The Sustainability Buzz

Everything You’ve Ever Wanted to Know About Carbon But Were Afraid to Ask

Carbon - Periodic Table of the Elements“So why are we doing a Carbon Footprint?”

The question stopped me dead.  We’d been working for months with our industrial client to develop their first Carbon Footprint. Their team of very talented engineers had been excellent partners and we were making significant progress and then, the question.

“So why are we doing a Carbon Footprint?”

He didn’t want the obvious answer — that an executive at the company had asked for it to be done. He wanted to know how measuring the facility’s carbon footprint would be a valuable exercise.  And it reminded me that when you are immersed in a subject everyday, what you take for granted as shared knowledge is not necessarily the same as the general public’s. So with 400,000 people marching in NYC for action on the environment and Climate Summit 2014 underway at the United Nations, we thought this might be a good time to talk about carbon – the good, the bad and the misunderstood.  Herewith, A Carbon Primer!

Carbon
Carbon is a naturally occurring element, the fifteenth most abundant in the Earth’s crust and the fourth most abundant in the universe by mass.  It forms more compounds than any other element (almost 10 million have been identified to date) and is commonly found in the form of graphite and diamonds. The largest source of mineral carbon is coal.

Carbon is present in all known life forms and is the chemical basis for all known life.  As any good Star Trek fan can tell you, Spock was searching for “carbon-based life forms” every time the crew went off to inspect a new planet.

Carbon Dioxide
Carbon dioxide, the combination of one carbon atom and two oxygen atoms, is critical to life on the planet in its role in the carbon cycle.  This is in stark contrast to its evil sibling, carbon monoxide, the combination of one carbon atom and one oxygen atom, which is fatal to most life forms when inhaled in sufficient quantity.

Carbon dioxide occurs naturally in the atmosphere and, when combined with water in the process called photosynthesis, produces carbohydrates as energy for plant growth and oxygen as a waste gas that most life forms then breathe in.  CO2 is also produced through the breathing (respiration) of all oxygen-based (aerobic) organisms and through decay, combustion and fermentation. It’s also produced during eruptions from volcanoes and geysers and can be released from rocks by dissolution in water. Atmospheric CO2 is the primary source of carbon in life on Earth.

So far, so good. Carbon dioxide is clearly our friend.  And in fact the photosynthetic process has been capable of handling the balance of CO2 in our atmosphere since the Precambrian eon.  Carbon dioxide levels changed based on seasonal cycles and natural events such as eruptions and decay and the photosynthetic process adjusted and accommodated to those changes.

With the arrival of the industrial age in the mid-18th century, that careful balance began to be disrupted, as human effort began creating mechanical processes that slowly flooded the atmosphere with excess CO2, primarily from the combustion of fossil fuels in manufacturing. The natural cycles were unable to keep up with the increase in CO2. And this is where the trouble begins.

When carbon dioxide is released into the atmosphere, it serves, along with some other gases collectively known as “greenhouse gases”, as a blanket of sorts, permitting light from the sun to reach the earth but preventing some of the reflected light and radiated heat from escaping beyond earth’s atmosphere.  When the climate is in balance, this is actually a good thing as it provides the warming necessary to create our temperate zones and make Earth habitable.  But as the carbon dioxide levels increase, so does the blanket effect, increasing Earth’s temperature.  Voilá, global warming.  In addition, excess carbon dioxide dissolves in the oceans that serve as a giant heat sink for the planet.  That dissolution in water lowers the Ph level of the ocean by creating carbonic acid that leads to ocean acidification and the disruption of the life cycles of aquatic life forms.

Carbon Footprint
As the threat of excessive carbon dioxide emissions to the environment became increasingly clear in the last decade of the 20th century, the challenge of reducing carbon emissions (the shorthand for carbon dioxide emissions) was complicated by the lack of a consistent process to measure emissions by various entities – individuals, cities, industries.  The concept of the Carbon Footprint developed to standardize the measurement of carbon emissions across different organizational structures and to quantify the emissions that contribute to climate change.  As we at iSpring like to say, “If you can’t measure it, you can’t manage it”.  The Carbon Footprint is the first step in managing carbon emissions through careful measurement.

The Greenhouse Gas Inventory is a corollary to the Carbon Footprint and measures additional gases that contribute to climate change.  However, since carbon dioxide is the largest contributor to the greenhouse effect, calculating Carbon Footprint and managing it provides the largest initial improvement in emission reduction. In 2012, carbon dioxide accounted for 82% of all the greenhouse gas emissions from human activity in the United States.  The largest sources of carbon emissions were electricity, 38%, transportation, 37%, and industry, 14%.

The Carbon Footprint also identifies which processes of an organization produce the most emissions.  By pinpointing emission sources, companies can then more effectively target their reduction efforts.  The Carbon Footprint is typically comprised of direct emissions, e.g. from the burning of fuels to power machinery or used in transportation, and indirect emissions, e.g. from the production of electricity and the production of elements used in manufacturing. An industry with a highly-developed supply chain could produce a variety of Carbon Footprints dependent on the choice of scope – from the Carbon Footprint directly for manufacturing all the way up to a comprehensive Carbon Footprint that measures the entire product lifecycle – procurement through delivery to customer and recycling.

Carbon Tax
The challenge of reducing carbon emissions is compounded by the difficulty in getting some industries and manufacturers to voluntarily take measures to reduce emissions.  To that end, many countries and some U.S. states have voted for the imposition of a carbon tax.  This tax is levied on companies that produce significant levels of carbon emissions, at this time primarily utilities, heavy industry, and airlines. The governing body will generally legislate a carbon emissions limit, sometimes by industry, or, in the case of the European Union, a blanket limit for the entire Union. Companies are issued credits to the limit they are permitted. Companies that produce more carbon emissions than are legally permissible are then heavily fined for excessive pollution.  Over time, the emissions limits are slowly tightened, requiring more and more companies to implement emission reduction processes.

In reality, however, some companies produce far fewer emissions than the legal limits.  These companies then have excess credits that they don’t need.  Thus is created a carbon market.

Carbon Market
The carbon market is the vehicle for companies to buy and sell their carbon credits.  The EU-ETS (the European Union – Emissions Trading System) is the first and currently the largest system for trading greenhouse gas emission allowances.   This “cap and trade” system covers more than 11,000 power stations and industrial plants in 31 countries as well as airlines that have flights into or out of the partner countries.  69 U.S. companies participate in the EU-ETS.  The market covers 45% of the EU’s greenhouse gas emissions. When the Chinese carbon market opens as planned in 2016, it will immediately become the largest in the world.

There are two operating carbon markets in the U.S. One is in California. The other is in the Northeast, the Regional Greenhouse Gas Initiative (RGGI).

496 global companies that disclose to the Carbon Disclosure Project (CDP), a global non-profit dedicated to the reduction of greenhouse gases, are part of global carbon trading schemes.  Of those, 96 are U.S. companies.

Carbon Price
The existence of carbon markets allows carbon to be “priced”, i.e. the cost of a tonne of carbon can be derived from the price that traders are paying for credits on the carbon market.  According to the CDP’s most recent report, 150 companies have integrated a “shadow price” into their long-term financial planning and their future business strategies.  This is based on their assumption that global carbon pricing will become a reality in the near future.  By incorporating carbon pricing into financial modeling, these companies are reducing their risk of economic shock when the inevitable carbon tax structures are implemented.

29 large American public companies report that they have already developed a shadow price for carbon and are actively engaged in defining strategy based on those price assumptions.  Among the companies are ExxonMobil, Dow Chemical, Google, Delta Airlines, Hess Corporation, Chevron, Delphi Automotive, Duke Energy, Exelon Energy, Conoco Phillips, Microsoft, Walt Disney Corporation, Bank of America, Goldman Sachs and Google.  Google is actually already a carbon neutral company, purchasing high quality carbon offsets for their carbon emissions.  In that sense, the cost of carbon emissions has already been priced into Google’s operations.

Summary
So there’s the long answer to a short question.  Here’s the short answer: A Carbon Footprint helps a company identify its sources of carbon emissions in order to develop and implement a strategy for reducing them in preparation for the inevitable carbon tax.  When a carbon tax becomes a reality, those companies that have already reduced their carbon emissions will be on the winning side in a carbon market if they can then sell their excess credits.  It’s never too late to start planning.

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