulatory Enforcement.” Environmental and Resource Economics 37(2): 411-430.

[2] The fraction of entities mandated to participate versus the fraction that voluntarily opt-in can vary from zero to one.  For example, under the U.S. Acid Rain program, the ratio is essentially one (mandatory), while for non-governmental systems, such as the Chicago Climate Exchange, the ratio is zero (entirely voluntary).

[3] See http://www.nature.com/climate/2007/0711/full/climate.2007.58.html#B4

[4] Gillenwater, M., Redefining RECs (Part 1): Untangling attributes and offsets, Energy Policy, Volume 36, Issue 6, June 2008, Pages 2109-2119.

[5]Gillenwater, M., Redefining RECs (Part 2): Untangling certificates and emission markets, Energy Policy, Volume 36, Issue 6, June 2008, Pages 2120-2129.

The only reasonable solution to the problem of human-induced climate change is for society to reduce emissions of GHGs, thereby lowering atmospheric concentrations.[3] Unfortunately, there are many obstacles to doing so.

The obstacles to finding an easy solution to the problem largely derive from its fundamental characteristics, which can be summarized in the following five factors that result in what is probably the most challenging problem ever faced by humanity.

1. Uncertainties – Despite progress in climate science, significant uncertainties still remain regarding the environmental impacts from increasing concentrations and the timing and location of these impacts.  There are also uncertainties that cannot be significantly reduced due to the long time frame of the problem, such as the path of future emissions, the cost of future mitigation of those emissions, and the role technological innovation will be able to play.
2. Actor heterogeneity – Although the problem is one involving a global commons, it is also characterized by a geographically heterogeneous distribution of impacts and a far from unanimous assessment of the distribution of causal responsibilities.  The impacts of climate change will most likely be severest in developing countries, both because of their greater geographical vulnerability (i.e., vulnerable to sea-level rise, etc.) and because of their lower adaptive capacity.  In contrast, the build-up of GHGs in the atmosphere to date has largely resulted from the activities in industrialized countries.
3. Long-term problem – GHGs have long atmospheric lifetimes (e.g., from 12 to 50,000 years), which allows them to continuously accumulate in the atmosphere.  Action to address the problem, therefore, will be required long before significant benefits (in the form of avoided damages) are accrued.
4. Global problem – The atmosphere is a global commons: the impacts of emissions are completely independent of the geographic location where they occur.  This characteristic of the problem necessitates a collective solution with broad if not global participation; it must confront the incentives for each individual actor to free-ride on the efforts of others.[4] Worse still, non-participants may actually gain a competitive advantage in international trade by staying out of a climate mitigation regime.[5]
5. Broad issue – The breadth of activities affected by this effort will almost certainly be vast.  The major sources of GHG emissions are related to the consumption of fossil fuels, which currently supply 80% of the energy humans use.[6] Dramatically reducing GHG emissions from energy consumption is likely to lead to significant costs in the form of economic restructuring and changes in lifestyles for many.  Plus, it threatens to limit the economic advancement of many more by limiting their access to low cost energy resources.

Each of these factors necessitates society to do things we are not often good at:

• taking measures collectively that will only show the largest benefits for future generations;
• cooperating with friends and foes around the world in a deep and substantive way that changes all aspects of our lives and economy;
• Doing these things in a situation where we are not sure that the costs or benefits will be; and
• accepting that there will be winners and losers and taking action even in the face of objections from the losers.

I am curious if any of you know of another problem that presents similar challenges. Maybe some public health issues?

[1] IPCC Fourth Assessment Report.

[2] IPCC Fourth Assessment Report

[3] Other solutions have been proposed, such as the use of space mirrors, seeding clouds with reflective particles, scrubbing CO₂ from the atmosphere, ocean fertilization, shooting sulphates into the atmosphere to mimic a continuous volcanic eruption, and moving out the orbit of the Earth from the Sun.  None of these proposals has been shown to be practical.

[4] Free-riders are normally thought of as actors whose individual contribution does not make a significant difference to the common good, but reduces their own individual cost.  In this case, however, some players have a more significant impact than others.  For instance, if the United States tries to free-ride, the problem will not actually be solvable.  See Mancur Olson, Jr. (1965). The Logic of Collective Action, Harvard University Press.

[5] This is because any climate mitigation regime is likely to impose extra costs on producers of goods that involve greenhouse gas emissions.  As such, the production costs of members of the climate regime will likely rise relative to non-members’ costs.

[6] International Energy Agency. “Key World Energy Statistics”

The return to climate policy on the international stage provides an opportunity to discuss one of the clearest policy signals to emerge from 2009’s muddled and confused conclusion at COP15 in Copenhagen. I am, of course, referring to REDD, the topical acronym for Reduced Emissions through Deforestation and forest Degradation in developing countries. The term is ripe for puns (apologies for the title of this post) and has seen its stock rise since the 2007 COP13 in Bali, Indonesia.

The underpinning concept, reducing deforestation and in turn related GHG emissions in key regions by providing a financial incentive, has proven particularly attractive in international negotiations. Indeed the proposed mechanism’s approach has benefited from a broad acceptance of the need to stem deforestation as an essential component of global climate change mitigation. Moreover, REDD is further boosted by a range of popular ancillary benefits that extend beyond climate, from rainforest and biodiversity conservation to development assistance for rural land stewards.

Of course, turning this concept into a functioning carbon finance mechanism is a long road fraught with eye-watering complexity. Fortunately, as a REDD regime hurdles toward political reality, it continues to pull great minds and dedicated personalities under its tent.

Yet, for all the thought given to REDD’s high level architecture and on-the-ground project design, we here at the Institute can’t help but look forward and wonder more concretely about the implementation challenges of a REDD regime. Specifically, from a human resources perspective, how to scale the workforce necessary to measure, report, and verify (MRV) GHG fluctuations in REDD projects even with the assistance of satellite imagery and other remote sensing technologies. Though the REDD world has some time before it faces a chronic human resource shortage, it is certainly worth highlighting (cutesy as it may sound) that a bit of MRV REDDiness will go a long way.

For more on REDD, please see the UN’s excellent web resource, The UN-REDD Programme. Or for an in-person update from the perspective of the carbon finance community see Environmental Finance’s “Forestry, Biomass & Sustainability 2010” conference in London, 13-14 May of this year. The emergence of this conference, and what will surely be similar events in the future, is interesting in that it represents a clear acknowledgement by project developers and financiers of the significance of REDD.

Finally, to learn more about forest carbon accounting, the underpinning fundamental for REDD, please check out the Institute’s new course “GHG Accounting for Forest Inventories.”

Now, more than a month after the release of the interpretative guidance, let’s take a look at the SEC tealeaves that had so many, commentators and professionals alike, chomping at the bit.

To start, the SEC’s guidance is just that: guidance. While guidance in this context may have broader implications and deeper meaning, as it is a fairly rare that the SEC issues such guidelines (only 22 releases since 2000 reckons law firm Van Ness Feldman’s legal research), it is still guidance. In more straightforward terms, no disclosure requirements have been created or amended, but rather the SEC has now formally opined in some detail as to how climate risks should be incorporated into existing corporate disclosures. Indeed, as is the name of the game with risk disclosures, much hinges on implementation. “Material risk,” the guiding principle at the center of disclosure is as slippery as ever, and while the guidance preaches precaution with respect to climate risks, there is significant room for debate on the required precision of such disclosures.

Two fairly straightforward concepts to remember are: i) the fundamental purpose of financial disclosures and ii) the methods of recourse that push companies to make these disclosures. That is, disclosures are required as a means by which to provide investors with foresight on potential risks and opportunities, a concept that is buttressed by the potential for litigation against companies failing to make reasonable disclosures.

But as with so much in climate change policy, the devil is in the details and minutiae of implementation. Getting into some specificity, the SEC guidance explicitly outlines four separate risk areas requiring attention and offers some accompanying direction:

A. Impact of Legislation and Regulation. Perhaps the most obvious and immediate risk factors emanate from the potential impacts and opportunities generated by climate policy and associated regulation. The SEC does not mince its words here, stating that registrants “should consider specific risks they face as a result of climate change legislation or regulation and avoid generic risk factor disclosure that could apply to any company.” The guidance goes on to advise companies to undertake policy, risk, and operational analysis at a number of levels: evaluating the likelihood of pending regulation and assessing the material impact of the regulation on the registrant’s operations and financial condition, tempering a given analysis with the anticipated “difficulties involved in assessing the timing and effect of the pending legislation or regulation.”

B. International Accords. Part and parcel to domestic regulatory developments, the SEC also notes the potential impacts of international climate negotiations on business operations and disclosure requirements. Given the effective similarity to domestic regulation, the SEC’s comments in this section refer directly to their comments on legislation, yet it is worth noting the inclusion of the international dimension.

C. Indirect Consequences of Regulation or Business Trends. Taking a market-wide view of the applied impacts of climate change regulation as well as tipping its organizational cap to the case for corporate social responsibility, the SEC outlines indirect consequences and opportunities presented by climate change. Specifically, the SEC runs through a laundry list of shifts in supply and demand for goods and services on the basis of their carbon content or ability to innovate towards a new carbon economy. But the SEC’s commentary does not stop at traditional supply and demand curves. Extending to the realm of reputation, the SEC advises registrants to consider the marketplace of public opinion: “a registrant may have to consider whether the public’s perception of any publicly available data relating to its greenhouse gas emissions could expose it to potential adverse consequences to its business operations or financial condition resulting from reputational damage.”

D. Physical Impacts of Climate Change. Finally, citing a GAO statistic on the magnitude of weather impacts on business (“88% of all property losses paid out by insurers between 1980 and 2005 were weather related”), the SEC introduces the importance of assessing business vulnerabilities to “severe weather or climate related events.”

As outlined, the reach of the SEC’s guidance represents a new era of climate risk disclosure and indeed one that the corporate world is not necessarily well-prepared to embrace. The GHG Management Institute’s own survey data have shown that institutional capacity to simply measure, report, and verify corporate GHG emissions — let alone developed nuanced risk assessments of associated policy impacts — is disconcerting inadequate.

With so much ground to make up, our recommended first steps echo the SEC’s guidance. Drawing specific reference to three voluntary reporting regimes — The Climate Registry (TCR), the Carbon Disclosure Project (CDP), and the Global Reporting Initiative (GRI) — the SEC explicitly highlights the overlapping value reporting to these programs offers: “Although much of this reporting is provided voluntarily, registrants should be aware that some of the information they may be reporting pursuant to these mechanisms also may be required to be disclosed in filings made with the Commission pursuant to existing disclosure requirements.”

As a capacity building organization partnered with both TCR and the CDP, the Institute provides training in support of both programs.

Click here to learn more about climate risk through the framework of the Carbon Disclosure Project questionnaire.

Similarly, click here to learn more about our partnership with The Climate Registry and the associated coursework: The Basics of Organizational GHG Accounting and GHG Verification of Inventories and Projects.

Finally, for more on the SEC’s interpretative guidance please click here to sign up for “Climate Change Disclosure: Origins and implications of the SEC guidance and beyond” on March 31st, a webinar on the topic delivered by Dr. Julie Fox Gorte of PaxWorld Funds. (Available at no charge to premium members.)

Before jumping into what makes a voluntary carbon market, lets define more broadly what we mean by a voluntary program or market in the context of greenhouse gas (GHG) emissions.

Voluntary programs or markets can include:

i) programs or initiatives that attempt to overcome problems of incomplete information by those making investment decisions (e.g., EPA’s Green Lights program),

ii) a related category, eco-labeling, provides information as well as other “warm glow” benefits of a credence good [1],

iii) voluntary emissions reporting and commitment programs (e.g., EPA Climate Leaders),

iv) opt-in provisions for uncapped entities to take on an obligation under a cap-and-trade emissions trading system [2],

v) markets where credit buyers face a scarcity due to an emissions cap but may offset their emissions by purchasing credits from emission reduction projects outside the cap’s boundaries, and

vi) voluntary emission offset markets that do not involve caps on the buying or selling entities and where trading only occurs via emission reduction credits that are calculated relative to an agreed baseline.

When we talk about voluntary carbon markets, we typically are referring to categories “iv” through “vi,” all of which involve emissions trading.  Category “vi” also has characteristics that make it similar to charitable giving. [3] For this blog post I am going to focus on categories “iv” and “v.”  I will address category “vi” in Part 2.

The economic argument for including voluntary offset provisions in mandatory emission trading markets proceeds assuming that equalizing marginal abatement costs over a broader number of sources and sectors will improve the cost-effectiveness of the overall policy.  Whether an entity is capped (i.e., participation is mandatory) or an entity enters voluntarily (i.e., opts-in or sells offset credits) only changes who pays the cost of abatement. Theoretically, the actual mitigation measures implemented in both cases will be the same. [4] These provisions are acceptable because, in the case of GHGs, the location of abatement (and to some degree the timing) is independent of its environmental impact.

The political argument for voluntary provisions is that they give policy makers a mechanism by which to address political interests and issues of equity.  The ideal emissions trading market would have all sources under a mandatory cap.  Domestically, governments can coerce participation and require entities to participate.  However, it may be politically difficult to mandate participation of certain sectors.  Instead, they may be allowed to voluntarily opt-in to a mandatory program (e.g., during phase I of the U.S. Acid Rain program).  Allowing the use of offset credits by regulated entities under a cap can address similar issues of political power because both purchasing and selling parties benefit from these transactions.  In addition, it may be impractical to include certain sources or sectors in a capped system because they cannot be easily monitored or in some other way lack the capacity to participate as a capped entity.

Nearly identical issues arise at the international level, where the entities in question are nation states.  The issue at this level, though, is that no governing body has the power to coerce participation. [5] Parties eager for agreement may then need to provide incentives for parties less willing to participate. [6] Reluctant parties can be encouraged to “opt-in” through the use of side payments.  Or they can be allowed to participate by being a supplier of offset credits from emission reduction projects. As above, there may also be issues with the capacity of a party to take on a cap because they lack the legal, technical, financial, and/or other administrative infrastructure for monitoring and compliance.

There are three key problems with voluntary participation provisions in both domestic and international emission abatement policies:  adverse selection, transaction costs, and reduced incentives for innovation.

Because they can participate voluntarily, those entities, projects, and parties that would have participated anyway will do so.  In the case of emission offset projects, it is this adverse selection bias that additionality determinations are intended to thwart.  The requirement to determine the additionality of projects, as well as project-by-project administration, likely entails greater transaction costs than a simple cap-and-trade system.  Also, it may be that the sources, sectors, or parties least able to participate (e.g., because they are poor and lack the technical capacity) have the largest potential for emission reducing technological improvements.

Endnotes:

[1] Baksi, S. and P. Bose (2007). “Credence Goods, Efficient Labeling Policies, and Regulatory Enforcement.” Environmental and Resource Economics 37(2): 411-430.

[2] The fraction of entities mandated to participate versus the fraction that voluntarily opt-in can vary from zero to one.  For example, under the U.S. Acid Rain program, the ratio is essentially one (mandatory), while for non-governmental systems, such as the Chicago Climate Exchange, the ratio is zero (entirely voluntary).

[3] See http://www.nature.com/climate/2007/0711/full/climate.2007.58.html#B4

[4] This interpretation is based on a neoclassical economics understanding of behavior of rational economic actors.  More recent work in behavioral economics (see work of Daniel Kahneman) shows that agents are more adverse to give up something than to purchase it, suggesting that Coase’s claim that the initial allocation of property rights is immaterial to the outcome is not how people actually behave.

[5] I am assuming here that we are dealing with a transnational or global public problem where provision of that good requires cooperation between parties.

[6] The reasons a party is less willing to participate may vary, but will likely be dominated by a perception that the costs of full participation (without side payments) will be greater than the benefits it receives in the form of the public good provided.

We also get asked if we are a U.S.-focused organization? No is the easy answer. The Institute was established to serve a global community and have a global presence. Our faculty and staff are located in several countries, with the largest numbers actually residing in Canada and the Philippines, not in the United States.

So far, I don’t expect this story to be of much interest, but there is an element of our operations that I believe is noteworthy.

We put a lot of thought into the design of the GHG Management Institute as a 21st century organization. Indeed, we take the challenge for companies and other organizations to reduce the carbon footprint of their operations very seriously. So much so, in fact, that while setting up the Institute we decided to do what so many talk about, but so few organizations actually do. We created a virtual organization, thereby eliminating commuting emissions and inefficient use of building space. We focused on finding the best experts in the world, regardless of their location. We invested heavily in information technology infrastructure rather than bricks and mortar (and continue to do so). We minimize our travel, and therefore travel related emissions, to the greatest extent possible. You may wonder why you rarely see us at conferences or other events. This is not by accident. We are not against travel, but insist that it be necessary travel.

We hope to serve as a model for what an organization can be if it takes the need to reduce its emissions seriously and is willing to innovate and experiment.

And because we are heavily relying on information technology tools to build a new global professional community, we believe that the best way to explore what works is to first try it out on ourselves.

We are eager to hear your thoughts on how the organizations of the future should be structured to meet the challenge of climate change and what your organization is doing in this regard.