Cap N Trade
On Thursday I participated on a panel at the Northeast Campus Sustainability Consortium Conference in Burlington, VT. Our panel hosted a discussion about how universities and colleges (650+ of whom have signed the Presidential Climate Commitment (PCC)) should consider financing their efforts to become carbon neutral.
Not surprisingly, at the time they signed up most institutions didn’t focus of the financial costs for going carbon neutral - now a few years later it’s becoming more clear that the big issue (beyond behavior change) is where is the money to make this possible?
Today, getting an entire institution close to carbon neutral can only be achieved by purchasing REC’s or offsets. This is probably a reason why Harvard and Yale have yet to sign the PCC, as they would be perceived as buying their way to neutrality with their now smaller, but still large endowments.
The good news is that the PCC goals are LONG TERM – when you’re an institution with plans to be around for the next 100 years, you can talk about the year 2050 in academic terms. However, each year that passes after making a PCC announcement it will become more clear how unprepared these institutions are to make significant progress, except through buying REC’s and offsets. There’s no silver bullet for Mr. University (or anyone else) to pay for new solar arrays, CHP systems or all new EV fleet. An extra green student fee won’t do it. Most have already attacked the “low hanging fruit” early on – so their respective annual report cards will be pretty hollow without some serious investment.
Which is why I’m a bit skeptical about the chance of success for the PCC.
Compare the PCC to the EPA’s Climate Leader (CL) program. CL has had similar signup momentum with over 250 large companies committing to reduce their climate impact over a multi-year period. Where the PCC talks about Carbon Neutrality in the next 20-40 years, the Climate Leaders’ goals are typically for 10-15% reductions over a 3-5 year period. Where the PCC members chose to require a profound multi-decade goal, CL members chose Kyoto-like targets. The CL annual reduction targets are being tracked and several corporations are now preparing their next targets, having achieved their initial targets in the last year.
The climate problem isn’t going away in a few years. While both goal systems can work, only CL can be measured and reported in a way that allows for learning, revising and setting new direction in an iterative fashion. Even grand challenge goals need to give folks a more likely chance of success in reasonable timeframes…
So we spent our time in the panel talking about lifecycle costs, energy performance contracts, taxable vs tax-free capital and power purchase agreements. My expectation is the the university/college market will come quickly to the right decision – the only way to make a near term dent in their GHG emissions is to finance there way there.
Since our Wal-Mart Supplier Readiness Seminar a few weeks ago the broad impact of this program is clear – we’ve seen multiple suppliers rushing to learn how to respond to the Wal-Mart Sustainability Index (WSI) and how to boost their performance once they’ve completed the initial fifteen question survey.
As with any new Wal-Mart initiative, even companies not in it’s retail supply chain are studying the WSI’s relevance to their own business and industry. These companies are left wondering whether the WSI is a precursor to their own industry’s environmental report card or whether this is just another Wal-Mart false start RFID project.
While the US considers its climate position going into Copenhagen, the SEC ponders whether to force climate reporting on financial statements, and CDP offers an emerging standard for voluntary corporate reporting, the WSI has already become today’s most important mandated environmental reporting trend for US corporations. Unlike these other programs, this reporting has near term and real business consequences.
Like with the CDP, large companies are already set up to respond to something like the WSI. However, mid-sized and smaller companies are struggling to figure out how fast they need to gear up for their own industry’s version of the WSI. Most of these companies care a lot more about their current cost of energy than their carbon emissions, much less their sustainability costs. But Wal-Mart is a leading indicator they cannot dismiss….
Three years from now we may look back at the WSI as having initiated regular sustainability reporting for Wal-Mart’s entire supplier base. More profoundly, WSI’s bigger legacy might be having jump started industries outside of retail to develop their own sustainability reporting indices. And, if that reporting leads to more proactive management of environmental impact, our friends at Wal-Mart will deserve a lot of the credit.
Not long ago we were all adjusting to an extraordinary increase in the price of a gallon of gas. As prices accelerated economists speculated on how devastating it could be to our economy if it continued…
Here we are a year later and the world looks quite a bit different. The economy has cracked, but fuel prices, which started coming down heading into the September 2008 Lehman bankruptcy, were not the principal culprit.
However, there is a lot to be learned from the period in 2008 when our gas prices briefly stayed above $4 per gallon. At this price level something very logical occured. Behavior changed. People started driving less. Visible energy pundits like Thomas Friedman encouraged us to study this accomplishment.
So now in 2009, with the economy struggling and the US debate on carbon cap-n-trade in full swing, the same economists are debating the potential impact of this carbon utility tax on the price of electricity.
It’s interesting to consider what would happen if the cost of electricity suddenly accelerated. Like gas, electricity in the US costs significantly less than other developed countries and we have historically taken its availability and low cost for granted. So, if kWh prices were to accelerate, do you think we might see the same logical result – ie. behavior change?