The Sustainability Buzz

2016 — The Real Work Begins

Eiffel TowerWelcome to 2016, the year with the best chance so far of concerted progress towards sustainable improvement in the U.S. and the world! What will it mean for you, your company and your world?  Let’s take a look back at what happened in 2015 and see how that positions us for the new year.

There were two significant events in the sustainability world in 2015 – the Paris Conference on Climate Change COP21 and the release of the US EPA Clean Power Plan. COP21 ended with a global agreement among more than 190 countries to take legally binding steps to combat the effects of climate change.  An agreement of this breadth has seldom been seen in world history, ranking along with the creation of the United Nations, the World Trade Organization and Bretton Woods.

The agreement, which includes legally binding requirements, commits its signatories to:

  1. Employ all possible measures to keep global temperature rise below 2 degrees Celsius, with an even more ambitious stretch goal of 1.5 degrees Celsius.
  2. Provide a detailed, structured plan to reduce CO2 emissions every year. These plans must put forward a target, explain the target, and identify standard means of measuring carbon inventory and reporting reductions so that the rules for counting emissions are transparent. This portion of the agreement is legally binding.
  3. Assist developing countries to achieve their targets, including providing technology, financing and other support. The Green Climate Fund serves as the primary mechanism for funding projects focused on helping developing countries in particular meet their targets.

As a corollary to the COP21 agreement, Bill Gates and Mark Zuckerberg announced the creation of the Energy Breakthrough Coalition, to facilitate “large funding commitments for basic and applied research.” According to its site, the coalition will also focus its investments on “early stage companies that have the potential of an energy future that produces near zero carbon emissions and provides everyone with affordable, reliable energy.”

In addition, Bill Gates and President Obama have announced the creation of Mission Innovation to double the public investment in energy research from $10 to $20 billion over the next five years.  Nineteen governments have already signed onto Mission Innovation, including China, India and the U.S.

All of this points to the clearest market signal so far that clean energy production and the development of new clean energy technology will dominate global investment now and for the foreseeable future.  Extraordinary global market opportunity will be created for exporting technology for clean energy, overtaking fossil fuel by 2030.  Unlike in the U.S., other governments have not been questioning the need for change in fundamental energy policy. This translates to an export market eager to capitalize on new energy technologies.

Beyond just the energy sector, the COP21 agreement foreshadows an accelerating decline in coal, an increase in onshore manufacturing due to the enormous carbon impact of world-wide shipping, tighter CAFE standards which ultimately reduce transportation costs, and increased investments in infrastructure that supports carbon “sink” projects, such as sustainable forestry and reforestation.

And closer to home?  That’s where the Clean Power Plan (CPP) comes in.  Each signatory to COP21 is required to produce an Intended Nationally Determined Contribution (INDC), basically the structured plan mentioned in item two above.  For the U.S., that plan is the Clean Power Plan.

The CPP was announced in August 2015, the first-ever national standards that address carbon pollution from power plants.  The final rule was developed following more than 4.3 million comments received by the EPA on the draft version.  It provides a framework for moving from fossil fuels to clean energy between now and 2030, targeting a 32% reduction in carbon emissions from the power sector by that date.

The most effective component of the CPP is the flexibility for each state to develop its own compliance plan, using a combination of approaches that works best given each state’s current energy mix.  Each state has its own reduction target as identified by the EPA in collaboration with the state.  The Plan’s flexibility permits a state to construct a plan that could improve current power generation efficiency, reduce demand at the consumer level, invest in and expand clean energy production, some combination of those or other creative approaches as long as it reaches the target reduction.

Another component of the CPP permits states to work together on multi-state approaches, including emissions trading.  From the EPA’S description of the Plan’s components, this will “allow [each state’s] power plants to integrate their interconnected operations within their operating systems and their opportunities to address carbon pollution.” The ultimate goal of the flexibility of the rule is, again in EPA’s words, “to reduce costs to consumers, minimize stranded assets and spur private investments in renewable energy and energy efficiency technologies and businesses.”

For American business, that means stability in the direction that public policy will take over the next fifteen years.  We’ve often discussed how the unknown in business can increase risk and cause businesses to be unwilling to take action for fear of what might be coming. The CPP removes that risk by outlining a clear path to a clean energy environment, encouraging businesses to expand with greater certainty.

There has been some concern about the future of the CPP because 20 energy companies and 27 states as well as other organizations have filed suit against the government to halt the CPP. The U.S. District Court of Appeals for the DC Circuit rejected those efforts last week to put the carbon emissions rule on hold. The CPP will remain in effect and implementation can begin while the lawsuits wind their way through the judicial system.

What can you do to support the Clean Power Plan?

First, you can learn more about it. This EPA Fact Sheet covers the history, contents and benefits of the CPP.  You can read more detailed information on the jobs and business impact of the CPP here.  Give some thought to how the CPP will influence your business and your life and then drop an e-mail or letter to your state legislator in particular, encouraging him or her to support your state’s development of its customized implementation plan.  Point out why the CPP is particularly good for you and your business.  Or give them a call.

2016 is when the work really begins on global sustainability. Until now, we’ve just been plowing the ground and planting the seed. It’s time to make sure it grows.

Why the EPA’s Clean Power Plan Is Good for Your Business

Clean Power Plan“On August 3, 2015, President Obama and EPA announced the Clean Power Plan – a historic and important step in reducing carbon pollution from power plants that takes real action on climate change. Shaped by years of unprecedented outreach and public engagement, the final Clean Power Plan is fair, flexible and designed to strengthen the fast-growing trend toward cleaner and lower-polluting American energy. With strong but achievable standards for power plants, and customized goals for states to cut the carbon pollution that is driving climate change, the Clean Power Plan provides national consistency, accountability and a level playing field while reflecting each state’s energy mix. It also shows the world that the United States is committed to leading global efforts to address climate change.”

That quote from the EPA’s website on the Clean Power Plan is an excellent summary of the Plan and its intended effects, but what does it really mean for your business? Most of us are not in the power plant business, so why does it matter that the EPA has taken this action?

Of course there are the obvious benefits for us as individuals and communities – cleaner air, reduced costs, reduced carbon emissions, more jobs – but as business people, the biggest advantage of the Clean Power Plan can be reduced to two words – mitigated risk.

Risk is the greatest challenge a business faces. It’s those inconvenient, unfortunate occurrences that threaten business survival. Accurate analysis of risk and the identification of appropriate mitigation strategies are what separate successful companies from those that are buffeted by unforeseen circumstances. The availability of reliable, affordable energy is critical to all businesses, especially those in the manufacturing sector. Price spikes and supply disruption create unanticipated costs and loss of profit.

The Clean Power Plan addresses those risks through a number of mechanisms.  The flexibility of the plan allows each state to adopt its own implementation path based on what works best for its current environment and energy mix.  Pennsylvania needs to reduce its power plant emissions by 32% by 2030. Our current mix of energy – 36% from coal, 24% from natural gas, 36% from nuclear and 2% from renewables – serves as the baseline for developing the plan. States can use any combination of improved energy efficiency at the consumer (demand) level, improved energy efficiency at the power plant (supply) level, and adjustment of the energy mix towards more renewable energy to reach their goals.

By permitting states to develop the plans that work best for them, the Clean Power Plan provides the leeway to make the best decisions to mitigate cost impact for the consumer, including businesses. The EPA estimates that by full-plan implementation in 2030, individual consumer energy bills will drop by $7/month. That may not seem like much, but multiplied by the amount of energy that a business uses, that is considerable. More importantly, it shows a downward trend in energy costs over a 15-year period. From a risk perspective, this is a much better trajectory than the spiking that’s been all too common in the last decade. And while energy costs have leveled off in recent years due to the greater use of natural gas, businesses still face the risk of high costs due to disruptions to the supply.

And that is the second way that the Clean Power Plan addresses business risks. Although we are far less dependent on Middle Eastern oil for power generation these days – and in Pennsylvania apparently not at all – we are still at the mercy of weather and accidents. The Fukushima reactor disaster in Japan following a tsunami is just one example. While it’s unlikely Pennsylvania will ever experience a tsunami, our increasingly extreme weather can cause accidents. The distressing number of train derailments and explosions and pipeline breaks can create disruptions to the natural gas supply. Mining accidents are not unheard of, nor are nuclear plant mishaps. Any of these can create energy disruption. With an implementation plan that supports a greater renewable energy component to Pennsylvania’s energy portfolio, power generation shifts to more reliable sources than fossil fuels. After all, the sun’s going to keep shining and the wind’s going to keep blowing, at least for the foreseeable future.

Perhaps you’re thinking that long-term dependence on renewable energy is improbable or impractical. The state of Iowa already produces 30% of its energy from renewable sources. The state of Colorado has reached 14%. With the incentives from the Clean Power Plan, any state can make a stronger move into renewables and Pennsylvania’s Renewable Portfolio Standard already requires that 18% of Pennsylvania’s generated energy come from alternative energy resources by 2021.

It’s not just the EPA that thinks broad-based renewables are the future. As part of Climate Week in September, nine more giant corporations pledged to transition to 100% renewable energy. Nike, WalMart, Goldman Sachs, Johnson & Johnson, Proctor & Gamble, Salesforce, Starbucks, Steelcase, and Voya Financial joined 27 other companies that have already pledged to make the transition. Steelcase already gets 100% of its energy from renewable sources.

In the broader picture, reduction in carbon emissions mitigates climate change. The cost of climate-related natural disasters in Pennsylvania in 2012 alone was $1,219 per taxpayer. Imagine the costs to business. Every ton of avoided carbon emissions lowers that cost.

The EPA’s Clean Power Plan mitigates the risk to businesses of increased costs and interrupted energy supply. Pennsylvania’s implementation of the Plan will have a direct impact on your business. Keep your eyes open for potential incentives for energy efficiency programs and adoption of renewable energy in connection with the Plan’s implementation. Make sure the Clean Power Plan works for you.

Beyond the Carbon Footprint: What’s Next?

Carbon Footprint cartoon“So we have our first carbon footprint measurement.  What’s next?”

Coupled with wanting to know how their company compares with other companies, this is the inevitable question management teams ask when presented with their first carbon footprint number.

A carbon footprint is only a baseline, and it is difficult for companies to compare themselves to other companies because of the wide variation in how organizations calculate carbon footprint.  While the Greenhouse Gas Protocol presents guidelines for establishing organizational boundaries, it isn’t prescriptive in its advice.  As a result, Company A may choose different boundaries from Company B, making a comparison meaningless.

Therefore, a carbon footprint’s value lies in its use as a yardstick against which to measure future reductions.  Here’s how we recommend companies make use of their first carbon footprint measurement.

1.  Use it internally.

A carbon footprint is a great starting point from which to measure improvements.  It can be a useful metric for management to make decisions, especially when combined with shadow pricing, a way to ascribe financial value to something—like carbon—where no market price currently exists.  (We discussed the concept of shadow pricing more fully in our last post on the Buzz.)

By combining the two, companies can get a much better handle on the true value of executing sustainability projects that have a carbon savings component, which are many of them.  This will prove especially useful once carbon pricing emerges.  (More on that in a bit.)

2.  Use it externally.

For companies that need to communicate their environmental progress to stakeholders outside the C-suite (and who doesn’t, really?), a carbon footprint can be a great tool to do so.  Publishing a baseline carbon footprint and the progress towards lowering that number provides credible proof that a company’s sustainability initiatives are making a difference.  It’s a meaningful step towards the transparency that many external stakeholders are seeking.

3.  Make a plan.

Considering the fact that climate change and carbon dioxide reduction continue to be on the global agenda, and that six major oil companies (somewhat shockingly) threw their support behind carbon pricing in a letter to the United Nations last week, it’s likely that some sort of carbon pricing structure is on the not-so-distant horizon.  And when that happens, companies will need a plan to mitigate their carbon or face an increase in the cost of doing business.

Determining its carbon footprint is the first step a company can take towards generating a low carbon future for itself.  It’s a journey that can mean considerable cost savings and reduced risk from an uncertain carbon pricing future.

That’s what’s next.

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