How do you explain additionality?

If you have worked in the climate change space for very long, you have likely faced this question in one form or another. Try explaining carbon offsets to your sister-in-law and you have two choices. Either you give her a superficial response in an attempt to change the subject or you dive in and try and explain offsets. If you chose the latter, you will find it near impossible to avoid the concepts of a baseline and additionality.

Although I have done my share of dodging the question over the years, it has been the deep dive discussions on offsets (including the work we did as part of the Offset Quality Initiative) that led me to realize, not only did I not fully understand additionality, neither it seems did anyone else. (Or at a minimum any additionality experts out there seem to have serious trouble articulating their full comprehension of the topic.)

There are, of course, lots of opinions about how impossible or complicated additionality is to apply. But it was only when I started looking into the reports and other literature, with the sole purpose of studying how additionality and baselines were addressed, that I realized we had a real problem here. No wonder people are skeptical about offsets. If you look at the climate community’s own words on the subject, we don’t appear to have a handle on a concept we have championed as integral to the policies we have created. Language on additionality and baselines is vague, inconsistent, or both. No two authors seem to define these concepts in the same way without falling back on some platitude like “business as usual.”

Now, it is at this point where I expose a bit of my personality. I have a tendency to be a bit of a gadfly at times (some might go as far to say this time it is more of a Don Quixote complex). Would you spend several years researching and writing a paper on additionality? Well I did. And further, I wrote three papers.

(As an aside, some of the impetus for this research came out of my work comparing Renewable Energy Certificates and carbon offsets and thinking about what really justifies a claim that an activity actually reduces emissions.)

So before I go any further, here are the papers. We released an earlier version of them several months ago. Since then I have received comments from a number of you (thank you!). The versions we are releasing now incorporate the comments as well as some other improvements.

• What Is Additionality? Part 1: A long standing problem
• What Is Additionality? Part 2: A framework for a more precise definitions and standardized approaches
• What Is Additionality? Part 3: Implications for stacking and unbundling

Each of the three papers does something different. Part 1 explores how we got here. Why is additionality important and why is it such a mess. It concludes with a definition for additionality and baseline that addresses some long standing problems.

Part 2 is a beast of a paper. So be prepared. It dives deep into how to be more rigorous in the application of additionality and baselines and do so in a way that enables the development of standardized approaches. Part 2 has an element of guidance to it, but more importantly, it walks you through the theoretical questions we need to answer as a community if we are to defend offsets as a legitimate policy mechanism.

Lastly, Part 3 takes a tangent into the world of credit stacking and ecosystem services. Once you have thought deeply about additionality, then you can reflect on how to deal with cases where you have multiple overlapping offset programs that are crediting multiple environmental benefits. As we know, many project activities produce benefits other than just greenhouse gas emission reductions.

All three papers are written in an academic style. In this blog, I am not going to try and give a complete summary of them in a non-academic style. But I will make a few points.

Defining the definitions

Hopefully, it is already clear to you that proper consideration of additionality and baselines is key to the environmental integrity of offsets. I would go even farther and say that the very concept of an “offset” requires the concept of additionality. You can’t say you have offset some harm unless you can show that you “caused” some equivalent extra good to occur elsewhere. Additionality is about this causal question.

To start, we need to clarify the precise “cause and effect” we are concerned with in the context of project-level accounting for emission offsets? For us, the “effect” is the implementation of the proposed project (the effect is not the reduction of emissions…see Part 2 paper for an explanation why).

Next, we need to specify our “cause”? You can’t try and predict an effect if you never bother to identify the cause with which you are concerned. Ignoring this issue is like saying:

Betsy: “Why should I trust that this offset credit is real?”

Tom: “Because, we caused the project to happen.”

Betsy: “OK, how?”

Tom: “Well we don’t know how, and we avoid thinking about what we did to cause it. But we know we did cause it to be implemented.”

In the offset community this line of thinking is epitomized by the vacuous, and unfortunately widely used, phrase: “the project would not have occurred otherwise.” This type of language is problematic because it is half a thought: Otherwise except for what?

The “cause” is the policy intervention recognized by an offset program. It might be limited to the economic incentive created by the GHG program (i.e., the risk-adjusted offset credit price signal), but it does not necessarily have to be limited as such (for why, see the Part 2 paper). The additionality question then becomes whether this intervention caused the proposed project to happen or whether there was no behavior change resulting from the intervention. How do we answer this question? By assessing whether the proposed project is the same as its baseline, which, if so, indicates that the policy intervention had no effect. Therefore, the definition of additionality is contingent upon the definition of a baseline. And what is a baseline? Well, it is what would occur in the absence of the policy intervention, holding all other factors constant. So, again, we are back to the importance of being precise about what we recognize as the policy intervention.

The problem here is that few GHG programs explicitly specify what they recognize as their policy intervention. Therefore, they leave it to validators, project developers, and media reporters to guess and play games with what is additional. Further, and probably more importantly, their lack of specificity makes it impossible to falsify a determination of additionality. We especially need to be precise about the recognized policy intervention before we can develop standardized approaches (i.e., we have to know what we are setting a standard for).

Avoiding linguistic traps

But my biggest annoyance when discussing additionality —and a very common trap that’s snared no shortage of climate policy wonks— is the circular definitions error. How many times have you read or heard someone say that additionality is about what “would occur without the project” (e.g., the Kyoto Protocol itself includes this type of language). The problem with this way of thinking is that we are trying to understand a cause and effect relationship, as discussed above. We are trying to decide if behavior is being changed. The project cannot cause itself to happen. That makes no sense. It is not the absence of the project that is the defining characteristic of a baseline. It is the absence of our recognized policy intervention. This is what is meant by circular definitions. Saying something causes itself puts you in a meaningless logical loop.

Critics will say that we can’t go trying to get inside the heads of every project developer and investor and predict why they are doing what they are doing. I agree. But it would be good enough to predict what a typically project developer would do. What would a reasonable project developer do under typical conditions in this industry or country under conditions where the recognized policy intervention is absent? This is our baseline.

If we are very precise about our recognized policy intervention we can then call on critics to use more rigorous testing and analysis in their arguments rather than vague challenges. Likewise, we can provide validators and methodology developers clear guidance on what their standardized approaches are to approximate.

Another reason there is so much confusion and frustration on the topic of additionality is that most GHG protocols and standards have provided little help. Both the ISO standard and the GHG Protocol for projects basically punted on the topic. We have gotten so used to sloppy and vague language on additionality and baselines that these non-definitions have started to sound like they actually mean something. Since no one seems to say anything that sounds carefully crafted, we assume it must be OK for us to do the same. It is a classic case of groupthink.

I know this is a challenging topic (and one that most really do not want to discuss), but it is not going away. Either, as a community, we deal head on with the conceptual challenges of additionality and baselines, or we should just walk away from offsets as a policy mechanism. I’m convinced that for us to make progress on offset policy, we first have to be far more precise in our thinking about additionality and baselines.

I look forward to hearing your thoughts and comments on my attempt to do just that.

Epilogue

Why is the GHG Management Institute publishing these discussion papers? To be clear we are not a traditional research institute or think tank. There are plenty of those already. And while we are highly cognizant of the value of research and academic inquiry (we even sponsor a peer-reviewed journal), it is not part of our mission to add to the ongoing 20+ year avalanche of policy white papers and reports. Indeed, we long ago determined that our greatest contribution comes in changing the way GHG management is taught, technical skills are developed, and the resulting practitioner class professionalizes. As we work to achieve that mission our research program selectively identifies neglected research questions we believe are key for the GHG community to grapple with for the benefit of all and to further develop ourselves professionally.

Was Durban a success or failure? A holiday edition.

It’s December, a month best characterized in many parts of the world by holiday cheer, winter revelry, and reflection of the year that’s about to draw to a close. But for those following international climate negotiations, the end of the year also marks the season for another brand of reflection: deriving meaning from the annual UNFCCC Conference of the Parties.

As an organization that makes a concerted effort to avoid wading into political debates, this is a season when we have historically parried “how was the COP?” questions to others’ analyses. This year, however, it’s been difficult to ignore that most questions about the COP have come wrapped around off-hand observations on the meeting’s outcomes; casual analysis that, intriguingly, seems evenly split in calling out Durban’s success or failure.

What do I mean exactly? Let’s look at the example of a holiday party I attended last week. As the event was hosted by a climate NGO (not GHGMI), it was inevitable that the fact that I had just the day before stumbled off a plane from South Africa after two weeks in Durban would work its way into cocktail fodder (though I should mention that the canapés garnered impressive conversation attention as well). Puff pastries aside, when the conversation did finally turn to the COP, a great climate see-saw began:

“How was the COP? It must have been so inspirational — they finally broke through the Berlin Mandate!”

“It sounds like not very much was accomplished in Durban. Did you at least have a good time in South Africa? Are they going to keep having these annual climate meetings?”

“What do you think of the Durban Platform? They really saved the process by the skin of their teeth, eh? Glad we’re finally going to see binding action for all major emitters. Did you get out of the conference center at all?”

“Another roadmap — sounds like Bali redux. Those diplomats have gotten really good at kicking the can down the road. What is Durban like? Did you have good curry?”

And back and forth we went.

Two images of Durban

Images courtesy of IISD

Considering my own post-COP reflections, with these contrasting cocktail party voices dancing in my head, two competing narratives take form. Just as the above images convey two perceptions of the COP, the eyes and ears behind those perspectives are more than ever writing to different audiences.

One need look no further than the Earth Negotiations Bulletin summary for one perspective. The ENB, famous for covering the minutiae of the negotiations, is the first stop for those tracking the pitch and roll of the UNFCCC’s awkwardly-acronymed negotiating tracks. At the end of each UNFCCC session the ENB publishes both a long form technical wrap-up and a shorter high-level summary. Perhaps still high on the adrenaline of the COP’s overtime feats of diplomacy, ENB’s Durban summary reads like a victorious warring country’s account of the technical details of a major peace accord. You can almost read the grins of elation on the authors’ faces.

In contrast, a quick survey of commentators leveling their punditry at audiences less steeped in close to two decades of UNFCCC talks reveals post-COP analyses served up with everything from a dose to an extra generous dollop of cynicism. Writing to populations eager to see targets and policy mechanisms that correspond with the scientific imperative, these analysts translate the UNFCCC process in highlights, noting that Durban may have secured, from the brink of collapse, a roadmap to targets and corresponding reductions that notably transcend long-standing negotiating impasses. Yet, the same voices are quick to qualify this progress with the observation that the Durban Platform will not for years translate into the type of ambitious action needed to manage climate change.

Indeed both voices make the same high-level points, it is in the balance of their weighting that they diverge. Whereas one lauds the success in process and relegates external measures of success to footnotes, the other underscores the need for action and decries the slow progress of the UNFCCC process for its insufficiency in meeting the challenge.

Measured progress

So which is it? Was Durban the disruptive breakthrough that the ENB insiders would have us believe? Or just another year and another set of questions to be answered another day? Good COP, bad COP? Success or failure?

Amidst this debate, I reckon the most appropriate question is a clarifying one: by what measure success? Some observers may balk at the very thought of having to carefully qualify success metrics, lashing out against assiduously calibrated assessments as an exercise in rebranding failure or justifying incrementalism in the face of challenges requiring sea change. Such assertions are not without merit and indeed are emblematic of a flavor of activist pressure that plays a valuable role in the political discourse on climate action. But for those seriously looking to assess the progress of the negotiations, both context and metrics matter.

And here’s exactly where our two dialogues diverge. Whereas the ENB junkies may become so fully ensconced in the UNFCCC context, they celebrate procedural success in the face of what may seem to more casual observers as glaring omissions (i.e., no near term ambition; and many open questions for the medium to long term). (As one European headline rather pointedly put it: “Durban saves climate talks rather than climate.”) Conversely, much analysis proffering this breath of fresh air, weighing negotiating progress against measures from science and economics, does not fully account for the complex political economy of climate change and systematically undervalues the vast distance climate negotiations have come in addressing an unparalleled collection action challenge.

So what does this all mean? Aside from success being in the eye of the pundit, it seems like these two groups could use to listen to each other. Climate negotiations are complicated; yet complex or no, the timeframe for action is narrowing.

As for the holiday revelers, I punted, concluding that interpretation of the outcomes from Durban depended on one’s expectations and measures of success. And for the rest of the night I reverted to raving about the nibbles, sticking carefully to COP17 topics more befitting holiday cocktail conversation… “Did you know there was no side event catering in Durban?”

What was GHGMI up to in Durban?

In addition to a number of workshops, meetings, and exhibiting, we managed a frenetic slate of events at the COP. We are grateful to our partners, fellow panelists, organizers, and most importantly the engaged attendees that made these events a success. Below is a short list of some of the Durban events to which we contributed:

UNFCCC media training workshop for developing country journalists: The CDM and carbon market actors

GHGMI participated in a UNFCCC-hosted panel of carbon market participants examining the Clean Development Mechanism. An on-demand video webcast of this event is available on the UNFCCC website here.

Professionalization: A pathway to a mature, resilient, capitalized carbon market

GHGMI co-hosted —with the University of Michigan and the International Forest Carbon Association— a panel discussion on the GHG measurement, reporting, and verification and financial system investments needed to scale the carbon market participation. A short write-up of the event is available on the University of Michigan website here.

The 2nd International Compliance and Voluntary Carbon Market Assembly

GHGMI offered an update on the U.S. voluntary market as part of a panel of experts speaking on national carbon market innovations. A short summary of the event, coordinated by Climate Markets & Investment Association, Ecosystem Marketplace, and IETA/ICROA, is available on The CarbonNeutral Company’s website here.

Alternative markets for CERs in the absence of a global deal

In an event co-hosted by EcoMetrix Africa, Evolution Markets, and legal specialists IMBEWU, GHGMI provided perspective on the possibility of future U.S. federal, regional, and state (California) participation in the market for international offsets. The panel was organized around an article published in the Dec 2011/Jan 2012 issue of Trading Carbon magazine. The article “South Africa’s Carbon Crossroads” is can be found on p16-18 of the magazine and is accessible free-of-charge online here.

Verifying in a world of disparate accreditation models

GHGMI participated on a diverse panel representing offset project developers, verifiers, buyers, and GHG program administrators in an International Emissions Trading Association hosted panel examining the confusing and often “behind the scenes” world of verifier accreditation.

Press briefing announcing GHGMI and iCET Chinese training partnership

GHGMI held a press conference with a number of partners to announce the new Chinese training partnership. Click here for more information on this initiative.

A plain English look at the post-Kyoto carbon market

“Will failure to strike a post-Kyoto deal in Durban kill the carbon market?”

With the latest big annual United Nations climate conference just a month away in Durban, South Africa, this question is seeing attention from the press the world around. The question seems innocuous enough, but as with so much in climate policy —and particularly the UN process— answers come in pieces, with caveats, and almost exclusively in acronym-thick jargon difficult for anyone who doesn’t happen to be a full-time climate policy wonk to penetrate.

We are doubtless guilty of falling into the climate domain language trap ourselves in this blog, dissecting the often inaccessible nuance of carbon accounting program design. Complexity in past posts notwithstanding, we thought it might be timely and instructive to break down the post-Kyoto question for a broader audience.

Defining our terms: “The Carbon Market”

First, let’s talk definitions. If we’re to consider the impact on “the carbon market” what all exactly is wrapped up in the carbon market?

This is exactly where the challenge of addressing this question starts: whether written in the singular “carbon market,” plural “carbon markets,” or any of its synonymous forms (e.g., emissions trading, cap-and-trade, etc.) popular reference is almost always some form of catch-all term. What’s implied for inclusion under “the carbon market” (the form I’ll stick to in this post for continuity’s sake) may be everything from one discrete scheme to a few specific programs or an even wider net employing more generous interpretations of what should be considered.

The reality here isn’t necessarily as wide ranging as I may suggest, but the language is nevertheless imprecise, and it stands to reason that any question of analysis need at a bare minimum define its scope of coverage.

In the interest of not getting too bogged down with the details of different programs or going to the trouble of developing a taxonomy to academically address this definition, let’s consider at a high level a few different types of carbon market programs that are generally discussed. To keep things simple we’ll keep it to three labels: compliance, pre-compliance, and voluntary.

The compliance programs are perhaps the most obvious. These are programs structured around legal obligation. Compliance schemes may hinge on obligations at various levels, from international treaties, to national regulations, down to municipal ordinances. The key point is that meeting these commitments is compelled by law.

Examples include international (country to country) emissions trading under the Kyoto Protocol, national and supernational (firm to firm) emissions trading programs like the European Union Emission Trading Scheme (EU ETS) or New Zealand’s ETS, as well as other market-based national climate policies like Britain’s Carbon Reduction Commitment and subnational programs like the Regional Greenhouse Gas Initiative in the United States or the New South Wales abatement program in Australia. Programs that are in the design phase, but when operational will be obligatory, such as Australia’s freshly approved program or California’s cap-and-trade scheme, would also make this list when they formally start up. The compliance net should include both the programs themselves and also related offset programs that mint instruments accepted for program compliance.

Pre-compliance programs are slightly less cut and dry. Pre-compliance may mean different things to different people. For the sake of creating a definition so we have something to work with let’s consider the programs developed with the intent to support regulatory objectives. As any lawyer will tell you, intent can be quite difficult to prove, but we’re painting with broad brushstrokes for the sake of illustration. These programs might include initiatives established to eventually integrate with regulatory programs, or programs that might become compliance regimes themselves. Such programs may even have elements of law and regulation in them, but they don’t completely fit the bill of a compliance scheme.

In the context of the carbon market, “pre-compliance” is often used to describe offset project development that braves the regulatory uncertainty of early day program design (see Ecosystem Marketplace’s annual state of the voluntary carbon market report for one definition of pre-compliance). Indeed projects developed for use in future compliance programs, such as has been seen across the United States —most recently for California’s program— would seem to suit the pre-compliance label.

But looking more broadly, a strong case could also be made that larger-scale international initiatives like national and subnational (“nested”) avoided deforestation schemes (referred to in UN acronyese as “REDD” or Reducing Emissions from Deforestation and forest Degradation in developing countries) and “nationally appropriate mitigation actions” (NAMAs) —think: very large activities often on a municipal, sector, or even economy-wide scale— are also a part of the pre-compliance carbon market. These initiatives and programs look to tightly dovetail with future international agreements and associated markets, but are undertaken without a proper market to speak of today. Part and parcel to these larger scale programs is the development of emissions measurement, reporting, and verification (MRV) infrastructure at all scales. Finally, pre-compliance also includes a whole class of “voluntary” programs founded with an explicit or implied intent to transition to a compliance program. Examples include Japan’s voluntary “JVETS” program, the ever-growing number of voluntary schemes emerging in China, and even the now defunct US-based Chicago Climate Exchange.

Rounding out our categorization of the carbon market, voluntary programs would be those that don’t meet the “intent” requirement of pre-compliance programs. In other words, programs that are truly optional and don’t have serious designs on becoming part of the climate regulation edifice. Maybe they were designed to stave off regulation, give organizations an opportunity to prove their climate bona fides to stakeholders, or provide a mechanism for climate-concerned citizens to take some action on their own part. Whatever the reason, for this classification we’re talking about programs that are not going to tie into compliance programs anytime soon.

As with pre-compliance offsets, voluntary or “true voluntary” (to lean on another Ecosystem Marketplace definition) offsets —that is, those used for “carbon offsetting”— provide a good starting point for breaking out the voluntary carbon market. In reality these distinctions are quite porous, meaning what is pre-compliance one day may be compliance the next or even voluntary the next. (The Voluntary Carbon Standard’s recent name change to the “Verified Carbon Standard” concisely illustrates the fluidity of these classifications.) Without devoting too much energy to trying to create a perfect definition of “voluntary” here I think this and the other rough working classifications provide sufficient latitude to broadly break up “the carbon market.”

Now that we’ve gone through the trouble of breaking out the carbon market into its component flavors, let’s revisit that scenario we started with: There is no “successor to Kyoto,” — no second Kyoto commitment period or other binding collective target-based treaty agreement. Where does that leave the carbon market?

Compliance markets

First, let’s take a look at what happens without that Kyoto successor? For one, Kyoto’s first (and only) commitment period expires. And, with that expiration, out the window go international treaty commitments for Australia, Canada, Europe, Japan, New Zealand, Russia, and a few other former Soviet countries like Ukraine. Legally, that’s about it.

The expiry of Kyoto will close the door on one part of today’s compliance market, international emission trading between Kyoto countries (versus firms). But the Kyoto national allowance trading market, while large in scope, was just one compliance mechanism, and not a particularly active one. Other compliance schemes governed by national and subnational legislation have been clear in communicating that the conclusion of Kyoto commitments will not slow their programs. Indeed, the European Union Emission Trading Scheme, the world’s largest trading program by transaction volume, is actively continuing to expand its scope at the very time the region’s Kyoto commitments wrap up. In a similar vein, in Australia a slated carbon tax program is pegged to start up just as Kyoto winds down. (The Australian program ramps up ambition in later years, converting to a trading scheme in 2015.) Likewise, compliance programs have been ushered forward in countries without Kyoto targets in spite of the looming end of the Kyoto era and what many market participants would characterize as serious pessimism about the renewal of international commitments. (How much more aggressive the growth of today’s compliance market would have been with a global climate deal in reach we’ll never know.)

However, the Kyoto Protocol as a legal instrument survives and continues to be legally binding, as it does not terminate with the end of any given compliance period. The most notable surviving element of the Protocol in the absence of a second commitment period is the Clean Development Mechanism (CDM)¹ —an “offset” scheme that credits emission reductions financed in developing countries. The CDM plays maybe the most confused role in the post-Kyoto scenario. The offset program, designed as a “flexibility” mechanism for Kyoto compliance, was linked to other compliance programs, namely the EU ETS and the much smaller New Zealand Emission Trading Scheme. There is nothing to legally or administratively prevent the CDM from continuing to operate under the UNFCCC. The CDM is self-funding, and as long as the Parties to the UNFCCC agree not to shut it down and there remains demand for the offset credits it issues, it can continue. Notably, without international emissions trading, the CDM is left to serve as one of the few obvious options for linking various national and subnational programs.

Pre-compliance markets

Perhaps one of the most important considerations regarding the failure to re-up Kyoto is the degree to which policymakers and market participants have anticipated this outcome. Indeed, large pre-compliance initiatives (e.g., REDD, NAMAs) and supporting program capacity building efforts have emerged in a policy environment that arguably assumes no immediate Kyoto successor (or has at least seriously discounted the possibility). Time will bear out the assumption that these initiatives can survive in a post-Kyoto scenario, but the fact that these investments are being made as Kyoto elapses returns us to attempting to derive meaning for the carbon market.

Employing the strictest definition of what the Kyoto expiration impairs, the commitment period’s conclusion has no immediate bearing on these emerging mechanisms. In other words, they are not legally constrained without Kyoto’s targets. If anything a lapsed Kyoto commitment period, in removing the dominant regulatory structure under the umbrella of an international treaty, may open up more room for pre-compliance markets.

Voluntary markets

Finally, the voluntary market, much heralded as a proving ground for innovation, is not immediately impacted by Kyoto’s expiration. Hinging on corporate and individual sentiment and ambition, rather than government policy like the compliance and pre-compliance markets, the voluntary market is notoriously challenging to predict. Arguments could be made that a post-Kyoto conclusion of international commitments could either depress or invigorate true voluntary market-based efforts.

Checking the pulse

So in the end where does this leave us? I’ve tried to be reasonably even-handed, but, of course, in choosing to confront the supposition that the expiration of the Kyoto Protocol’s commitment period will be an end to all carbon markets I’ve addressed something of a straw man argument. In other words, no one who closely follows climate policy seriously believes that the end of Kyoto will, in one fell swoop, bring down with it the entire universe of market-based approaches designed to mitigate climate changing emissions. In contrast, what I meant to illustrate in this quick stocktaking is that in the absence of a Kyoto successor much survives. Critically, however, the markets do lose some other key institutional pieces, including a centralized structure (as observers and participants have been saying for some time the integration of markets is challenging without the coordination to link them).

Yet taking a step back from this exercise, all the stocktaking and legal analysis in the world still leaves us with a very poor proxy measure of the related looming question: When will the world show the collective ambition to seriously address climate change? …a question to which Durban is liable to provide another ambiguous, caveated, and buzzword-rich response.

What we can say is, from an infrastructure and market readiness perspective, a post-Kyoto world may not be in substantially worse shape to address that challenge.

¹ If anyone reading this can provide a clear explanation of what happens to the Clean Development Mechanism’s much smaller sister Kyoto offset program, Joint Implementation, in the absence of a second Kyoto commitment period please post in the comments.

Disheartened by the state of climate policy? Consider the long view on capacity building

It is easy to get pessimistic, if not outright depressed, in this business. After all, humanity keeps beating on the atmosphere with a sharp stick hoping that the climate will keep taking it with a smile. Meanwhile witnesses to this abuse expectantly turn to governments to intervene only to find a political horizon devoid of ambition for real change. Indeed, governments around the world seem overstretched already as they impotently struggle to calm markets and restart engines of economic development in the face of financial turmoil, the impacts of which continue to seep into and saturate the global economy. Drowned out by policy debates on economic woes and fiscal policy, climate change, it seems, rarely even makes the agenda anymore.

In the United States, a near medieval political environment is even halting progress on clean air. And polls show fewer Americans believe anthropogenic climate change is a real and pressing issue than just a few years ago. More recently, the states’ sole up-and-running cap-and-trade program, RGGI, failed to attract bidders for all of its allowances available for auction —a shortfall partly rooted in weak target-setting. And anyone reading this blog is surely familiar with the potential for U.S. federal climate legislation or a major breakthrough at the UNFCCC negotiations in Durban.

If your spirits have not hit bottom yet, how about the recent study that finds our path to a low carbon future may actually be a bridge to nowhere. Tom Wigley at the National Center for Atmospheric Research is reporting that substituting natural gas for coal would likely worsen planetary radiative forcing when other pollutants (e.g., methane, sulfates, etc.) are taken into account. If this is correct, then the only real option is to go straight to eliminating fossil fuels (unless we find a way to deploy geologic carbon sequestration on a massive scale).

For you voluntary carbon offset market fans, we have definitely seen glimmers of progress. The voluntary market continues to innovate and mature, and is starting to prove its mettle as a testing ground for future compliance instruments. But let’s not fool ourselves. The true voluntary market (i.e., excluding some pre-compliance buying) is not booming. A number of large companies have recently backed away from their carbon neutrality pledges. (Note: These moves also have a lot to do with issues I have written on regarding Renewable Energy Certificates. See the links below for references.) As has been said many times, climate change is not a problem that will be solved through voluntary action. Solving it will require deep and broad international collective action through mandated regulation.

At the international level, NAMAs, LEDS, and REDD are the key buzz acronyms of the day. Now, these are worthy (although not necessarily new) concepts and there are many valuable initiatives now focused on fleshing out these concepts. But one observation I have made after working in climate policy for a number of years, is that our community resembles the boss in a Dilbert comic strip. We seem to jump from the latest management buzzword to the next like a teenager switching between clothing fads. This pattern is understandable given the composition of the community and the limited avenues we have to implement policy. For a community dominated by policy wonks and analysts, it is always the new policy idea that is more exciting and that can justify more analysis, more websites, and more reports.

But is a lack of policy proposals or analysis reports really something that is holding us back? There is certainly room for innovation and learning more, but I generally think the best way to learn is experimentation with its associated trial and error. Luckily, Europe continues to lead the way here, but they are still largely alone. And this is a problem that must be addressed collectively and globally. The optimistic look to Australia, California, and a number of other regional efforts as signs of hope. But, it is hard to argue any of these will be game changers.

To summarize the outlook for the short-term: the politics look bleak, the problem is probably even more difficult to solve than we thought, and we are caught in a circle of trying to analyze our way out of it, as if the cumulative mass of policy white papers will somehow move us into a new orbit.

As I have written previously, this has led me to focus on the longer-term. I do not think the problem is going away. I also think it is highly probable that society will at some point be shocked into action. So the question is what can we work on now that is focused on the long-term? A lot of resources are focused on advocating for action in the short-term. Much of which I’m not entirely convinced are a good investment.

I continue to watch the Arctic as a possible wake-up alarm to society. As a signal of the coming change, we are seeing new species migration corridors open up as the ice melts that are allowing Atlantic and Pacific species to begin mixing. And the sea ice extent in the Arctic continues to shrink at what seems like an accelerating rate. I will be curious to hear how news outlets openly skeptical to climate change will explain a North Pole without ice.

Focusing on long-term measures does not mean only putting money into research. There is a lot more that can be done to prepare and build infrastructure than just research. These other investments are what the GHG Management Institute was created for. The Institute is working on rigorous capacity building using time-honored institution of professionalization, which can be both a driver of change as well as a robust approach for preparing for the kind of serious GHG mitigation actions that will eventually be required. We expect the Institute’s work to have its biggest impact a decade from now as we slowly put in place a social infrastructure necessary to enable real action.

To governments, foundations and other funders: If you are interested in investing in this kind of long-term capacity building and change, we would love to hear from you.

Note References:

Gillenwater, Michael, “Redefining RECs (Part 1): Untangling attributes and offsets,” Energy Policy, Volume 36, Issue 6, June 2008, Pages 2109-2119. [Click here for pre-publication discussion paper version]

Gillenwater, Michael, “Redefining RECs (Part 2): Untangling certificates and emission markets,” Energy Policy, Volume 36, Issue 6, June 2008, Pages 2120-2129. [Click here for pre-publication discussion paper version]

Gillenwater, M., “Taking green power into account,” Environmental Finance, October 2008.

Gillenwater, M. and C. Breidenich, “Internalizing carbon costs in electricity markets: Using certificates in a load-based emissions trading scheme,” Energy Policy, Volume 37, Issue 1, January 2009, Pages 290-299. [Click here for pre-publication discussion paper version]

“Maintaining Carbon Market Integrity: Why Renewable Energy Certificates Are Not Offsets” Offset Quality Initiative, June 2009.

GHGMI and SEI re-launch Carbon Offset Research & Education (CORE) web resource

There is no shortage of opinion on the concept and application of carbon offsets. The fervent debate these wonky mitigation instruments whip up runs an impressive multidisciplinary gamut from questions of morality to marginal cost of abatement. But while offsets have spurred a prodigious volume of discussion, there is a striking dearth of plain English analysis breaking down the complex commodities. Correspondingly there are startlingly few resources that dig beneath the veneer of marketing statements or go beyond a simple rehashing of basic concepts and statistics. In the face of this information shortfall, researchers at the Stockholm Environment Institute (SEI) have shown notable leadership. Over the past few years SEI has published a valuable catalogue of clear, accessible, and rigorous reports on the technical bits (e.g., greenhouse gas accounting and other programmatic rules) that underpin offset programs. In an effort to make this information even more user-friendly and digestible, SEI translated these materials into an interactive website: Carbon Offset Research & Education (CORE).

Now, more than a year after its initial launch, the Institute has partnered with the SEI to re-launch an updated CORE site to reflect recent program updates. In keeping with GHGMI’s mission to build the social and educational infrastructure necessary to enable climate change programs, the refreshed CORE site offers concise up-to-date programmatic detail across voluntary and compliance offset standards, making it both an excellent stand alone resource and an impeccable complement to GHGMI’s range of offset-related curriculum.

Please watch for these changes to be phased in over time. In the meantime, the current iteration of the CORE site offers a timeless introduction to many of the fundamentals that serve as the basis for specific programmatic rules and approaches.

A version of this blog post appeared as an article in an edition of The American College & University Presidents’ Climate Commitment “Implementer” newsletter.

So how’s that professional certification thing going?

Your response to the launch of the EP(GHG) professional certification over the last three weeks has been tremendous, confident, and unequivocal. Indeed, the reaction from the international GHG community has obliterated even our most ambitious expectations. Professional certification is the capstone initiative under our mission as a non-profit organization. Therefore, we want to say thank you those of you that have already expressed your support. (If you would like to add you voice to the list of supporters email us at: info@epghg.org. We will be excerpting some of these responses in future dispatches.)

Looking to the metrics behind your response, EP(GHG) applications, inquires, and web traffic have all exceeded our expectations. We have also been impressed by the diversity of support, spanning an impressive range of sectors and geographies (registrations from dozens of countries).

Your supportive response has validated the investment in the development of a rigorous professional designation for experts in GHG quantification and verification. We are not saying that certification is appropriate for everyone, but we do believe certification is a powerful tool of social transformation that can both provide a career path for many and provide a foundation for greater public and policy maker confidence in those tasked with the work of GHG measurement and management.

We also want to reiterate the message that we see our role at GHGMI as but a conduit for a professional movement; a movement that we want to catalyze and see as being much larger than our organization.

In an attempt to live up to this vision, in the coming months we will be asking you and your organizations to take greater ownership over this process of professionalization and specifically the development of certification programs for carbon management professionals. Our collective success will depend on us all accepting ownership over our evolution as a recognized professional community.

Open call to GHG trainers, educators, and capacity building professionals

As a first step in this direction we are making an open call to the broad network of individuals and institutions directly engaged in GHG training, education, and capacity building. Some of the requirements of the EP(GHG) designation can be met through recognized relevant training and coursework. We are actively seeking to recognize existing and emerging GHG training, education, and capacity building programs, courses, and initiatives to be listed as meeting these requirements. GHGMI offers an expanding curriculum of its own online courses. But GHGMI is not alone in providing GHG training. In the spirit of living up to and even exceeding the requirements of the EP(GHG) program’s ISO 17024 accreditation, which stipulates an unbiased treatment of training providers, and to meet our organizational mission to help build a collaborative and global GHG community, we are actively seeking to recognize other relevant training programs. If you are interested in becoming an EP(GHG) recognized training provider, please contact us at: info@epghg.org.

So, thank you again for all of your support. Recognizing that we are all just starting the trek towards professionalization, it is invaluable to know that we are doing it together as an increasingly vibrant community. We look forward to working with you as we collectively further develop the EP(GHG) certification program.

Ending the “Carbon Cowboy” Era: Globally certifying GHG management professionals

The Greenhouse Gas Management Institute is elated to today announce that it has partnered with the Environmental Careers Organization of Canada (ECO Canada) to launch a groundbreaking new professional certification for GHG practitioners: the EP(GHG).

If you’re curious about the specifics of what the EP(GHG) entails, the press release announcing this new certification is provided below and further information is available at www.epghg.org. But first, we’d like to take this opportunity to provide some background on how this new professional certification fits into the broader need for professionalization across GHG measurement, reporting, verification (MRV), and carbon management.

The need for professionalization

As an organization with deep experience training GHG practitioners across the world in collaboration with leading climate change institutions, we have cultivated a unique perspective on the challenges endemic to developing the human resources required to implement and scale climate policies and programs. This experience has made us a strong advocate of the power of professionalization to expand the impact of training and capacity building initiatives. In brief, it is our view that professionalization is an immensely powerful tool to assure competency and experience, introduce professional norms and ethics, and design systems to develop and scale human resource capacity.

As a part of GHGMI’s mission, we have embraced and strategically prioritized a path toward a professional model that incorporates these elements. Today’s launch of the EP(GHG) certification marks a critical step toward the realization of these guiding objectives.

Professional certification as assurance

Personnel certification is the cornerstone of most fields deemed critical to social welfare. By codifying minimum knowledge, competency, and experience requirements, professional certification institutions enhance governance, increase transparency, and reduce risk and transaction costs across a range of occupations and issues. With respect to climate policy, competent and experienced professionals are critical to developing GHG metrics, assuring their quality, and ultimately meeting the objectives of the programs that rely upon these performance metrics. For detailed thinking on how professional certification stands to benefit specific climate program applications, we invite you to take a look at our commentaries on human resources in existing and emerging climate programs:

• On a North American climate regime in Point Carbon’s Carbon Market North America (Sept ‘09)
• On the CDM in the context of EB proposal call to certify individual GHG auditors in Environmental Finance (Jan ‘10)
• On the MRV of a post-Cancún international deal in Carbon Finance (Dec ’10)

Professional certification as a conduit for professional norms development

Personnel certification also introduces an ethical dimension tied to individual professional behavior. Sound ethics are particularly vital for GHG markets and programs, which deal in intangible goods and are dependent on political support for their continued existence. (For further discussion of ethical challenges in GHG accounting see the GHGMI issue brief “Taking Quality Assurance Seriously in Carbon Markets.”)

In 2009, GHGMI released a first-of-its kind Code of Conduct for GHG professionals, an initiative which seeks to not only safeguard against malfeasance (i.e., the world’s “carbon cowboys”), but foster a supportive and constructive culture of professional practice. The EP(GHG) certification further embeds ethics by incorporating the GHGMI Code of Conduct.

Professional certification as a career path

Personnel certification unambiguously outlines a career path for aspiring professionals, key to meeting the scale and pace of market demand for qualified practitioners.

Through GHGMI’s work developing and providing training to climate practitioners from all types of organizations and institutions, sectors of the economy, and geographies we have honed unparalleled insight to the needs of employers, climate program administrators, and practitioners from novice students to seasoned experts. From this perspective we can say with great confidence that a clear professional ladder would greatly benefit stakeholders across the board.

In addition to GHGMI’s institutional learning we have also collected empirical data over the last two years from over 1,000 global GHG practitioners, which we’ve published as the 2009 and 2010 editions of the “Greenhouse Gas and Climate Change Workforce Needs Assessment Survey Report.” Notably, last year’s survey confirmed a strong demand for professional certification with a majority of jobseekers sighting challenges in demonstrating their GHG-related qualifications in the absence of clear indicators, a further 85% of employers said a professional certification scheme would have aided their recruitment.

A clear stepwise professional path that allows career-minded individuals to enter the field and scale the practitioner workforce is all the more critical in the face of concerns cited in this survey and elsewhere regarding the state of today’s technical human resources capacity available for existing climate programs and graver projections looming over the specter of further expanded GHG measurement, reporting, and verification regimes.

The EP(GHG)

In sum, we are excited to introduce the EP(GHG) certification, a key milestone in the development of the robust infrastructure essential to professionalizing the work of GHG practitioners.

(Press release below)

Launch of the World’s First ISO Accredited Greenhouse Gas Professional Certification

June 2011 – The Greenhouse Gas Management Institute and the Environmental Careers Organization of Canada (ECO Canada) are announcing a groundbreaking global personnel  certification program for “carbon management” professionals. The Environmental Professional Certification on Greenhouse Gases – EP(GHG) – is the world’s first and only professional greenhouse gas-related certification accredited to ISO 17024.

ISO 17024, an international accreditation standard for bodies operating personnel certification schemes, defines criteria that a professional certification program must meet to assure quality and objectivity. As the first and only ISO 17024 accredited program for greenhouse gas professionals, the EP(GHG) certification stands as a uniquely robust, globally recognized credential.

With pressure to meet strict standards and regulations, companies and governments continue to increase the demand for experts highly qualified in measuring and managing greenhouse gas emissions and removals. In a recent global survey, undertaken by the Greenhouse Gas Management Institute, eighty per cent of employers polled stated they would be more inclined to hire certified professionals over non-certified GHG practitioners.

The EP(GHG) is open to all qualified professionals working on the quantification and/or verification of GHGs arising from national activities, from activities of organizations, entities, facilities or emissions reduction projects.

“Greenhouse gas measurement, reporting, and verification underpin all international efforts to address climate change. It is our vision to ensure that there is an adequate supply of certified professionals to meet the growing needs of the global GHG measurement and management climate policies/programs. The EP(GHG) will provide certainty to the global community that quantification and verification of GHGs can be undertaken at the highest possible professional standard,” says Grant Trump, CEO of ECO Canada.

“The world desperately needs the field of GHG management to mature. To implement the type of climate change policies necessary to fully address the problem, a process of professionalization must be initiated quickly, globally, and at all levels, from intergovernmental to corporate. Our future relies on building and maintaining the confidence of the public and decision makers that climate change policies can work. A globally uniform and ISO accredited professional certification is a fundamental institutional building block of a low carbon future,” stated Michael Gillenwater, Executive Director and Dean of the GHG Management Institute.

To help build a new and growing generation of GHG professionals, the Greenhouse Gas Management Institute and Environmental Careers Organization Canada partnership is also launching the Environmental Professional in Training title – EPt(GHG). The EPt(GHG) distinction will be available to emerging professionals who have satisfied EP(GHG) post-secondary education requirements but have not yet completed the extensive work experience and/or GHG training  necessary to achieve the EP(GHG) certification. Both the EP(GHG) and EPt(GHG) titles are available worldwide.

For more information www.epghg.org or info@epghg.org.

Letter from the Dean: Are you a Carbon Management “Professional”?

I think we all realize that eventually governments and society will reach a point of dramatic transition characterized by the implementation of serious measures to address climate change. Indeed, the question today is not whether this transition will happen, but when and how. As we so often say, it is our mission at the GHG Management Institute to help build the capacity to prepare for and enable this transition to occur.

Our focus is on you, the professional class that will make up the human resource infrastructure upon which this transition is built. To date, our discipline has lacked a key institution common to almost every other field of professional practice: a credible and well-recognized personnel certification. We have been working towards this objective, which we see as the pinnacle of professionalization, since the inception of the GHG Management Institute. In doing so, we have consciously chosen the slow and deliberate path, focusing on quality rather than speed because ultimately the success of a professional certification is dependent on its credibility.

Two years ago we produced the world’s first professional code of conduct for the field, believing that ethics must be the foundation of any profession. In the coming weeks we will be making an exciting announcement about the next phase in our process of building the professional development infrastructure of the future. The goals of this second phase include:

• Provide a globally harmonized standard for carbon management professionals so that all GHG metrics they generate and are used to support policies and programs are based equally credible.
• Provide a clear career path and platform to recognize the advancement of new professionals, including graduates, into the field.
• Remove the ambiguity regarding competency faced by clients, employers, policy makers, and other stakeholder as to what a true carbon management professional is and who has demonstrated those qualifications.
• Provide professional governance, oversight and peer-policing tied to ethical and competency standards, enabling the development and implementation of successful GHG regulations.

We think these are pressing concerns that demand substantive and comprehensive treatment through the expansion of professional infrastructure. If these sound like important and timely objectives to you, please contact us to become engaged in this exciting new program. We are actively seeking partners that share our commitment to the professional development of GHG measurement and management.

The GHG Experts Network 2.0: The GHGMI Forum

Here’s a test to see how long you’ve been part of the GHG expert community: Do you remember the old GHG Experts Network?

If the answer is yes, then I have good news for you, the Institute is recreating the old Experts Network listserv as a part of our membership program. Of course this is good news even if you’ve never heard of the GHG Experts Network, but it’s exciting to finally have a resource to point the “old timers” who have for years been asking what happened to the GHG Experts Network listserv.

What did happen to the listserv? Well, with the migration to the GHG Management Institute, we shut down the Experts Network. In retrospect, that was a mistake. So, now —after too long— we are recreating this valuable global discussion listserv.

If you have no idea what I am talking about and have never heard of the GHG Experts Network, then let me take a step back and provide a little history. In 2005 I created an online community of GHG experts with the purpose of facilitating online networking for people working on and interested in GHG inventory related issues. One of the most widely used tools the Network provided was a listserv that enabled members to post “carbon geek” questions and news items to the community. The online discussion centered on issues and questions related to GHG measurement, reporting, and verification (MRV), such as where to find a specific emission factor for biodiesel or which set of GWP values one should use. In its heyday the Experts Network listserv had over a thousand subscribers. It was a dynamic resource that facilitated intelligent crowd-sourced Q&A and technical discourse on MRV issues. Further, the Network also brought some semblance of community to the globally fragmented population of technical GHG experts.

In short, we’re thrilled to finally be bringing the Experts Network back. Over the course of this month we will be rolling out this new —yet nearly identical to its predecessor— listserv to post questions, answers, and news items to. The new GHGMI Forum will be facilitated and managed through GHGMI’s membership platform. Access to the Forum is available to both basic (free) and premium members. (Instructions on how to configure your GHGMI Forum account can be found here.)

We hope the GHGMI Forum will be an exciting new…I mean old…resource that will enhance your professional development and help us all build a more robust global GHG expert community.

Defining Additionality

The professional lexicon of climate policy has an air of maturity. Melding climate science terminology, esoteric domain concepts, and countless three letter acronyms (TLAs), carbon wonks are known to dialogue in an inaccessible jargon so rich it may, to the uninitiated, appear to border on another language. Yes, by this hollow measure, climate policy would seem to have the trappings of more established professional fields. Yet, a cursory look at the definitions associated with carbon’s work bank rather nakedly underscores our discipline’s immaturity. Nowhere in climate policy is language and definition more confused than the concept of additionality.

Additionality, often called out as the very crux of many important climate programs, is simultaneously described as challenging, slippery, elusive, thorny, and even controversial. These charged adjectives are reflected in discourse on the topic, which ranges from highly acrimonious debate on the challenges of (often quite narrow) application (e.g., CDM EB E+/E- decisions) to altogether omission of additionality for fear of “having an additionality conversation.” Indeed, I don’t think it would be an overstatement to say that additionality is today considered notoriously difficult to discuss.

Perhaps the most overlooked dimension of the failure of the additionality dialogue is a crisis of definition. Definitions of additionality and the supporting concept of baselines utilize a range of ambiguous non-standard terminology. What’s more, cutting through the challenges of specific word choice, at a more basic level, definitions of additionality generically fall into a trap of a circular definition, identifying the same component as both cause and effect.

In a nod to the importance of additionality with respect to climate policy and in a further acknowledgement to the rather low point at which discourse on the topic currently sits, GHGMI has recently released a three-part discussion paper that aims to reinvigorate the additionality discussion by taking a step back and methodically considering the aspects that appropriate definitions must account for. The three papers are pithily summarized below; we hope that considering this topic from a different and more fundamental perspective provides the grounding necessary to foster a more productive dialogue on the topic. As such, we look forward to your comments.

What is Additionality? Part 1: A long standing problem

Part 1 looks at the history of the concept and addresses —and attempts to resolve—some of the problems with definitions used to date. The paper makes the bold claim that the way we have thought about additionality in the climate change policy and carbon markets community has been based on a circular definition. It then offers improved definitions of both additionality and baseline for use by scholars and offset program policy makers. (Download Part 1 here.)

What is Additionality? Part 2: A framework for a more precise definition and standardized approaches

Part 2 goes further by looking at the application of the additionality and baseline concepts to standardized approaches. This paper examines the issue at a theoretical level incorporating guidance from social science and program evaluation. It provides an intellectual framework for thinking about additionality and baselines when the key concept of a policy intervention is included. (Download part 2 here.)

What is Additionality? Part 3: Implications for stacking and unbundling

Part 3, lastly, applies the concepts developed above to the issue of offset credit stacking. It concludes with specific options of how to implement a credible additionality assessment process where a single project has the potential to earn more than one type of offset credit. (Download part 3 here.)

Together, we hope these papers will push the discussion on additionality forward after several years of what feels like stagnation.

All three parts of this discussion paper, as well as selected other GHGMI publications, are available for free download on our Research Publications page.

A version of this blog post appeared as a commentary in the March 19, 2011 edition of Thomson Reuters Point Carbon’s Carbon Market North America.

SEC Climate Risk Disclosure One Year On

For the climate policy news junkies and carbon geeks that follow greenhouse gas reporting for work or (sadistic?) pleasure, the last few weeks have seen a particularly high churn of new developments. It’s hardly news that the new U.S. Congress isn’t terribly keen on continuing to classify GHGs as pollutants. Likewise, new decisions from the European Commission on the EU Emission Trading Scheme may not please participants and environmental watchdogs alike, but its movements and process are at least well understood.

Looking past these regulatory news spigots, early March has seen a host of stories related to the mundane nuts and bolts of GHG reporting. Specifically: U.S. EPA announced it will delay its mandatory reporting deadline from the end of this month to later this summer; the British government is reportedly set to announce its carbon reporting rules (or justify why it doesn’t need GHG reporting); and the Australian government still has yet to give a clear picture of what we should expect.

A recently released Ceres report (Disclosing Climate Risks & Opportunities in SEC Filings a Guide for Corporate Executives, Attorneys, & Directors) [PDF] looks at this policy volatility through the lens of climate risk disclosure. Financial disclosures of climate risks must necessarily acknowledge our uncertain political environment, including the potential for future regulation as well as a host of other material risks and opportunities presented by climate change. (For more on what all is wrapped up in financial climate risk disclosure see a blog I wrote on the topic last year after the US SEC released its interpretive guidance on climate risk disclosure.)

Given the convergence of factors driving disclosure and the newness of the practice, conventional thinking has suggested that reporting would improve over time. With this in mind, just over a year on from the SEC’s release of interpretive guidance, where do we stand? And more pointedly, what does this mean for GHG measurement, reporting, and verification?

Deferring to Ceres’ expertise on the topic, their conclusion is less than heartening for those who envisioned financial disclosure requirements as a rapid driver of change. In the report’s conclusion, the authors set the tone by ominously reminding their audience of the power of disclosure requirements: “The release of the SEC Guidance on climate disclosure marks an important recognition of that reality, and underlines that disclosure is a matter not only of sound corporate strategy and good investor relations, but, in many cases, a legal obligation.”

Yet the gravity of the force of law is eroded by the authors’ concluding remarks on the realities of current practice: “Although public companies’ climate reporting has improved somewhat in recent years, it remains true that disclosures very often fail to satisfy investors’ legitimate expectations.”

How to measure this apparent mixed bag? The report presents examples of corporate disclosures in an attempt to sketch out a best practice vision. But while these case studies are helpful, from a GHG reporting angle, the authors’ 11-point checklist offers perhaps the most insightful perspective on the state of the art. On the one hand, this section offers frustratingly little reference to GHG verification (in fact the entire report contains only a single explicit reference to auditing/verifying GHG data); on the other hand, systems, governance, and data quality are generally broached:

Systems, processes and controls to gather reliable information on firm emissions, physical risks, enacted and proposed regulations, and climate-related initiatives will determine the quality of management analysis, decision-making and disclosure to investors. For many companies, these systems are essential, because the process of gathering emissions data poses complex questions related to setting organizational and operations boundaries, tracking emissions over time, managing inventory quality and other issues.

Yes, discussion in this paper remains relatively high level on these issues, but if this report can be viewed as broadly capturing the state of discourse on climate risk disclosure, it would seem to suggest a shift to considering some the realities of the institutional capacity questions related to implementation (a subject we at the Institute view as a critical — and often overlooked — priority).

In spite of progress on this front, the report also contains hints that seem to suggest a diverse field amongst corporates analyzing climate risk. With some still on the sidelines, requiring cajoling to begin even basic reporting.

Whether or not greenhouse gas emissions are material and subject to mandatory disclosure under the securities laws will depend upon the magnitude of a company’s emissions weighed against the content of existing or proposed regulations. But a firm cannot identify the potential impact of regulations without knowing what its emissions are. As the SEC Guidance explains, management “should ensure that it has sufficient information regarding the registrant’s greenhouse gas emissions and other operational matters to evaluate the likelihood of a material effect arising” from enacted or proposed legislation or regulations.

With these observations noted, what can we conclude about climate risk disclosure one year on from the SEC’s interpretive guidance release? Perhaps the authors left it best at marginal improvement that fails to satisfy legitimate expectations.

Welcome to Greenhouse Gas Measurement & Management

I am thrilled to announce the release of the first issue of Greenhouse Gas Measurement & Management (available for free download here) on behalf of the Greenhouse Gas Management Institute, Earthscan, and the journal’s editorial board. On the occasion of this launch I’d like to highlight an article Tinus Pulles and I wrote introducing the new journal.

Reader,

Welcome to this new journal published in partnership with the Greenhouse Gas Management Institute. Greenhouse Gas Measurement & Management (GHGMM) is uniquely focused on the development of the intellectual infrastructure needed for society to move beyond the debate over the design of climate change policy. Its focus is on the serious work of implementation that will increasingly be paramount in the future. Specifically, the focus of this journal is anticipated to be on the management of our greenhouse gas (GHG) emissions and removals, with particular attention given to the use of metrics that are the foundation of all rigorous management systems. This journal fills an extended niche that looks beyond the political challenges of the present and instead focuses on the follow-on work required to turn policy agreements, at all levels, into real action. In that sense it is a perfect complement to our stable mate journal at Earthscan, Climate Policy.

There is a diverse and newly emerging collection of professionals, academics and researchers thinking about these issues, but few forums for scholarly inquiry bring the various stakeholders together to share research and ideas. This journal is intended to connect practitioners, researchers and academics at all levels and across fields. It is also the desire of the editors to help to catalyse the creation of new researchers, academics and resources (e.g. textbooks) focused on these issues.

The management of GHG emissions and removals is a very nascent field of inquiry and practice and is inherently interdisciplinary. But, as proof of the pudding is in eating, measuring emissions are fundamental to our ability to manage them as well as being the foundation of compliance with reduction targets. Decisions at all scales, from personal to global, will need to consider the implications of actions on the atmosphere.

We do not pretend to have perfect foresight into how this process of intellectual exploration will progress and how scientific progress will interact with the policy processes accompanying international negotiations and agreements. And so this journal is intended to build a global community of scholars to take part in and to utilize the developments of this exploration. The editorial and commentaries presented in this inaugural issue of GHGMM are meant to initiate a deeper discussion both on what this journal is to be about and the broader question of what is ‘carbon management’. Specifically, the authors highlight a number of research questions that are in need of further exploration. Future issues of this journal will continue this exploration.

The research articles presented in this first issue are illustrative of the range of scales to which GHG measurement and management issues are relevant, ranging from the global to national to city to individual mitigation activity.

We are proud to have brought together an esteemed editorial board to launch GHGMM and have put in place a rigorous double-blind peer review process with excellent support of the staff at Earthscan, who bring their own expertise and passion for scholarly issues related to climate change and sustainability.

GHGMM is being launched with the recognition that we must be cautious and patient as we build the intellectual foundation for a long-term GHG management effort. We recognize that the attention of the academic community to the kind of applied research needed to dynamically manage our intervention with the Earth’s atmosphere will come slowly. But we are committed to catalysing this slow process and look forward to a lively intellectual debate as well as exploration of issues and questions, many of which we have surely not even identified yet.

Sincerely,

Michael Gillenwater and Tinus Pulles

Editors

This is the introductory letter to the first issue of Greenhouse Gas Measurement & Management, a new peer reviewed journal. The first issue is available online free of charge here.

How do we move beyond just accounting for carbon?

At the Institute, we are constructing the intellectual and other infrastructure needed to grow a global professional community of climate change professionals. Later this month we are proudly introducing the latest component of this infrastructure: a peer-reviewed scholarly journal. The title of this new journal, as you have hopefully heard by now (if not from us, then perhaps on the BBC), is Greenhouse Gas Measurement & Management. This title is our way of simplifying down to two concise terms the scope of our professional field.

I think we all understand the meaning of the first term: measurement. We refer to this work by a variety of names, including greenhouse gas (GHG) accounting, or monitoring, or inventorying, along with its concomitant auditing, validation, and verification. Most of us have a sense of what this kind of work looks like. Fundamentally, it is about developing the metrics upon which policies and measures at all levels (e.g., corporate, governmental, and international) are based. And so the scope also includes metrics beyond just emissions data, such as financial metrics, climate change impact metrics, etc. Policies without hard metrics are little more than unverifiable aspirations. When we at the Institute make reference to “GHG professionals,” we are referring to the people that policymakers and other stakeholders will trust to generate these metrics.

But what about management? Admittedly, this term is ambiguous. By it, we mean the work related to using metrics to manage the problem of both greenhouse gas emissions and the broader issue of climate change. Again, you cannot manage what you do not measure. A key aspect of managing this problem will be emissions mitigation. How do you decide what to manage and how to manage it? This is the topic of mitigation analysis.

As you probably know, the Institute is the global leader in training curriculum on GHG measurement, reporting, and verification (MRV) issues. We have many courses available, and more on the way. We also support many of the most important GHG programs in the world such as the Kyoto Protocol. But what about training on GHG management, or more specifically on mitigation analysis? At this point in time, the Institute does not have any courses focused on management, versus measurement. However, it has been the focus of the Institute’s strategic plan from its founding to develop curriculum on mitigation analysis and implementation. It’s what we call Phase 2.

Over the last couple of years, we have done some research in preparation for Phase 2. In doing so we have been shaken to find that no rigorous guidance or educational materials appear to exist in the public domain on GHG mitigation analysis at the sub-national level. Apparently, we have all spent years talking about emissions accounting, while mostly ignoring what you then do with the emissions data we collect.

Well, it is our intention to be a trailblazer once again and take an important step towards getting serious about carbon management. Thanks to a grant from the U.S. EPA, the Institute will be developing a new general course on GHG emissions mitigation analysis. The unique attributes of this course are that: 1) it will be applicable to facility and organization managers; and 2) it will provide a framework for analysis that is explicitly driven by GHG accounting data.

We are excited about this new path-breaking course: Our first GHG management focused course. The planned launch for the course is the end of 2011. We see it as just the first step of a broader initiative to expand the focus of the entire expert community beyond measurement issues. To do so, though, we need more established and rigorous frameworks and guidance on what it means to actively manage GHG emissions.

We welcome your input to this initiative and will be engaging in a stakeholder outreach process as part of our work under the grant. Please contact us at info@ghginstitute.org if you are interested.

I bet our emissions are lower than yours!

I am proud to announce the Institute’s first greenhouse (GHG) gas emissions inventory report . As a leader in education and professional development on GHG management, one of the Institute’s objectives in developing this inventory is to lead by example, publishing an estimate of the GHG emissions related to our operations consistent with the international best practices we teach.

I think you will find our story unique and inspiring. We have successfully created an organization designed to operate with minimal GHG emissions and achieve maximum global impact. We hope our experience will serve as an encouraging example for other organizations, particularly other NGOs focused on climate change.

Jumping straight to the results: in 2009, the total estimated GHG emissions of the Institute were 23.1 metric tons of CO2-e. To put this number in perspective, the average individual living in a U.S. city produces roughly 24.7 metric tons of CO2-e annually. (I think it would be a challenge to find another organization that can claim to emit less than the average U.S citizen.) Or perhaps a better metric is to compare emissions per employee. Using our friends at the World Resources Institute as a benchmark – an organization that has taken commendable efforts to manage their own GHG emissions – per employee our emissions are less than half WRI’s.

How can this be? Is this dodgy accounting? Not to sound smug but we do know a little about emissions accounting. Armed with that background I can unequivocally tell you the answer is no. Further, the story is even more interesting, because the Scope 1 and 2 emissions of the Institute are zero!

How can this be possible, you ask? Well, as we have described before in this blog, the Institute operates as a high-tech virtual organization, which is defined as an organized entity that does not exist in any one, central location, but instead exists and operates through utilization of the internet.

The Institute was designed to serve as an example of the low carbon footprint organization of the future, utilizing modern information technology tools to maximize the global impact of its programs while minimizing its GHG emissions. The 2009 GHGMI staff consisted of four full time employees and five part time contractors working from home offices around the globe. The Institute is also staffed by numerous adjunct faculty members from around the world and does not own or lease any facilities or vehicles. We also operate with an aggressive policy that all non-essential travel, especially air travel, is to be avoided.

Alumni of our training will already have figured out that our emissions must all be Scope 3. We did not want to simply use our virtual organization model as a trick that would allow us to outsource our emissions. So for our inventory, we made every effort to estimate our Scope 3 footprint. This required we include emissions from our prime contractors, our faculty, as well as from our learners who take our training courses.

Specifically, we chose to define organizational boundaries to include staff, end users (e.g., learners), and other select behaviors associated with the organization. This includes employee, contract and part-time staff, students, instructors, staff travel, and business offices of other organizations where staff perform work for the Institute. Employees perform work from dedicated home offices, and we choose to take responsibility for emissions from these home offices. We also included emissions associated with energy consumption by our server which hosts our website and learning management system.

Most of these emissions resulted from Scope 3-related mobile combustion and Scope 3-related purchased electricity (i.e., for home offices, faculty, and our learners). We estimated emissions of both CH4 and N2O, although, CO2 was by far the dominant gas emitted. And emissions related to Institute staff and our e-learning contractor accounted for 78% of total emissions. Because half of this amount was from our contractors, one of our key lessons learned is that we need to work with our contractors to help them reduce their emissions.

Now, you might say, hey, these guys are supposed to be the experts on this stuff. And they are just doing an inventory now? Well, the Institute was founded as a nonprofit organization in November of 2007. So, our first full year of existence was not until 2008. But that was really a start up phase year, with rapid changes and new systems being developed from scratch; hardly a good baseline year to start an inventory. So we chose to use our second full year of operation, 2009, as our base year.

We also wanted to use the process of completing our inventory as an opportunity to help fulfill our own mission. For us, that meant using the whole process as a tool for capacity building. So, our inventory preparation process began with the training of two GHGMI interns using our online courses. Upon completion of the coursework, the interns developed a plan for the inventory, which included emission sources and calculation methodologies. Because of the limited guidance available for specific emission sources associated with a virtual organization operated from a network of home offices, new methodologies were adapted from existing ones. The plan was then reviewed, discussed, and approved by GHGMI management. Data collection and calculation then proceeded. Final results were reviewed and approved internally.

Further, we wanted to investigate the kind of impact not just our virtual office model had, but also what impact our focus on e-learning had. To do this we compared our emissions to that of traditional educational institutions.

Traditional universities and college campuses have large sources of emissions from purchased electricity, stationary combustion, and mobile combustion associated with campus buildings and student and faculty commuting. By creating an online learning environment, we are able to effectively educate learners worldwide while minimizing emissions associated with traditional organizations and instruction.

In order to evaluate and compare the level of GHG emissions from our services to other organizations with related educational missions, a benchmark, or ratio indicator, in the form of GHG emissions per student instructional hour was used. The specific comparison references were select U.S. universities. The expectation is that the difference between a university’s emissions and GHGMI’s would indicate the approximate magnitude reduction of emissions achieved by GHGMI relative to an organization with a traditional instructional arrangement.

For the year 2009, we delivered a total of 12,104 instructional hours with total emissions estimated at 23.1 metric tons CO2e. Our resulting average emissions were calculated to be 1.91 kg CO2e per instructional hour.

The American College and University Presidents Climate Commitment (ACUPCC) tracks and reports the GHG inventories for 665 higher education institutions throughout the United States. These include community colleges, colleges, universities, and specialized institutes which offer undergraduate and graduate degrees. We obtained the GHG emissions inventories and student credit hour data records from the University of California, Davis, the University of California, Berkeley, and the University of Colorado, Boulder. All three universities have climate action plans and programs in progress to improve the sustainability of their campuses. Student credit hour data from each university were converted to equivalent instructional hours based on the assumption that each credit hour represented a 15 week semester and that one hour of lecture required one hour of out of class lab or homework.

Compared with the Institute, the emissions per instructional hour for these universities range from three to four times greater. In other words, this simple comparison suggests that educational organizations could reduce their emissions in the range of 60 to 75% by focusing on online learning and a virtual workplace (see Figure). The majority of emissions from these institutions are from purchased electricity and stationary combustion associated with buildings and the mobile combustion emissions from commuters to community colleges.

It should be noted that the number of instructional hours delivered by GHGMI is a fraction of those delivered by a large universities (roughly 0.04%). However, the incremental emissions associated with a doubling of output from a virtual classroom provider like GHGMI is likely to be small relative to a bricks-and-mortar institution. Therefore, the approach used by GHGMI is likely to be highly scalable without a significant increase in emissions.

The virtual environment for learning at GHGMI provides an example of how online education can successfully provide education while limiting large sources of GHG emissions associated with traditional institutions. However, further research and analysis is needed to better quantify the differences between operational models and to identify causal factors for those differences. This initial analysis is intended only as a scoping exercise to identify the order of magnitude emission reduction potential of GHGMI’s organizational model.

It is reasonable to ask whether it is really fair to compare an online course with a real university course. Well, we think that e-learning has a great deal going for it where it comes to both sustainability and learning outcomes. Our reasoning for using e-learning is that:

• Learners can proceed at their own pace, an approach that has been proven to maximize knowledge and skill acquisition;
• The course is always “on,” minimizing the delivery challenges associated with the classroom;
• The course can be taken “anytime, anywhere,” improving access for learners in all locations, meaning opportunities are not limited to those in rich countries;
• The cost of training can be minimized without sacrificing quality; and
• We can avoid the emissions associated with traveling and commuting while still providing global access to world-class instructors.

And outcomes? Are we sacrificing on quality to reach more people and avoid travel? Actually, reviews of learning effectiveness point to e-learning as not only being on par with classroom-based learning, but one of the most widely accepted studies on the matter concluded that e-learning was in fact more effective than face-to-face instruction:

“The meta-analysis found that, on average, students in online learning conditions performed better than those receiving face-to-face instruction”
- Evaluation of Evidence-Based Practices in Online Learning: A Meta-Analysis and Review of Online Learning Studies, U.S. Department of Education, 2009

This study found that superior outcomes for students engaging e-learning were explained by students tending to spend more time on online courses than the equivalent face-to-face course.

So, we achieve lower emissions, better learning outcomes, save money for our stakeholders, and provide opportunities to those in developing countries that a traditional model simply could not.

To sum up, this inventory will be the first of many annual accountings and reports to come, and will serve as the touchstone for future efforts. It also demonstrates the challenges for emissions accounting for organizations of the future while also demonstrating the potential and opportunities to achieve significant emissions reductions by embracing everything that modern information technology has to offer. The results indicate that our GHG emissions are less than half that of other NGOs and traditional learning institutions. We hope that this report will serve as an example to peer organizations for what can be achieved through innovation and a commitment to “practice what we preach” when it comes to addressing climate change.

You can download the Institute’s 2009 GHG inventory report here.

1Emission Facts: Greenhouse Gas Emissions from a Typical Passenger Vehicle. EPA420-F-05-004, February 2005. http://www.epa.gov/oms/climate/420f05004.htm

2Greenhouse gas inventories for teaching institutions are publicly available at the American College and University Presidents Climate Commitment (ACUPCC) website. http://acupcc.aashe.org/

3The following websites provide student credit hour data:
http://budget.ucdavis.edu/data-reports/documents
http://calprofilesplus.berkeley.edu/
www.colorado.edu/pba/records/fte/term0910.htm
www.colorado.edu/pba/records/fte/term0809.htm

GHG & Climate Change Workforce Needs Assessment Report now available!

Earlier this month, against the backdrop of a busy first week of international climate negotiations in Cancun, Mexico, GHGMI – in collaboration with Sequence Staffing – released a report detailing the findings of the 2010 GHG & Climate Change Workforce Needs Assessment Survey. (The full report is available here.)

Attracting responses from more than 1,000 global climate change professionals, the 55-question survey’s findings provide invaluable practitioner perspective on a range of important issues including policy implementation and capacity building, workforce development, and the state of GHG accounting.

The report is organized around nine broad findings (summarized below), which are introduced by a detailed participant profile.

1. Climate Change Remains an Emerging Field Where Practitioners Rise Quickly Through the Ranks
2. GHG Training Gets High Marks Overall, But Serious Reservations are Noted
3. U.S. Facilities Ill-prepared for Regulatory Emissions Reporting, While American and International Companies Cite Confidence in Climate Risk Disclosure
4. Climate Change Practitioners Support U.S. Carbon Pricing, Yet are Concerned About Level of Public Understanding on Climate Issues
5. Carbon Management Software Market is Still Embryonic
6. Practitioners Concerned with Peer Competency; Auditors Divided Over Quality of Work
7. Carbon Markets Not Up to Snuff; Auditing Needs Enhanced Governance
8. GHG Personnel Fail to Meet Current Market Requirements; Competency Concerns Loom with Expansion of Climate Programs
9. Climate Employers and Job Seekers Cite Challenges in Demonstrating and Assessing Carbon Competency, See Professional Certification as a Fix

For the second year, this comprehensive survey captures the “boots-on-the ground” view of the practice of GHG measurement and management. At GHGMI we view this report as a unique glimpse into the often-overlooked human resource dimension of climate policy implementation. We are proud to present this survey’s findings and look forward to the opportunity to continue to support the development of the social infrastructure necessary for the industry’s professionalization – a need that is sorely stressed in numerous survey findings.

The limits of complexity and capacity in climate policy: What can we learn from Britain?

Introduction

In a wave of reorganization initiated by Her Majesty’s Treasury Spending Review, the British government has brought reform to the UK’s gleaming new climate program: the Carbon Reduction Commitment and Energy Efficiency Scheme (the CRC). The CRC, an ambitious organizational GHG trading scheme, is facing substantial restructuring under the banner of simplification. As a part of this reconfiguration, the program will: shed some of its more complex elements including a carbon trading regime with indirect linkages to the European Union Emission Trading Scheme (EU ETS); reduce the scope of its reporting requirements; and, in a development that has raised eyebrows around the world, scrap its revenue recycling provisions, effectively converting the program’s performance-based economic incentives into an ad hoc carbon tax levied across participants and expected to deposit £1bn per annum into public coffers (the program was previously revenue neutral).

A yawning deficit in Britain easily explains the overnight amendments to the CRC’s revenue provisions. But the sudden and sweeping reform of the program’s other design elements demand closer consideration and a number of tough questions regarding the British approach to regulatory complexity and capacity in climate programs.

The UK Emission Trading Scheme

The case of the CRC is not unique in Britain’s climate policy history. In 2002 the British government launched the United Kingdom Emission Trading Scheme, a voluntary program designed to reduce emissions and give participants a venue to practice in advance of the implementation of the in-design EU ETS. The program attracted 34 direct participants who committed to making emission reductions before concluding in 2006. The scheme is credited with yielding a number of practical lessons and other positive developments, including cementing London’s place as the global locus of carbon trading and associated service activity. The program’s reviews, however, have been mixed. The UK ETS was sharply criticized for its administrative complexity. A government-commissioned postmortem (available in British archives here), summarized the scheme’s complexity as follows:

Although some aspects of the scheme (e.g. the registry) have been commended for their simplicity, others have been criticised for being over complicated (e.g. the detailed rules). … Indeed it is essential that a scheme is practical if it is to function at all.

This review was not unequivocal in challenging complexity, however stating in its closing analysis:Experience from both the UK and EU emissions trading schemes has shown that there is a trade-off between keeping the rules simple, effective and fair.

The Carbon Reduction Commitment

With a headache of an overly complex program so near in Britain’s policymaking memory, the groundwork for the CRC is rife with references to the UK ETS’s cautionary lessons. Consider the following excerpt from a frequently cited CRC presentation:

Keep it as simple as possible

– CRC is a simpler approach than the voluntary UK ETS, which featured a complex site based changes of operation regime

Yet, while British policymakers honed communications condemning administrative complexity in the development and implementation of the CRC, the realities of the program they finalized stand in defiance to this rhetoric.

It is true, as the presentation cites, that the CRC’s framers were aggressive in fighting needless complexity in many program rules. However, in marked contrast to the “as simple as possible” adage, the CRC’s fundamental program design elaborately mixes policy approaches, incorporating elements from nearly every compartment of the environmental policymaker’s toolbox. Prior to the CRC’s modification, the scheme integrated reputational and economic drivers through the publication and dissemination of emission league tables, performance on which was to serve as the basis for “revenue recycling” (i.e., performance-based direct payments back to affected organizations). The CRC was also designed to serve as a self-contained emission trading scheme, which would have auctioned tradable emission permits and in some price scenarios would have allowed the use of EU ETS allowances for CRC compliance. In sum, the ambitious inclusion of so many linked elements meant that a point-by-point listing of the CRC’s design read more like the topics in a postgraduate “methods of environmental policy” syllabus at the London School of Economics than a working program blueprint.

A hallmark complement to the CRC’s complexity is the program’s ambitious reach. As originally designed, the CRC required roughly 4,000 large British organizations to fully participate in the scheme and a further 12,000 to report their organizational emissions without further obligation. For its point of regulation (i.e., using energy consumption thresholds to mandate organizational GHG reporting and trading program participation) and the number and type of organizations it directly touched (i.e., obligating organizational participation and reporting) the CRC was without precedent.

Conclusion

So what does the British government’s streamlining and scuttling of so many of the CRC’s design elements tell us? (Beyond suggesting that Britons are capable of developing a climate program so elaborate it would make Rube Goldberg blush.)

Looking past the impossible to ignore realities of unprecedented economic challenges and a change of political horses, reform to the scope and complexity of the CRC appear to add support to the importance of the guiding principle of capacity. For organizations required to simply report to or fully participate in the CRC alike, capacity to measure and actively manage organizational GHG emissions represent new and substantial challenges. The British government’s effective referendum on the more elaborate and ambitious components of the CRC signal both a hard tack to a simpler program design, but also point to an insufficiently fortified base with respect to the capacity of affected organizations to be the GHG measurers and managers the program’s designers anticipated.

Who knows, with an aggressive GHG measurement and management capacity building push maybe we’ll one day see a quintessentially British policy layer cake of a climate regime up-and-running. However, if recent recommendations are any indication of the state of GHG capacity, no matter how sound the program, implementation will continue to fall short of ideal.

The principle is sound: saving energy, reducing emissions and improving competitiveness through a clear and transparent nationwide programme. But the implementation fell short of the ideal. We share many of your concerns about the CRC. That is why we have made a commitment to simplify it.

Chris Hune
Secretary, UK Department of Energy and Climate Change
November 17, 2010

The Chicago Climate Exchange closure, a vote for robust GHG MRV?

In the wake of last week’s “wave” election in the United States significant attention has turned to sifting through the new political realities for climate policymaking in the US and beyond. As the climate world grapples with this political shift we would like to offer a slightly different take on the state of GHG management by pausing to examine a separate announcement that came out of the US just in advance of the elections, the meaning behind which is particularly instructive in this time of change and upheaval.

The stepwise shut down of the Chicago Climate Exchange (CCX) follows the purchase of its parent company Climate Exchange Plc (CLE) by the Intercontinental Exchange Inc (ICE). In addition to the CCX, CLE runs a network of financial exchanges, including an exchange in Europe, on which carbon commodities are traded. The CCX itself consists of two components: (1) a series of voluntary, yet legally binding, corporate emissions mitigation commitments embedded in an emissions trading program; and (2) a GHG emission offset program. (More on the specifics of the design and operation of CCX can be found here.)

Following ICE’s acquisition of CLE, market analysts identified two key factors that led to the deal: (1) that ICE wanted to expand into carbon trading in Europe’s regulated market vis-à-vis CLE’s profitable flagship London-based European Climate Exchange, and (2) with sentiment on the future prospects of carbon trading depressed on the heels of failure in Copenhagen and the US Senate, CLE was available at a bargain price.

The narrative of one company acquiring another followed by operational retooling is hardly unusual business-page fodder and not a news item we’d generally choose to highlight in this blog; however, wrapped up in this example of carbon market consolidation is the decision to effectively shut down the CCX’s pioneering corporate cap-and-trade scheme.

The CCX’s unique voluntary-yet-binding structure and atypical for-profit administration have served to catalyze significant debate on the program’s merits. Yet the timing of ICE’s decision to unwind the CCX has led commentators to tie the closure to a narrative related to sagging US climate policy sentiment. While there is truth to this analysis, there’s more insight to be gleaned from ICE’s decision-making. Indeed, counterintuitive as it may sound, the shuttering of CCX’s voluntary cap-and-trade experiment may stand as one of the more constructive milestones in the history of corporate climate initiatives. The real story here? The triumph of the next generation of climate programs, characterized by a fundamental shift toward more robust methods and systems to measure, report, and verify GHG emissions.

Breaking up CLE into its component parts —a network of commodity bourses, the CCX offset scheme, and the CCX corporate GHG program— provides a useful framework against which to both evaluate the significance of the CCX closure and handicap the present state of play in climate policy.

The exchanges

CLE operates a global network of carbon exchanges. An aggressive first-mover, the company was not shy about expansion, moving into new markets well in advance of the formulation of substantial trading regimes. The CLE network is best known for its bourses in Chicago and London, on which a range of carbon commodities are traded, though emission allowances and offsets destined for compliance use in the European Union’s Emission Trading Scheme make up the lion’s share of traded volumes. CLE also runs exchanges in more nascent markets in Canada (Montreal), Australia (Syndney), and China (Tianjin).

The CCX

The development and administration of the CCX —the company’s original venture— extended well beyond the marketing and maintenance of financial infrastructure. Whereas CLE’s subsequent exchange network was developed to serve as regional clearinghouses for carbon commodities —credits developed through a range of third-party climate programs, administered by NGOs, intergovernmental bodies, and governments at all levels— the CCX took a more active role in policymaking, creating its own market from the ground up. Writing their own rules, they initiated an innovative and untested experiment: a privately administered voluntary cap-and-trade program.

Central to the effectiveness of environmental policy is trust. Insufficient buy-in and support from the public and other stakeholders can erode policy to the point of ineffectiveness. With respect to the CCX, operating as a venture of a private for-profit entity, the program faced a credibility gap from its inception. This shortfall, critics have argued, was never appropriately addressed, leaving open nagging concerns related to trust in the program. At scrutiny here was the program’s approach to transparency and information sharing. While government and NGO administered programs often strive for openness in their operations, the CCX operated an opaque regime.

The CCX’s closed process exacerbated discord amongst observing experts and advocates regarding a range of program design issues, including the stringency of the CCX’s organizational targets, the rigor of the MRV requirements for its offsets, and its treatment of key concepts such as additionality, leakage, and permanence. The CCX consequently became a lightening rod for criticism within practitioner communities and failed to achieve buy-in from key stakeholders, including several influential NGOs. (Some environmental NGOs even went as far as to actively discourage potential participants from joining the scheme. See for example the National Resource Defense Council’s memo “States and Cities Should Not Join the Chicago Climate Exchange” [PDF].)

Snapshots of the nature of CCX’s challenges during its early years of operation have been anecdotally captured in a range of media reports. (One of the more comprehensive pieces published in the New York Times in 2006 is available here.) With the benefit of hindsight, it now seems obvious that it was only a matter of time until the CCX’s programs were replaced. But an examination of shortcomings only tells half the story. While the CCX’s credibility gap loomed large as a potential challenge to the notion that CCX credits would be recognized in a future compliance regime, it was not until more sophisticated, open programs that seriously addressed the CCX’s technical shortfalls emerged that the scheme’s fortunes began to wane.

Conclusions

What does the case study of CLE and its CCX tell us about the state of play in climate policy? First, while sentiment on climate policy may seem bearish here in 2010, major mainstream actors are still making long-term bets. ICE may have acquired CLE for a relative low price, but their outlay still represents a significant expenditure.

In contrast to the relatively straightforward wager on future carbon trading volumes embodied by ICE’s interest in CLE’s bourse network, the CCX’s proprietary cap-and-trade program demands a more nuanced business analysis. In addition to the frequently parroted line that the CCX closure is a referendum on US climate policy sentiment, ICE’s decision to keep only the offset program running at bare bones administration can be viewed as a direct reflection of the CCX’s failure to satisfy the confidence of its stakeholders. Conversely, this development also reflects the success of peer programs in keeping up with these demands.

The Institute welcomes the increasing orientation of carbon markets towards technical sophistication. This quiet period for climate policy, we believe, represents an opportunity for the community to “double down” on robust MRV systems and capacity. Perhaps consolidation will be the unlikely force clearing the path for such action.

What will break the climate policy log jam? And what do we do in the meantime?

Earlier this month the European Environment Agency (EEA) released a report (http://www.eea.europa.eu/publications/progress-towards-kyoto/) detailing Europe’s progress towards emission targets set under the Kyoto Protocol. Europe’s relative success in limiting its emissions can be explained by a number of factors, which could monopolize this entire post (and more), but for the purposes of this blog I think it’s timely to give a nod to Europe’s laudable and substantive policy response to climate change. At the same time, the news coming out of the EEA provides a good opportunity to critically reassess the state of global climate policy, which is due for a reality check. Some have referred to climate change as the mother of all collective action problems, and indeed it is an inherently global problem that demands a global (or near global) response. Europe is not able to, nor can it afford to, do it alone. Meanwhile, it doesn’t require sophisticated policy analysis to conclude that other major emitters (e.g., the United States, China, India, and Brazil) do not view the issue of climate change with the same political imperative that they do in Europe, at least not yet.

As commentators start to weigh in on the question of what it will take to break the political log jam, allowing us to begin the implementation of a serious global response to greenhouse gas emissions, I think it’s important to take a step back and add some structure to this thought exercise by agreeing on some fundamental assumptions. Below are my assumptions (i.e., predictions) and associated conclusions. I look forward to any comments or spirited disagreement.

Assumption 1: The global economic downturn, while not affecting every country equally, will continue for the next 5 to 10 years, primarily impacting employment rates. The structural factors within the U.S. economy, as the world’s largest, are such that it is hard to come up with a likely alternative scenario.

Corollary 1a: Given Assumption 1, it is unlikely that the political will is going to exist in this decade to push for robust legislation to mitigate U.S. GHG emissions.

Corollary 1b: Given Corollary 1a, achieving a global or significant multilateral deal on climate is unlikely.

First, let me say that I sincerely hope I am wrong. But betting on pessimism in this line of work does not seem to typically be a bad wager. The reason being that this is a really really difficult problem (see here and here for why).

But I recognize that it is good scientific practice to challenge your own assumptions. So in that spirit, what might change the logic above?

My assumptions are rooted in my somewhat odd personal history. My entire childhood and college years were spent in very conservative small towns in Texas. The kinds of places where oil wells outnumber Longhorn cattle and people deeply mistrust the government. Following graduation in the early 1990s, I was transported to an entirely different environment: Cambridge, Massachusetts. The culture shock was extreme. There, in one of my first graduate seminars, I was asked by the esteemed Professor Henry (Jake) Jacoby (who is also a Texan, by the way) what I thought it would take for us to take action on climate change. Instinctively, I knew what it would take to convince the people, with whom I had spent my entire life up to that point, that climate change was a real issue. I said that where I come from no one would believe this is a real issue until there is visceral evidence of harm that demanded action, such as three hurricanes in one year hitting New York or the melting of the North Pole.

Over 15 years later, my answer to that question has not really changed. And there you have your answer to the question of what might change the logic above. Evidence that forces America, in the Churchillian sense, to stop avoiding the problem. It’s not pretty is it?

Sadly or luckily, though, it may come to this more quickly than we think. Look at the Arctic. Although it is impossible to predict, there is a realistic probability we may first see an ice free North Pole at its summer minimum this decade. Now I’m not talking about a permanently blue water arctic, which is not predicted till after 2050; what I am talking about is the probability that we see the geographic North Pole melt during a single extreme year such as we saw in the summer of 2007.

This is my alternative scenario. What’s yours?

If you want to follow the Arctic with me, take a look at these sites:

http://nsidc.org/arcticseaicenews/

http://psc.apl.washington.edu/ArcticSeaiceVolume/IceVolume.php

http://en.wikipedia.org/wiki/Arctic_shrinkage

Of course simply waiting for Mother Nature to provide a frightening wakeup call is probably more depressing than most of us want to think about. In the meantime, we needn’t be relegated to simply thinking and waiting, as there is a great deal of important proactive work required to prepare the infrastructure necessary to move quickly and effectively once we are beyond pure politics and into serious implementation.

I am sad to conclude that it will come to something as grave as a melted Arctic to jolt humanity into seeing that the Earth cannot be infinitely abused. It is hard for me to be despondent, though, given that I always had low expectations for the political process both here in the United States and at the international level. Which is why when we founded the GHG Management Institute, we did so with a focus on the long-term institutional infrastructure needs of society to meet the climate change challenge, rather than the more popular push on political advocacy. I might be a short-term pessimist, but I am a long-term optimist. Those of us at the GHG Management Institute have invested blood, sweat, and tears accordingly. I hope you agree that there is work to be done building the foundation to enable real action in the future. We have this decade to build the institutional and professional capacity to seriously take on the challenge of climate change. And we hope that more organizations will join with us and share the burden of our mission.

Putting GHG capacity building on the needs map

This blog is not strong on subtlety. Whether you’re a committed reader or a casual “skimmer,” you have likely gleaned that we use this forum to highlight our vision for greenhouse gas measurement and management. Central to this vision, and at the heart of the Institute’s mission, is the critical need to build the capacity to measure, report, and verify GHG emissions.

If you’d like to refresh your memory on this topic, refer to:

• How we do international capacity building;
• Who is building our global GHG MRV infrastructure?; and
• Sink or swim? Given the political reality of climate change policy – what do we do now?

In recent years our observation of this capacity gap has been coupled with the lament that few decision makers acknowledge — let alone plan or take action to mitigate — this shortfall. Fortunately, as the climate change policy community has taken a contemplative step back over the last few months, the question of capacity building seems to finally be attracting attention beyond standard political lip service. References are still scant, but we would like to draw your attention to the conclusions of three recent expert multi-stakeholder climate change policy needs assessment exercises undertaken by the World Resources Institute (U.S.), the National Institute of Standards and Technology (U.S.), and Parhelion Underwriting with Standard & Poor’s (U.K.).

Last spring, Institute Dean Michael Gillenwater and I added our voices to two of these mapping initiatives. In March, Michael attended WRI’s “First International Workshop of GHG Protocol Programs” a two-day conference in Washington, D.C. where he facilitated a panel on inventory quality assurance and participated as a discussant in a session titled “Training & Capacity-Building: Scaling Up GHG Accounting Expertise.” A few months later in June, I participated in NIST’s “GHG Emissions Quantification and Verification Strategies Workshop” at Scripps Oceanographic Institute in La Jolla, California (poor me), where I was a part of a two-day mapping breakout session considering GHG measurement needs as they relate to carbon market applications. A few days later in London, U.K., Parhelion Underwriting and Standard & Poor’s convened yet another mapping exercise to assess the probability and severity of risks facing “climate finance.” Needs assessment is a painfully modest first step that in its own right does not guarantee action. Yet we are cautiously optimistic to see others bring interest to this long overlooked, but critical component of climate policy implementation.

The final reports from the two U.S. meetings are forthcoming. In the meantime, draft summaries can be found at the following links:

• WRI “First International Workshop of GHG Protocol Programs”
• NIST “GHG Emissions Quantification and Verification Strategies Workshop”

You can also download the following short report from the Parhelion Underwriting/Standard & Poor’s roundtable: “Can Capital Markets Bridge the Climate Change Financing Gap?”

We look forward to providing a deeper treatment of the findings and actions coming out of these and similar needs assessment exercises in the coming months. While we wait for these reports to be finalized, we thought it would be valuable to draw your attention to some of the preliminary conclusions we found particularly compelling.

WRI’s “First International Workshop of GHG Protocol Programs”

As climate policy becomes a reality in industrialized and developing countries around the world, many emerging economies are adopting voluntary national GHG mitigation targets and identifying the policies and measures to best achieve them. These trends point to the need for greatly enhanced GHG accounting capacity and tools at a global scale to ensure that mitigation actions can be measurable, reportable and verifiable.

As demand for GHG information increases, a cadre of qualified professionals will be required to provide a range of GHG-related services. Therefore, a strong push to innovate more efficient models of capacity building on GHG accounting, inventory quality assurance, and verification is required. Local educational institution partnerships, certification programs, and increased training of verifiers will address these capacity needs.

NIST’s “GHG Emissions Quantification and Verification Strategies Workshop”

Global GHG MRV is a new field that faces significant challenges as it begins to increase in scale to address the challenge of validating emissions reductions. Some of the issues include limited institutional capacity, insufficient corps of skilled practitioners, lack of clear training pathways, and inconsistent capacity from country to country. Improvements are required to assure policy makers, the public, and emissions market participants of the veracity of GHG markets. In particular, an increase in the number of training programs, the number of investments in the longer-term academic structure, and the facilitation of standards development would be helpful in boosting world MRV capacity.

Parhelion Underwriting/Standard & Poor’s Climate Change Financing roundtable

If our roundtable participants are indicative of the industry groups they represent, funders and investors in climate change financing are also concerned that a lack of a well-trained workforce to implement projects (that is, Human/Operational risk) will significantly affect the willingness to invest. The roundtable consensus was that policymakers should develop an integrated policy that not only creates a high-level framework for climate change finance, but also a supporting operational infrastructure. Equally this provides a demand signal to industry to develop the necessary skills and competencies necessary for the implementation and delivery of climate finance.

In addition to the above quote, the Parhelion Underwriting/Standard & Poor’s report also includes the below chart (“Risk List – Average Probability and Severity Scales”), which graphically maps climate finance risks with respect to severity (vertical axis; “S”) and probability (horizontal axis; “P”). Of the risks included in their roundtable assessment, note the position of Human/Operational risk (defined as “lack of well trained work force to implement projects”), which I have highlighted with a red arrow. Given the high probability and severity Human/Operational risk poses to climate financing, the report’s authors have chosen to underscore its significance by grouping it with other high impact risk factors (delineated in area “A” on the chart).

The authors further include the following explanatory note:

According to Parhelion’s analysis, while all risks should be carefully considered and managed when considering a climate change financing investment, it is appropriate for policymakers to initially focus their attention on those risks with the highest probability and severity (the area of the chart marked “A”).

As this blog has and will continue to document, the Institute is deeply committed to the expansion of GHG capacity building. As such we are pleased to see an NGO, a government entity, and the private sector separately mapping the importance of bolstering MRV capacity. Indeed we’ll be curious to see what recognition capacity building garners in those to-be-published final reports.

Though, while a rhetorical shift is welcome, we are far more interested in the details of follow-on substantive actions and eagerly await the opportunity to seriously engage the challenges of capacity building. In the meantime we will continue to be both ardent advocates for and early implementers of an underserved component of climate policy deemed essential by a growing drumbeat of experts.

GHGMI Committee on Professional Competency Requirements prepares for fall standards push

Earlier this summer GHGMI convened a group of international experts to examine and systematically address the question of competency in greenhouse gas management. This Institute-initiated “Committee on Professional Competency Requirements” (the Committee), a top priority of GHGMI’s professional programs has since begun to lay the groundwork for the realization of the Institute’s capacity building mission. While a priority, this initiative is but one component of GHGMI’s professional programs. The Committee’s work has been coordinated to dovetail with a range of other intellectual, ethical, and evaluative professional infrastructure undertakings. Specifically the Committee’s work has been synchronized to build on the Institute’s last year-released GHGMI Code of Ethical Conduct, the imminent launch of the peer-reviewed Greenhouse Gas Measurement & Management journal, and the findings of GHGMI’s second annual workforce needs assessment (report forthcoming; 2009 report available, click here. (For more on the role of professional infrastructure in GHG management, see the following blog post: “Who is building our global MRV infrastructure?”.)

Considering the issue of practitioner competency through a multi-stakeholder lens, the Committee is leveraging the power of professionalization to support the young field of GHG management by defining criteria to support personnel certification, a critical piece of professional infrastructure of immeasurable benefit for governing, standardizing, and fostering the discipline’s rapidly growing practitioner community.

The Committee, selected with reference to experience, sectoral focus, and geographic distribution, brings together a diverse group of experts representing a range of stakeholders. Notably, the 20-person Committee spans the following:

*27% of those working in the service sector represent non-governmental/non-profit/aid organizations.

For more on the Committee, including a full list of members, click here.

The Committee is now working through the challenging task of defining competency requirements. This work includes a full consideration of education and training, experience, and other background considerations, as well an evaluation of appropriate forms of assessment. In addition, given the general newness of the field, considerable attention is being paid to boundary setting and scoping a generalist “GHG management” specification.

The work of the Committee promises to bring valuable attention to the critical question of personnel competency as GHG-related work continues to proliferate. To ensure Committee deliberation is appropriately structured, open and transparent, and expert-supported, the Committee’s policies and procedures are being drafted to ensure independence from GHGMI, which is serving a convening and secretariat role. The policies and procedures also allow for continuous improvement, including participation from approved outside observer organizations, and include mechanisms to call on support from external expert practitioners as needed.

The Committee’s work on competency requirements for the scope of GHG management will continue through this fall with further decisions regarding the timing and development of requirements for additional activities expected in the winter. Global personnel certification for professionals in the field, the overarching objective for which these requirements will form the technical basis, will follow the finalization of this work.

On behalf of the Committee’s administration, we look forward to working in partnership with you, the practitioner community, as our industry moves towards the important objective of professionalization. It is our hope that this Committee’s work products will foster robust debate and an actionable blueprint built on rigorous standards, promoting skills development, assuring competent ethical behavior, and enhancing transparency and governance.

Sink or Swim? Given the political reality of climate change policy, what do we do now?

The environmental community at the international level and here in Washington DC is coming to terms with failure. It is well accepted that global action to address greenhouse gas emissions is largely being held up by inaction in the United States. And so, U.S. legislative failure has been functionally equivalent to global failure. You will be hard pressed to find someone with high hopes for an international deal in Cancun.

In contrast, the hopes of the environmental community following the 2008 election in the United States were high, albeit fairly detached from reality. Fundamentally, the electorate that brought George Bush to office twice did not undergo some kind of environmental awakening in 2008. The force that lifted Barack Obama was, in large part, the same force that would push climate policy off the agenda. The massive economic contraction, created by the unleashing of Minsky-type processes of financial instability, demanded a change…any change…in U.S. politics.

Although a careful look at history and markets would have told you years ago that an economic crisis was coming, once again as we have done throughout history, too many fell for the ponzi scheme of “this time is different” (see recent paper from authors Reinhart and Reinhart). Now we are faced with what will likely be up to a decade of economic malaise in the West. And in this new era of economic contraction and distrust (if not downright hostility) towards financial institutions, it is even less likely that the environmental community will be successful promoting the expansion of emissions trading.

The ironic thing is that the global economy is being held back by a lack of demand right now. And demand can come from just a few places: consumer spending, government spending, or corporate investments. Good luck getting consumers in the rich OECD countries to spend like they used to, even if it was a good idea. We need to get consumer debt under control. Government spending can be a good idea, but unfortunately Keynesian theory only works well if governments not only spend when times are bad, but also save when times are good. Times were good in the 1990s and 2000s, but few OECD countries did much saving. In the United States, for example, a federal budget surplus was wiped out with tax cuts and two wars. Had that money been put away for a rainy day, stimulus spending would now be eating away at a big surplus instead of running up an already large debt.

So the last option is corporate investment. But why should the corporate world invest in the absence of consumer demand? There is one reason: to mitigate GHG emissions, large investments will need to occur. And luckily, those investments will create jobs. All that is needed is policy to give the private sector a clear signal that their investments will not be stranded. Ironically, U.S. climate policy and a robust global climate change treaty could have been the ultimate global stimulus right when we needed it.

But now that we are where we are, what can we do while we wait for a shift in the debate? (A shift that seems like it can only come from an environmental kick in the pants delivered from a mother nature that is increasingly out of equilibrium.) As I have said in a previous blog post, there is a lot of social and technical infrastructure that we have just begun to build that will be needed to implement climate policy and effectively use the capital investments noted above. Specifically, we need a competent and professional implementation workforce that will ensure that climate policy is not just another ponzi scheme or investment bubble with little social return. This means we need schools and other institutions to get serious about preparing this future workforce. If just a few environmental campaigners and international institutions would dedicate a small portion of their efforts to these kinds of technical long-term investments, great progress could be achieved. It is the mission of the GHG Management Institute to bring about this change and we are looking for others out there with the vision to join us.

Following decades of campaigning, policy makers have probably just about reached a climate policy white paper saturation point. So as we awake to the reality of today’s climate policy hurdles, I would challenge the environmental community to stop feeling sorry for itself and make the most of the next couple of years by getting to work preparing a foundation for GHG mitigation.

Why We Work at the Institute

Here at the Institute a good amount of our external communications are dedicated to describing just why GHGMI is an important and necessary institution. The talking points are likely familiar to anyone who has previously read this blog, seen Institute staff speak at a conference, or been cornered by any of us at a cocktail reception. This approach, and the context, tends to be more formal. So to put a slightly different and more personal spin on why the Institute is valuable, we turned the question around and asked ourselves why we found this cause important enough to deserve our professional attention. In other words, why do we work at the Institute?

To refer to the variety of responses from Institute staff, go to the Staff page by clicking here and look at each person’s “Why I Work at the Institute” response.

The verdict on “Climategate”

We now have ample evidence to come to firm conclusions about the much-discussed controversy and manufactured scandals surrounding climate change science. Instead of recreating the wheel, I am simply going to repost a summary on the topic here from the Pew Center on Global Climate Change and also provide a link to a similar factual recap from the World Resources Institute (here). This is something of a departure from the usual subject matter on this blog, but this is an issue that frequently arises in conversation on climate change and one that has been frustratingly underserved and misunderstood by traditional media outlets. The Pew and WRI summaries clearly and succinctly present the facts of a case which clearly exonerates the apparent defendant: climate science. In the face of any perceived doubt let me unambiguously state what any objective analysis will confirm: the science is still intact. The attention and false seeds of doubt this political hatchet job sowed, however, have served their intended purpose weakening the political resolve for action in the face of a grave and imminently looming challenge.

Comments welcome.

–

“Climategate” Scientists Exonerated

By Jay Gulledge on Fri, 07/09/2010 – 16:29

I posted previously on the controversy surrounding emails that were hacked from a computer server at the University of East Anglia’s (UEA) Climatic Research Unit (CRU) in the U.K. The emails revealed the private exchanges of several prominent climate scientists dealing with their science and their reactions to climate change deniers who requested access to their private computer files and intellectual property. The contents of the emails suggested to the untrained eye that the scientists had manipulated data and tried to undermine the scientific peer-review process. From my reading of the emails, I judged that nothing of the sort had happened. Since my last writing on the topic, five separate independent investigations (3 in the United Kingdom and 2 in the U.S.) of the matter have concluded that there was no mishandling of data or other wrongdoing beyond some foot-dragging in response to Freedom of Information requests by climate change deniers. The clear message from these investigations is that proper scientific methods were followed and the integrity of climate science remains solid as a rock.

• An inquiry by the House of Commons Science and Technology Committee concluded that the CRU scientists’ “actions were in line with common practice in the climate science community” and that “the scientific reputation of [former CRU director] Professor Jones and CRU remains intact.” Further, the committee “found no reason in this unfortunate episode to challenge the scientific consensus … that ‘global warming is happening [and] that it is induced by human activity.’” While the CRU’s scientific practices were “in line with common practice in the scientific community,” the committee “suggested that the community consider becoming more transparent by publishing raw data and detailed methodologies.” While I would say that climatology is already one of the most transparent fields of science, the committee makes the point that, “A great responsibility rests on the shoulders of climate science [since it must] provide the planet’s decision makers with the knowledge they need to secure our future.” With so much at stake, climate scientists naturally face more scrutiny than those in other fields and should strive to be beyond reproach for their own protection and to avoid the appearance of misconduct.
• A report by an international Science Assessment Panel requested by the UEA found “no evidence of any deliberate scientific malpractice in any of the work” and “that the CRU tree-ring work has been carried out with integrity, and that allegations of deliberate misrepresentation and unjustified selection of data are not valid.” That said, the panel described the CRU researchers as “slightly disorganized” and complained that they did not consult adequately with professional statisticians in analyzing temperature data.
• An independent review of the contents of the emails, also requested by the UEA, said of the CRU scientists, “Their rigour and honesty as scientists is not in doubt.” The review found no evidence that the scientists had manipulated their research to support any preconceived notions about climate change. Nor did the scientists withhold data necessary to validate their findings or attempt to subvert the peer-review process. The panel did criticize individual scientists for refusing to release their personal computer files in response to Freedom of Information requests. In reference to a graph that CRU scientists produced for a non-peer-reviewed climate report of the World Meteorological Organization, the review found the graph to be “misleading” because it was not clear that the authors had truncated a tree-ring data set and spliced tree-ring data to thermometer data. They did not find that these procedures were inappropriate, but only that they should have been disclosed clearly to the reader.
• A summary of two investigations by Penn State University Professor Michael Mann – a frequent correspondent with CRU scientists in the hacked emails – concludes “that there is no substance to the allegation against Dr. Michael E. Mann” that he engaged or participated in, “directly or indirectly, any actions that seriously deviated from accepted practices within the academic community for proposing, conducting, or reporting research, or other scholarly activities.” The one caveat is that the investigative committee found that Dr. Mann sent unpublished manuscripts by other authors who were his close colleagues to other close colleagues without obtaining the express consent of the authors. He said he believed that the authors would not mind, but the committee concluded that he should have obtained express permission in any case.

Who is building our global GHG MRV infrastructure?

Sometimes it feels quite lonely here at GHG Management Institute headquarters. Toiling away trying to do what we think is needed to support the future of greenhouse gas (GHG) mitigation policy. While most people who pay attention to the issue are obsessed with the politics of the moment, we work away behind the scenes thinking about and building infrastructure for the long-run. Indeed in today’s world of economic near-depression and policy gridlock, the unfortunate reality is that long-term infrastructure garners minimal attention.

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

What is different about methane (CH₄) emissions? The forgotten CO₂ in GHG emissions accounting

In this third blog post on greenhouse gas (GHG) emissions and Global Warning Potential (GWP) values, I want to focus on a unique characteristic of methane (CH₄).

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.

What is a Global Warming Potential? And which one do I use?

This question is not as silly as it may seem, and is so fundamental to GHG management that many practitioners are probably afraid to seek clarification out of fear of looking bad. Since not everyone in the field has studied atmospheric chemistry (I admit I have, but wouldn’t expect the range of folks working on these issues to have the same background), I’ll try and give a primer here on it. But first you should read my previous blog post on greenhouse gases.

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.

What are Greenhouse Gases?

OK, I am going to be a little lazy this time.  The two posts that will follow this one deal with issues related to greenhouse gas (GHG) Global Warming Potential (GWP) values and how we account for GHG emissions.  As I was writing these later blog posts, I realized that maybe I should not assume everyone has a deep understanding of what we mean when we say “greenhouse gas.”

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.

What is a voluntary carbon market (Part 2)?

I promised in a recent blog post to return to the question of what is a voluntary carbon market.  Specifically, I laid out a framework for thinking about voluntary carbon programs and markets more broadly with the following list:

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.

Why is climate change so difficult a problem?

Acceptance of the fundamental process of global warming has grown over time and is increasingly widespread, albeit with some notable exceptions within the political community. The most important statement of the problem was given in 2001, when the United Nations’ Intergovernmental Panel on Climate Change (IPCC) concluded that human activities are the cause of the changes in the concentration of GHGs in the atmosphere and that these changes are likely to cause global average temperature to increase.[1] The IPCC also projected that emissions of GHGs would increase without government action, and that the resulting increase in atmospheric concentrations will likely lead to higher temperatures and climate changes that are increasingly disruptive and harmful to humans.[2] These facts are not disputed by any credible source.

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”

Getting REDDy for REDD?

This Friday all eyes in the climate world will return to Bonn, Germany for the next rounds of the UNFCCC-convened Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol and the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-KP 11 and AWG-LCA 9). Or in less jargon-laden terms, the formal resumption of international climate negotiations under the United Nations.

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.”

The SEC climate risk guidance: An inflection point for reporting and institutional capacity building?

The U.S. SEC’s decision at the end of January to release interpretative guidance on corporate climate risk disclosure unleashed an impressively diverse maelstrom of articles, briefs, and alerts. Simultaneously, legal, financial, and policy analysts seized on the release and scoured the SEC document for hints regarding the shape of the SEC’s new climate risk regime.

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.)

What is a voluntary carbon market (Part 1)?

This blog post is going to be slightly more academic than my past ones.  Comments or questions are welcome.

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.

Where is the GHG Management Institute located?

We get this question quite often. Where is our office? Our headquarters’ address is in the Washington, D.C. area. Specifically, we are incorporated in the State of Maryland as a nonprofit organization with an address just outside of Washington, D.C. proper (literally, just a few hundred meters from the District border). For those of you familiar with Washington, you will know that most of the D.C. area is actually in Maryland and Virginia.

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.

The Treaty Compliance Challenge: Enforcement under the Kyoto Protocol

Now that we have the Copenhagen Accord, which gives us some hope that eventually we will have a treaty that includes the United States and active engagement from developing countries, it seems like a good time to open our history books and look at some lessons from the Kyoto Protocol.

Many consider the Kyoto Protocol a total failure. While it is correct to see the Protocol as not achieving much of what was hoped for, accentuating what it has failed to achieve is narrow and wrongheaded. Indeed, Kyoto has accomplished a great deal in terms of constructing a global carbon market and an international regulatory structure. One issue, though, that has yet to be tested under the Protocol is the challenge of compliance and enforcement.

The constraints that national sovereignty places on multilateral environmental agreements (MEAs), such as the Kyoto Protocol, create problems for compliance systems. Compliance can be disaggregated into four components: monitoring, compliance determination, enforcement, and dispute resolution.

Monitoring relates to how an agreement provides for the collection and dissemination of information on relevant activities of parties. The relevant activities are those related to a party’s commitments. Most states will insist that they self-report information. Ensuring the credibility of self-reported information is a central concern for any MEA. Because information is always associated with some uncertainty, a process for compliance determination is required. Once a party is found noncompliant, an enforcement mechanism is needed to coerce compliant behavior. A dispute resolution process allows a party to appeal a determination of non-compliance before enforcement action is taken. The Protocol addresses all of these components, but like most MEAs, fails to overcome the fundamental problem of enforcement.

Monitoring of Annex I parties’ mitigation commitments under the Kyoto Protocol is centered on annual submissions of national reports. These reports “inventory” the party’s anthropogenic emissions from sources and removals from sinks of greenhouse gases. The parties to the UNFCCC and the Kyoto Protocol have agreed to guidelines laying out the requirements for these inventory submissions. The IPCC has also elaborated detailed technical guidelines on best practices and minimum standards for inventories. Inventory reports are prepared by some combination of experts from government, industry, consulting firms, research institutes, and academia, although final submission is the responsibility of the government.

Although developing countries (non-Annex I) have no mitigation commitments under the Kyoto Protocol, they must still meet strict monitoring requirements for Clean Development Mechanism (CDM) emission reduction projects. The guidelines for monitoring under CDM rely on a “case law” approach in which project developers, with approval of their host party, submit proposed methods for crediting mitigation projects.

Under the Kyoto Protocol, the determination of compliance for Annex I parties occurs in several stages. Each party’s submission is checked by the Protocol’s secretariat as to whether it meets minimum standards of completeness. Teams drawn from a pool of trained and certified experts that have been nominated by parties to the Protocol then review the submission. The Protocol includes an incentive for submitting high quality inventory reports. The expert review teams can recommend that “conservative adjustments” be applied to specific estimates in a submission that are judged to be of insufficient quality. (Note, that the GHG Management Institute delivers this training for the UNFCCC and Kyoto Protocol secretariat. The UNFCCC training program is based on a series of e-learning courses of which I lead the development.)

A party can then either accept the review team’s adjustment or it can appeal it to a Compliance Committee. This committee is made up of two branches: the Facilitative Branch and the Enforcement Branch. The Facilitative Branch monitors parties’ progress towards meeting their commitments and warns other parties of cases of potential non-compliance. The Enforcement Branch makes final determinations on the application of adjustments to a party’s national inventory.

Expert review teams also pass judgment on the capacity of the party—through its “national system”—to produce credible annual inventory submissions prior to the start of the commitment period in 2008 (although no procedure exists for how to handle parties that fail this test, Article 5.1).

The final determination of a party’s compliance is simply a matter of comparing its adjusted inventory totals for the commitment period (2008 through 2012) to its holdings of allowances (i.e., AAUs, CERs, ERU, and RMUs).

One of the failures of the Kyoto Protocol is its lack of any real enforcement mechanism. Although the Compliance Committee includes an Enforcement Branch, this branch actually has no power of sanction or coercion over noncompliant parties. If a party is found to be noncompliant, its eligibility to continue to participate in the Protocol’s flexibility mechanisms (i.e., national emissions trading, CDM, and JI) can be suspended by denying the party access to the international emission allowance transaction registry.

The parties to the Protocol have also agreed that any party that has insufficient allowances must surrender in a second commitment period 1.3 tons for each ton it exceeds its allowance holdings. The effectiveness of this provision, though, is limited by the fact that reduction targets for a second commitment period have not been negotiated.

Parties may appeal decisions of the Enforcement Branch to the full meeting of the parties of the Protocol, which can override a decision with a three-fourths vote.

A similar process exists for determining compliance, enforcement, and dispute resolution under the CDM through the CDM Executive Board and its Accreditation and Methodology Panels. However, the CDM also enlists the private sector to a significant degree for the work of ex ante approval of emission reduction project proposals (i.e., validation) and the ex post evaluation of actual emission reductions achieved before credits are awarded (i.e., verification).

The compliance system under the Kyoto Protocol has yet to be tested. However, even if all components work as expected, the options for enforcement are minimal. Unfortunately, there are no obvious solutions to the enforcement problem with an MEA addressing greenhouse gas emissions.

So, what does this mean for the future of the Copenhagen Accord? Since we don’t have a world government to enforce international law, the people of representative governments around the world must make it politically unacceptable for their governments to fail to comply with their treaty commitments and, equally important, they must make it politically unacceptable for their governments to look the other way while other countries fail to comply.

For the GHG Management Institute, we have to make sure that the professional capacity and other infrastructure for measurement, reporting and verification of GHG emissions exists throughout the world so that compliance is feasible.

How we do international capacity building

In the climate change policy world there is plenty of talk about capacity building, especially for developing countries — though occasionally for developed countries as well. Less frequently, however, is what is meant by “capacity building” specified. The concept comes from the broader field of international development. The United Nations Development Programme defines it as:

Capacity building: the creation of an enabling environment with appropriate policy and legal frameworks, institutional development, including community participation (of women in particular), human resources development and strengthening of managerial systems, [recognizing] that capacity building is a long-term, continuing process, in which all stakeholders participate (ministries, local authorities, non-governmental organizations and water user groups, professional associations, academics and others).

But, even here we are left with only a vague concept that relates to community, human capital and institution building activities.

I have spent a good portion of my career, as have several others here at the GHG Management Institute, undertaking international capacity building work around the world on GHG issues. This experience has, in large part, shaped how we have set up the Institute.

Many climate change-related capacity building efforts adhere to the following model:

• Hire a consultant.

• Set up a workshop in the capital of a developing country at a western style hotel.

• Send an invitation to senior government, and maybe NGO representatives to attend.

• Fly the consultant and attendees from around the world or region in for a one to four day workshop.

The consultant spends several days flipping through PowerPoint slides on a screen and talking. The workshop closes, everyone goes home and that is the end of it. There is often little follow up after the workshop.

In addition to receiving training, a large incentive for many developing country representatives to attend these training workshops is that they receive a Daily Subsistence Allowance (DSA).  For government employees in many countries, this DSA money can represent a significant fraction of their salary. Additionally, going to fancy international meetings is a prestigious honor back at home. The point here is that the incentives are not necessarily there for government ministries and NGOs to send the right people to the workshop — those that can really use and implement the skills gleaned from the training.

Here at the Institute we take a different approach to capacity building. Focusing on the process of professionalization and the establishment of associated community norms, we take a more systemic approach. We strongly believe that professions — like law, accounting, engineering, medicine, etc.—have had a powerful influence on economic and social development. An emphasis on professional competency, quality, and ethical behavior provides the kind of social infrastructure that make it possible for larger things to happen that the broader society would otherwise not have confidence in doing. This point is especially relevant where the issue involves a public collective action problem, like addressing GHG emissions.

Building a professional community is a challenging project for anyone. Doing so both globally and quickly is even more difficult. Luckily, we have new communication tools to help facilitate the process and create the kind of infrastructure for training, community networking and norm setting, standards development, and professional certification that our parents could only have dreamed of. It is this infrastructure that the Institute is focused on building, in collaboration with partners around the world.

Our grassroots approach to capacity building is founded on centuries of human history. Professionalization is a powerful and enabling force. GHG measurement, reporting and verification will make up the foundation of nearly all climate change policies. But for society to have confidence in these metrics, they will have to be produced by personnel they trust. Right now we don’t have that trust, a shortcoming that must soon be rectified if we are to sufficiently scale climate change mitigation efforts. Our vision and solution to this trust gap is a community of professionals that support each other and police each other’s behavior.

Many of you may also have noticed that we charge for our training (although we provide generous financial aid and even full scholarships to many), while most other international capacity building initiatives provide training for free. We think this is an important difference. To develop the type of high quality training programs consistent with university degrees and other professional designations, it is essential to leverage resources beyond those that are available through international development funding.  It is also important for there to be a self selecting process for those that want to join this new community of GHG professionals. We want to have the correct people in the “room” that will be the experts and champions for the future of the profession. Ultimately, the profession must be viewed by society as earning their credentials in a credible manner.

I welcome your thoughts on how to best address the capacity building needs related to climate change and GHG management.

Why e-learning?

Here at the Institute, we are consistently amazed at the number of people who blindly assume we deliver training in a standard classroom setting. Indeed one of the most common inquiries we receive is where and at what time we are offering classes. After more than two years of responding to such format questions, we have gotten pretty good at explaining the how and why of the online learning tools (i.e., e-learning) we utilize.

Many of you will have noticed our big announcement regarding the launch of ghgLIVE, a joint initiative with the organizers of Carbon TradeEx and Carbon Expo, to provide onsite training workshops on GHG management.

Yet our focus is and will continue to be heavily based on e-learning.  It is reasonable to ask us to justify this strategy. In a question: “Why favor e-learning over traditional in classroom learning?”

Our reasoning for e-learning delivery proceeds as follows:

• Learners can proceed at their own pace, an approach that has been proven to maximize knowledge and skill acquisition;
• The course is always “on,” minimizing the delivery challenges associated with the classroom;
• The course can be taken “anytime, anywhere,” improving access for learners in all countries and locations;
• The cost of training can be minimized without sacrificing quality; and
• We can avoid the emissions associated with traveling and commuting while still providing global access to world-class instructors.

And outcomes? Are we sacrificing on quality to reach more people and avoid travel? Actually, reviews of learning effectiveness point to e-learning as not only being on par with classroom-based learning, but one of the most widely accepted studies on the matter concluded that e-learning was in fact more effective than face-to-face instruction:

“The meta-analysis found that, on average, students in online learning conditions performed better than those receiving face-to-face instruction”

- Evaluation of Evidence-Based Practices in Online Learning: A Meta-Analysis and Review of Online Learning Studies, U.S. Department of Education, 2009

This study found that superior outcomes for students engaging e-learning were explained by students tending to spend more time on online courses than the face-to-face equivalent course. And learners spent even more time, and did better, in blended courses, combining face-to-face and e-learning.

Our primary learning strategy is a blend of e-learning with experienced instructors and in-person workshops to practice and reinforce skills.  Due to the time and resources required to develop an e-learning course (we can definitely testify to this), more time is spent creating a course with strong pedagogy, which then leads to better quality instruction.

It is interesting to think about this study’s findings as they relate to the future of education more generally, especially university (post-secondary) education.  Could we do away with universities and put everything online?

Several schools are experimenting with online learning, including the program we partnered with at Harvard.  And there are even some totally online universities, such as Capella. But could universities go the way of travel agents and newspapers?

One company that is pushing this envelope is Straighterline, which provides online university level courses for typical subjects for just a flat rate of $99/month plus $39 per class.  Imagine a college education for a few hundred dollars per year.

Are these guys going to close down Princeton and Harvard.  No.  But mark my words: online learning will become a disruptive technology.  The next generation is increasingly comfortable doing almost everything online.  And with the internet, multimedia is beginning to deliver on its promises.  The economic pressures are too real to fend off forever.  Rich families will still go for the Ivy League brand.  But imagine it being possible for poor families in developing countries to afford a college education for their children.

Or imagine an entirely new professional community being trained and created globally in just a matter of years so that we can address the greatest environmental and social challenge of our time.

If we want to double and then triple the number of people around the world getting a college education (or exponentially grow the number of GHG management professionals around the world), how else can you imagine accomplishing this feat?

Other readings:

College for $99 a Month: The next generation of online education could be great for students—and catastrophic for universities. Washington Monthly, by Kevin Carey, September/October 2009.

A Virtual Revolution Is Brewing for Colleges. Washington Post, By Zephyr Teachout, Sunday, September 13, 2009.

A time for reflection

As we close out this year, now is a good time for some refection before we charge into a new calendar. At the Institute, we have done just that, by releasing a report on our first two years of operation.

In founding the GHG Management Institute, we were inspired by looking into both the future and the past. For the future, we recognized that, despite short-term political volatility, addressing climate change will dominate our future and our children’s future. So, when we thought about what we could do to meet this challenge, we focused on thinking long-term and on core capacity needs.

To identify those needs, we looked to the past and asked ourselves how society has addressed other massive challenges. One of the reoccurring trends we saw was that when society faced a pervasive and difficult challenge, new professional classes often emerged to address them. The challenge of social justice saw the creation of lawyers, judges, and law enforcement. The challenge of funding government saw the creation of accountants (for paying taxes). The challenge of education saw the creation of teachers. And so on. The model of professionalization is pervasive throughout society. We decided this model needed to be replicated in the context of climate change. The only unique aspect of our challenge is that this process of professionalization needed to be done quickly and on a global scale.

In 2002 the foundations of the Institute began to be set. Finally, in 2007, the Greenhouse Gas Management Institute was launched as the only global institution of professional learning and development focused on the rigorous and serious issue managing the emissions that are the cause of global climate change.

We set up the Institute as a nonprofit organization because we recognized the need for a credible and independent forum for training and professional development. We believe performance metrics—for emissions, personnel, technologies, etc.—are the basis for addressing the challenge of climate change. In international negotiations we call the development of these metrics “monitoring, reporting, and verification” and “GHG inventories.” For corporations, we refer to “greenhouse gas accounting.” And in the offset project markets we speak in terms of “protocols, methodologies, and monitoring.” Underlying all of these policies, markets, regulations, programs, and standards are professionals that enable action to be taken over the long-term by managing (e.g., reducing) greenhouse gas (GHG) emissions and providing the essential information needed to track performance.

The Institute’s educational, membership, and professional programs are designed to support GHG professionals globally to fulfill this essential role. Greenhouse gas management professionals will be one of the major green job categories of the future because they will provide the foundation upon which climate change policies and carbon markets will be implemented and grow.

Our focus is narrow by design: on GHG management, accounting, and auditing. Research and educational institutions around the globe are training experts in economics, engineering, and atmospheric science. And business and management schools are developing programs in corporate sustainability. But the Institute is the only global educational institution focused on the techniques and real world practicalities of accounting, auditing, and managing for GHG emissions. As we increasingly take the issue of climate change seriously, the need and demand for experts with skills and knowledge in GHG management and accounting will exponentially outstrip supply. Our 2009 Greenhouse Gas and Climate Change Workforce Needs Assessment Survey clearly illustrated the trends in the emerging field of GHG management. Organizations and governments around the world are beginning to realize that measuring and tracking GHG emissions is the first step to thinking about how to manage the issue. If you cannot measure, you cannot manage.

The Institute is not only focused on training. We take the term “professional” seriously and mean to create, in collaboration with our partners, professional designations that are unquestionably credible. Being a professional means meeting ethical, competency, and practice standards. With this definition in mind and our vision of becoming a leading professional association, we have created the world’s first Code of Conduct for GHG management professionals.

Currently, because of the near complete absence of educational and professional development opportunities at traditional institutions such as universities, there is no clear career path into the field of GHG management. Therefore, a rigorous training, membership, and professional certification programs will provide aspiring experts a clear career path that will enhance our ability to address the human resource needs that will result as we scale up our efforts to address climate change.

We sincerely fear the specter of discredit that would fall upon the entire endeavor of meeting the challenge of climate change if GHG policies and markets were to experience scandals like those in the financial world. The numbers upon which we build climate change polices and carbon markets must be of the upmost credibility.

Our primary learning strategy is a blend of the best of e-learning and interaction with experienced instructors. E-learning is a highly-effective means of reaching out, educating, and bringing together people around the world. I’ll be talking more about this in a later blog post.

In summary, much of the last decade has not been dominated by pleasant events. Terrorism, financial collapse, and more than a decade has passed the Kyoto Protocol was negotiated. Yet we seem only marginally closer to dealing with the challenge of climate change in a globally coordinated fashion. But, we take the long view, and try and look beyond our short-term political set backs. Climate change is real, this we know. Eventually the world will come to accept this fact more fully and embrace more aggressive action. Our role is to be sure the professional capacity is there, ready act, when the call goes out.

GHG Management Institute Historical Timeline

COP15 Postmortem: Part I the UNFCCC process

It has taken this observer a few days (critically complemented by well overdue restful nights) to fairly assess the results of the Copenhagen fortnight. This delayed consideration is in part due to access, an issue I will raise first, not in order of importance, but due to the immediate impacts on my final days at the COP.

The UNFCCC Secretariat and COP host city have historically made Herculean efforts to ensure proceedings are transparent and accessible to all that have a legitimate stake in the process. Indeed the first week of COP15 was no exception to this admirable trend, even as Copenhagen’s Bella Center swelled under the strain of a record number of participants. However, burgeoning crowds of new arrivals in the COP’s second week confounded UNFCCC computer systems, strained already taxed logistics, and quickly exceeded the building’s occupancy limit. These capacity issues were further compounded as scores of high-level ministers and accompanying entourages streamed in for the latter week’s push. Finally, access went from difficult to impossible as security was heightened in the closing days of the COP to accommodate the almost 120 heads of state assembled to throw their weight behind the negotiations.

The sheer logistical challenge of accommodating so many eager participants marked an inflection point in the UNFCCC process in a number of respects, with COP15 representing the first significant limitation of access to civil society. While the organizers’ decision to pare down the ranks of admitted NGO observers from more than 10,000 to 7,000 and finally to just 300 sparked visceral outrage, an alternate emotionally-removed perspective would be right to note that these were not arbitrary restrictions and by many measures the action required to manage this heightened interest speaks to the ascendency of climate change from an obscure technical conversation to a top tier pressing issue of our day. Nevertheless, the fact that an unwieldy 45,000+ registered for the COP – an awkward number for any venue outside of a football stadium – inexorably leads to a conclusion that the UNFCCC COP process requires fundamental retooling.

Indeed, in the wake of spoiled expectations having very little to do with civil society’s harrumphing, some commentators are loudly arguing that the UNFCCC process is not just broken, but unfixable. Highlighting UN formality and decorum with specific reference to the fora’s fixation on unanimity and in turn the equal power it de facto grants nations large and small, these voices suggest diversity ultimately undermines expediency. Pointing to the limited number of participants (five named with 28 total signatories) in the summit’s vague but incrementally ambitious gesture towards an international agreement, the U.S. brokered Copenhagen Accord, the value of alternative venues for large emitters has again risen to the fore. In fact one such meeting has already been proposed by French President Nicholas Sarkozy in advance of the UNFCCC’s summer intersessional (tentatively the body’s next scheduled meeting).

Debate over the UNFCCC process will undoubtedly pick up in the New Year, but for now the preliminary noise being made on the topic provides an interesting backdrop for the subject of the part II of this post: the actual progress made at the COP.

Crowds at the Bella Center queue outside the COP in long lines, often for hours at a time. photo courtesy of: http://www.flickr.com/photos/aussmc/4187971144/

Standing room only at the Institute’s Copenhagen side event

On Saturday evening the Institute had the distinct pleasure to co-host an official COP15 side event with the Business Council for Sustainable Development (BCSE) and the Carbon Disclosure Project (CDP).

The event, “Driving Low Carbon Investment,” drew a capacity crowd on the COP’s traditionally sleepy “changeover” day – a particularly impressive turnout given that the event happened to coincide with the commencement of the ever-popular Saturday evening NGO party.

The COP audience was treated to high-level presentations and insightful discussion on issues at the convergence of investment and measurement, monitoring, reporting, and verification (MRV), an impeccably topical conversation for the COP negotiations.

The event was kicked off by a short introduction from BCSE executive director Lisa Jacobson, and helmed by Richard Gledhill of PricewaterhouseCoopers.

The Institute’s Stelios Pesmajoglou began the evening’s presentations with an overview and projections on the role of MRV in the international process, highlighting key issues and challenges with a particular focus on the need for strengthened human capital and associated resources to achieve implementation.

Paul Simpson, CDP’s COO, then provided a corporate context, tying in his organization’s experience in providing an outlet for voluntary reporting of carbon liabilities.

With the tone set for discussion, the presenters gave way to a diverse panel of respondents.

At the governmental level, Suresh Prabhu, Indian MP and former minister several times over, offered perspective from his rapidly industrializing native India.

From the private sector, Karen Utt of U.S. consultancy Conservis spoke to her experience working on corporate inventories drawing specific attention to the challenges of accounting for Scope 3 emissions.

Looking at the other half of this equation, Institute Advisory Board member and Point Carbon Senior Advisor Einar Telnes, highlighted the importance of aligning training to reporting, citing the need for skill characteristics transcending financial auditing.

Finally, Nick Robins from HSBC took a step back and considered the role of MRV from the view of the investor community, drawing out the well-understood concept that there is a market failure in climate pricing, to further advise that there is a more fundamental and pressing market failure in climate data.

In sum, the event was both a success and a call to action. The evening’s engaging dialogue not only clearly outlined the importance of MRV in climate policy, but also served as a sharp reminder of the challenges implementation poses and the importance of integrating robust complementary professional capacity.

(Left to right) Richard Gledhill, PwC; Paul Simpson, CDP; Stelios Pesmajoglou, GHGMI

(Left to right) Einar Telnes, Point Carbon; Karen Utt, Conservis; Suresh Prabhu, Indian MP; Nick Robins, HSBC

COP 15 Week in Review

As the first week came to a close at Copenhagen’s Bella Center, I took a moment to record a few impressions on the grueling COP process and an overview of some issues the Institute will be watching as the negotiations advance.

Climate-gate and Sarah Palin?

You know that the times are getting a little weird when Sarah Palin starts talking about historical reconstructions using proxy data of average global surface temperature (see her recent opinion piece in Washington Post).

I really should keep this blog focused on items that are more core to the mission of the GHG Management Institute, but I am compelled to comment briefly on the issue of the stolen emails from the research center at East Anglia University.  I am compelled because they are being used as a political weapon to discredit well-substantiated understanding of atmospheric science.

The U.S. EPA has finalized its endangerment finding under the Clean Air Act, which now clears the way for regulations of GHG emissions in the United States for vehicles and ultimately other sources.  Immediately the EPA was sued by the Competitive Enterprise Institute, in part based on what they see as a smoking gun within these stolen emails that they claim are evidence of climate change being a big hoax.

There are now multiple investigations in the works to determine if any improper actions were taken by the scientists whose emails were stolen. Although, I cannot say with certainty, my bet is that the only improper action that will be uncovered is the obvious one.  That by those who illegally stole personal emails from respected scientists.  Already, one of the scientists involved in the so-called “climate-gate” has received death threats and another climate scientist in Canada has had is office broken into.  This state of affairs is the sign of an anti-climate change policy movement that is so lacking in credibility that anything goes.

The truth is that there is almost no credible science behind the other side, which is why they have to fall back on twisting words in private emails out of context to try and manufacture a conspiracy.

Just imagine trying to get thousands of scientists, researchers and academics from around the world to maintain and coordinate a decades long conspiracy for manipulating research results.  Yeah, right!  Scientists could pull that off.  Science does not always get everything correct the first time, but it is not because of some conspiracy (see The Structure of Scientific Revolutions (1962), by Thomas Kuhn).

I am actually happy that CEI filed this lawsuit because now a judge can look at all the evidence behind climate change and pass judgment.  I am pretty confident about the conclusion.  And just like the judge that looked at intelligent design as an alternative to Darwinian evolution (see Kitzmiller v. Dover Area School District), another judge can expose the climate deniers as the pseudo science that they are.

If you want to look more deeply into the stolen emails, see a really useful investigation by the Pew Center on Global Climate Change.

This week’s guest blogger – Don Bain

Please join me in welcoming one of our alumni and members as guest blogger this week for Inside the Institute. Don Bain is a highly successful management consultant, software expert and professional engineer.  He recently participated in the stakeholders’ workshops at WRI on new draft standards and is guest posting on Inside the Institute to stimulate a conversation with our Membership.

Last week I was privileged to attend the last stakeholder workshop for review of the GHG Protocol Standard for Value Chain and Product Life Cycle accounting and reporting.  The workshop was hosted by WRI in Washington, D.C. and was the final workshop in a multi-national series to afford the opportunity for the stakeholders to provide in-person feedback on the draft standards.  Work on these standards kicked off in 2008 in response to needs assessed by a survey conducted by WRI and WBCSD and included GHG Management staff on multiple workgroups.  These standards follow the well-received and successful GHG Protocol Corporate Accounting and Reporting Standard and GHG Protocol for Project Accounting, published by WRI/WBCSD.

Here are the headlines:

• over 100 people showed up and are engaged (my estimate)
• many companies including IBM, Levis, Kraft, DuPont, Sun Microsystems and Unilever attended
• a few NGOs, and a number of U.S. govt. agencies including EPA, Commerce and GSA attended
• consultants, at least one accountant and a few software providers attended.
• according to the WRI/WBCSD project team, over 50 companies have volunteered to “road-test” the new standards in 1Q & 2Q2010; remarkable
• motivation  to participate is high and not just based on anticipated regulatory compliance requirements.

My observations:

The 2 standards are well-written, large relative to the previous standards (nearly 100 pages), and ambitious.  There was some ‘grumbling’ about the amount of work and data implied by some practitioners in the room, but this constructive tension seemed borne of a grasp of the personal effort that will be required and a tacit commitment to getting it done.  In fact, an informal poll in a break-out session as to whether the standards should proceed to road testing and implementation resulted in an overwhelming ‘Yes’  response.

There are a few gaps in the documents remaining to be completed, but none that would preclude proceeding to the road test and implementation phases.  There were many comments back to the standards project teams, constructively delivered and well received.

One group of comments particularly struck me.  These comments advocated closing potential loopholes in the draft language that might be exploited to avoid accounting for all emissions.  The consensus was to favor more rigorous standards language in hopes that the uptake and results would be of higher quality.  At first, this seems in paradox to the previously mentioned concern for the quantity of work involved, as tougher standards mean more effort.  But it makes sense.  People in that room were highly motivated, alpha adopters.  It is no surprise they want to demonstrate leadership.

In one of the breakout sessions, I polled the room informally, asking: “This supply chain standard depends upon suppliers and trading partners to provide quality data on their scope 1 and 2 emissions.  Do you feel they are in a position to do so?”  The prevailing consensus in the room was ‘No, not yet’ and ‘They still need our help.’  I further asked, “What percent of your suppliers are in a position to provide quality data?”  Only one person ventured a response:  “Maybe 20%.”

Reflecting on the workshop, it was a good investment of time.  I studied the standards beforehand, had some things to say and the GHG Protocol team listened. Moreover, I heard some great anecdotes from practitioners and met some excellent people — birds-of-a-feather so to speak.

The comment period for the draft standards is open until December 21, 2009.  I strongly urge practitioners to read the draft standards available here and submit comments via the comment templates provided on the same source page.

If you attended one of the workshops, I encourage you to weigh in on your experience via the comment section below.

Don M. Bain, P.E.

Update from COP15 – What a ‘Whirlwind’

To say my first two days at COP15 in Copenhagen have been a whirlwind, would not only be a tired cliché, but would also horrendously underestimate the speed at which the wind has proverbially encircled this program associate cum international correspondent.

Indeed the COP, loosely charged with forging the framework for a new global treaty addressing the largest collective action problem the world will ever see, has had the effect of galvanizing more than just the technocratic climate brass. First and foremost, serving as the venue for a dizzying (with another caveat on the limitations of this term) array of concurrent UN negotiations, the COP’s deliberative core is in turn orbited by myriad official and unofficial side events, adding several layers of complementary conversation, debate, and information sharing amongst a diverse set of international actors representing civil society, government, and industry. A rich and fascinating informational overload, the parallel to multi-ringed circus is not lost on this author…

Over the next two weeks I will be delivering a few “postcards” from my experiences at this climate ground zero. I won’t get too deep into the nitty-gritty of the negotiations – there are plenty of other outlets for that level of analysis. But I will offer some observations from Denmark that bear particular relevance to the work of the Institute.

This first post takes that mantra quite literally speaking to my experience presenting an overview of the Institute as a part of the UNFCCC’s iSeeT exhibit. Located in the heart of the Bella Center, this open-aired venue is a central crossroads of exceptionally high visibility. A great locale to catch the ear of interested passers-by, it is also an obvious spot for demonstration. So it was with little surprise that two-thirds through my talk, I was forced to save my voice in deference to the sizeable swarm of media occupying a space no more than 30 feet from the podium covering an African protest to issues surrounding the negotiating topic du jour: the day’s leaked “Danish text.”

video: http://blogs.reuters.com/mario-disimine/2009/12/08/africans-protest-cop15-say-process-manipulated/

(For reference I am 180 degrees behind the cameraperson, and yes that melodic lull in the background is my presentation.)

An interesting initiation to what will doubtless be an eventful two weeks.

Poorly informed critiques

A group of climate activists have just produced an entertaining animated short called “The Story of Cap & Trade.” Although the film is correct to worry about market manipulation and the transaction costs of those we now love to hate on Wall Street (some of which seem to believe they create value in the economy equal or greater than their inflated salaries), it misses the point on policy.

Emissions trading is more complex than the film’s makers present. I could discuss at length the numerous liberties taken with the truth in the film, but it is more important to focus on the grown up arguments.

1) Political reality:  Cap and trade has the potential to pass the US Congress.  A carbon tax does not.  It’s that simple; no amount of cute animation films is going to change that.

2) Fraud:  While it is something we need to be vigilant about, we are not new to emissions trading.  We have been doing it nationally in the United States for more than a decade without massive abuse or fraud, and instances of fraud in the EU ETS have been minimal to date and are being addressed.

3) Offsets:  While offsets are a challenging environmental commodity to implement well, they are not impractical.  They are worth using, despite complexity, because they offer the unique potential to reduce emission in places and sectors that are inexpensive and that otherwise would be ignored.

4) Alternatives:  The filmmakers’ chosen alternative of essentially using command-and-control regulation and “carbon fees” (i.e., taxes) is by no measure superior.  It is not clear we know how to regulate this many different kinds of sources with strict technology and other mandates.  What we do know is that we would probably get a lot wrong and that it would take decades to get all the regulations in place.  We can get an emissions trading system up and running rather quickly.

As for carbon taxes, they do have benefits, but they also have their own problems.  The filmmakers complain about how allowances are allocated.  But do you think that redistributing all that tax revenue would be any less political?  And taxes are more difficult to monitor and enforce within an international treaty.  Countries can easily evade the punitive impacts by providing other economic kickbacks to industry that negate the economic effects of the tax.  Emission caps are more easily monitored and enforced within an international treaty.

Importantly, emissions trading instruments provide policy makers with some price discovery for both the current and expected cost of mitigation.  This is very powerful and something that taxes will not do.  With taxes you have to guess what the right tax rate is.  But with emissions trading the market tells you how much it costs to reduce.  Then you can adjust caps in the future accordingly.

Lastly, with taxes you have no certainty of the quantity of reductions you will achieve.  This is usually something that most environmentalists are concerned about.

I could go on, but this is a long blog post already.  In reality, it is not that cap and trade is always preferable to other kinds of regulation or carbon taxes.  What policy is best depends on the characteristics of the emission sources and the economics involved.  Different policy tools are appropriate in different circumstances.  And we will need to use them all.  Nothing says we can’t have both a carbon tax, with an emissions trading scheme, then regulation for some other sources, and offsets for even others.  As a matter of fact, I’m pretty sure that is where we will end up when we graduate from the cartoon world to the world of grownups.

Links:

http://storyofstuff.com/capandtrade/

GHG Accounting: Rocket science without the calculus

In an interview the other week I made the lazy mistake of oversimplifying GHG measurement with a tired colloquialism. While this may read as a statement of regret, I’m actually quite pleased I made this little slip as it spurred alumnus, member, and all around friend of the Institute Don Bain to take me to task in a succinct clever synopsis. Please read on for more on the actual relationship between GHG accounting and rocket science.

Well actually, greenhouse gas accounting is closer to rocket science than you think. Rocket science starts with a calculation of how much thrust is required to get to orbit, go to the moon, or wherever.

Net Thrust = (mass of exhaust x velocity)

And guess what? Mass of exhaust is determined directly from fuel burned.  Turns out in rocket science we start with the mass of fuel (actually fuel and oxidizing agent) and calculate from there. A consumption side calculation.  Sound familiar?  Think of it as a not-so-stationary combustion calculation exercise.

Now I know you were evoking the colloquialism to suggest that greenhouse gas accounting is straightforward and can be readily done by mere mortals.  Rocket science can too, with just a little calculus.  The trick is learning how to break down the problem into component parts that can be readily solved with the tools at hand.  That’s the essence of the Greenhouse Gas Management Institute courses: tools and techniques, once mastered, that make it look easy.

So think of greenhouse gas accounting as rocket science without the calculus.  Both fields are straightforward, if you invest in a little knowledge first.

Saying Goodbye to the Copenhagen Protocol

Those of us constantly sniffing the political winds during the numerous negotiations leading up to this December’s Conference of the Parties (COP15) in Copenhagen have known for some time that the chance of a real deal on a new protocol were near zero.More important to developing this intuition is tracking the political tide here in Washington, D.C., where the never ending debate on national reform of heath care policy has burned up all of the oxygen in the city and left Democrats less willing to push another “liberal” issue, and has Republicans smelling blood in the water as they continue to be the party of “NO” on every item on the Obama agenda.

We may still get emissions cap-and-trade legislation in the United States, although the chances are not great.  But months back, it became clear that getting legislation through the U.S. Senate was unlikely before the Copenhagen meeting, and so it would be nearly impossible to create the certainty U.S. negotiators needed.  If U.S. negotiators could come to the table with a firm target, then they could break the international logjam that could create a deal that China, India, Brazil, and the Europeans could go for.

We have to remember, though, that even with Kyoto back in 1997, there were a couple years of follow on negotiations needed to really put meat on the bones of what was a pretty thinly specified treaty.  Unfortunately, we won’t even have something like this coming out of Copenhagen.

In the meantime, carbon markets will continue to suffer from investor uncertainty.  And we have another one to two years of continued negotiations internationally.  The extra time does mean we have time to build up the kind of infrastructure that the GHG Management Institute was designed to do.  Specifically, we are developing the first rigorous and global professional certification program for the serious work of GHG emissions accounting, auditing, and management.  Much more on this coming soon, including a new article in the forthcoming Dec/Jan issue of Environmental Finance.

Michael Gillenwater

Dean, Executive Director, Co-founder

What do we think of the Clean Development Mechanism?

The GHG Management Institute is a founding member of the Offset Quality Initiative. OQI is a consensus-based effort that brings together the collective expertise of its six nonprofit member organizations: The Climate Trust, Pew Center on Global Climate Change, Climate Action Reserve (formerly CCAR), Environmental Resources Trust/Winrock International, Greenhouse Gas Management Institute, and The Climate Group.

We spent much of this year looking in detail at the history and operations of the Clean Development Mechanism and are releasing a new paper on it as I write titled: Assessing Offset Quality in the Clean Development Mechanism. The CDM, created under the Kyoto Protocol, generates emission offsets through investments in GHG reduction, avoidance and sequestration projects in developing countries. These offsets can be used by developed countries to cost-effectively achieve their Kyoto Protocol GHG reduction targets.

The CDM has been subject to a number of critiques, many of which call into question the program’s ability to generate high quality offsets. In this paper OQI provides an impartial description of the CDM and analyzes its ability to ensure offset quality in the future, based on the eight core criteria for offset quality outlined in OQI’s White Paper: Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets into North American Cap-and-Trade Policy.

Overall, OQI found that the CDM’s processes perform sufficiently against most of our core offset quality criteria, and with further refinement should be capable of performing sufficiently against all criteria. The biggest quality issues in the CDM have historically had to do with additionality and the reliability of independent third party verification. These issues are common across all offset programs and, in the case of CDM, can be addressed through streamlining and standardization of the additionality tools and significant restructuring of the third party verification system. On all other criteria, OQI finds that the CDM, with some modification, can sufficiently ensure offset quality.

Give it a read and let us know what you think.

Michael Gillenwater
Dean, Executive Director, Co-founder

Hot, Cold, Warm: The ever-changing role of North America’s regional cap-and-trade programs

Interest in North America’s trilogy of regional cap-and-trade schemes has seesawed since a group of northeastern US states first came together in the early half of this decade to put up a united and ambitious climate policy front in the face of federal inaction.

Hot
Commentators drawn to the states’ rights storyline, intrigued by the prospect of [incrementally] bringing carbon trading to the US, and charmed by the program’s anthropomorphized acronym (RGGI –> “ReGGIe”) embraced America’s first regional scheme.

Cold
Perhaps in part due to staler “acronyese” amongst the Regional Greenhouse Gas Initiative’s copycat brethren the Western Climate Initiative (WCI) and the Midwest Greenhouse Gas Reduction Accord (MGGRA), but more substantively a result of changing national political circumstances, interest in the genre subsequently waned. Indeed, acting as something of an inverse indicator of US federal climate policy hope, the regional schemes suffered an initial Obama bump… to the realm of irrelevance marked by legal discussion of preemption and codified in explicit credit-conversion provisions of the House-approved ACES bill.

Warm
Now that the cap-and-trade obstacle course has been marked in the US Senate, E&E News is reporting that, like a phoenix from the ashes, last week’s gathering of regional cap-and-trade leaders in Washington to discuss program linkage is again worth noting.

Rooted in in-your-face American federalism, made meek by the reality of narrow political applicability, and now diligently working behind-the-scenes, North America’s regional cap-and-trade schemes are emerging as a dark horse hedge against the possibility that a climate bill will fail the Congressional test.

Tim Stumhofer, Program Associate