Download An Introduction to Voluntary Carbon Offsets

Carbon Offsets: A Tool to
Help Slow Climate Change
(and Finance Facility
Improvements??)
Jennifer Clymer
February 14, 2008
Agenda

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
Why be concerned about climate
change?
What can be done to lessen impact of
climate change?
What role do carbon offsets play?
How can offsets help pay for facility
improvements?
2
Climate Change in Central TX

Weather Impacts

Water Resource Impacts

Human Health Impacts
3
Weather Impacts in Central TX

Temperature will increase year-round
– In summer, highs could increase 3-7°F
 July heat index could rise 10-25°F
– In winter, lows could increase 3-10°F
 Fewer freezes expected

Precipitation changes are less clear
– Changes in average precipitation uncertain
– More frequent flooding with longer droughts
4
Water Impacts in Central TX


Coastal sea level rise of 1.5-4 ft. could
lead to inland migration
Increased evaporation of surface water
up to 35%
– Less water available for groundwater
recharging
– Less water available for crop irrigation

Crop yields could be reduced by up to 68%
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Health Impacts in Central TX

Increased heat and pollution related
illnesses and deaths
– More intense heat waves
– More Ozone Action Days

Increased insect related illnesses and
deaths
– Expanded range/duration for mosquitoes
and other disease-carrying insects
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Two Ways to Combat
Climate Change

Reduce personal carbon footprint
(and potentially generate offsets)
– Turn off the lights
– Get out of the car
– Reduce, reuse, and recycle

Help reduce others’ carbon footprints
(aka, buy offsets)
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What is a Carbon Offset?

1 offset = 1 metric ton* of greenhouse
gases (GHGs) that are voluntarily kept
out of the atmosphere
– Reductions must be “beyond business-asusual”
*
1 metric ton = 1.1 U.S. ton
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Three Ways to Create Offsets
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Reduce the burning of fossil fuels (oil,
gas, coal)
Store carbon in plants or underground
Minimize the amount of GHGs leaked
to the atmosphere
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Projects that Reduce Fossil
Fuel Combustion

Renewable Energy/Fuels
– e.g., wind farm, landfill gas, biofuels

Energy Efficiency
– e.g., green building, ENERGY STAR®

Industrial Efficiency
– e.g., cogeneration, operational upgrades

Transportation Efficiency
– e.g., signal synchronization, mass transit
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Projects that Store Carbon

Tree Planting
Avoided Deforestation

Improved Agriculture Practices

– e.g., reduced fertilizer use, no till
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Projects that Reduce GHG
Leakage

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Natural gas pipeline improvements
Industrial gas processing and handling
improvements
– e.g., reducing SF6 leakage from electrical
transformers, reducing HFC leakage from
A/C units
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Offsets Must Meet Certain
Quality Criteria

Must be a real, measurable GHG reduction

Must not be required by law
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Must be beyond business-as-usual


Must not be financially or otherwise feasible
without offset sales
Must not be double-counted
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Benefits of Creating Offsets

Can provide funding for energy-efficient
facility upgrades
– Less demand for energy = less demand from
power plants
– Growing demand for new offset projects

Can provide good PR
– Promote proactive environmental initiatives
(although beware increased scrutiny of project)
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Energy Efficiency Example

HVAC replacement + reflective roof
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Energy Efficiency Example
(cont.)
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Saved 291 kW of peak demand and
387,000 kWh of energy
Offset revenue = $29,500 over 15
years at $10/metric ton
vs.
Austin Energy rebate = $114,500
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Benefits of Buying Offsets
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Cost-effectively reduce GHG emissions
when can’t reduce internally
Provide flexibility for compliance
programs
May have secondary environmental
and/or social benefits
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Wide Range of Offset Prices

Offset prices range from $0.50-$78/
metric ton
– Low end prices for Chicago Climate
Exchange offsets
– High end prices for Kyoto offsets

Conservatively expect to pay
~$10/metric ton for a high quality,
U.S.-based offset
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U.S. Offsets are Relatively
Cheap
$45
$40
$40
Offset Price ($/metric ton)
$35
$30
$25
$20
$18
$15
$16
$12
$10
$10
$9
$5
$8
$0
EU
Africa
Australia/Other
Asia
U.S.
Canada
Latin America
Offset Project Location
Source: Modified from Hamilton et al., 2007. State of the Voluntary Carbon
Markets 2007: Picking Up Steam. Published by Ecosystem Marketplace and
New Carbon Finance, July 18.
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Demand for Offsets is on the
Rise

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1st recorded carbon offset in 1989
Market began picking up steam after U.S.
rejected Kyoto in 2001
– Since 2002, number of offset providers has
jumped 220%

And really took off in past few years
– B/t 2005-2006, offset sales skyrocketed by
nearly 200%
– B/t 2006-2007, sales expected to at least double
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Regulations will Further
Increase Demand in U.S.

3 regional cap-and-trade programs
– Regional Greenhouse Gas Initiative
– Western Climate Initiative
– Midwestern Greenhouse Gas Accord

Numerous state carbon regulations
– CA, OR, MA, FL, etc.

Imminent federal carbon regulation
– Demand for offsets in the 1st year of leading
cap-and-trade proposal could be over 30X the
current volume of offsets!
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Recommendations

Evaluate your facilities for GHG savings
potential
– Before you can reduce, must measure

Make sure they’re certified to a nonproprietary standard to ensure quality
– VCS, CCAR, Gold Standard, CDM

Record offset transactions with a GHG
registry to ensure credit
– ERT GHG Registry, CCAR, CCX
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QUESTIONS??
[email protected]
322-6188
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