On the face of it, the New Zealand Climate Change (Emissions Trading and Renewable Preference) Bill passed on September 11 looks good. It is broader, covering more sectors than the first cut of the European Union Emissions Trading Scheme and UK Emissions Trading Scheme as it brings in early the transport and the utility sector under a regime that sets limits on the amount of greenhouse gases they can emit.

Planet Ark noted that, the New Zealand scheme is the “the first national cap-and-trade scheme outside of Europe”, joining 27 other nations that have adopted Climate Change bills. The bill was passed into law on a 63-57 vote in parliament, a relatively slim majority. Those that breach their limit will have to buy credits from users that produced emissions below their ceiling.

The New Zealand trading scheme phases in the less difficult sectors first across the economy such as emissions from forestry from 2008, transport by 2009, stationary energy such as coal-fired power stations by 2010 and agricultural waste by 2013.

The New Zealand emissions trading scheme will include liquid fossil fuels used in transportation beginning in 2011, and covers gasoline, diesel, aviation gasoline, jet kerosene, light fuel oil, and heavy fuel oil. Emissions from fuel used for international aviation and marine transport are exempted from the scheme, consistent with the Kyoto Protocol.

In Europe, the transport and power sector are where the big emissions are, whereas in New Zealand, the converse is true. About 60 percent of New Zealand’s power comes from hydro-electricity, while agricultural emissions, such as methane from livestock, comprise about 50% of the nation’s total greenhouse gas emissions, so this is no doubt why the agricultural sector is planned to be tackled last.  I am not up on the best ways to reduce methane emissions from livestock, but last time I looked at this sector, there were mostly plans afoot for flatulence pills in animals. Eating less meat did not seem like a likely solution as this would affect New Zealands exports. See the New Zealand government’s agricultural research efforts on agricultural emissions.

So paradoxically, transport is easier to do in New Zealand and the government is making a meal of this fact. It states the transportation sector accounts for 19.2% of New Zealand’s CO₂emissions. This sounds fantastic except this number needs to be looked at closely as there are 6 greenhouse gases that trap heat more powerfully than CO_2. They are usually referred to as CO₂ e (equivalents). Methane (CH₄) is one of the gases produced from livestock and is 21 times more powerful than CO₂ in trapping heat. So the overall number needs to be what percentage is the transport sector of all greenhouse gas emissions, my guess is it is probably half of 19.2% around 9.6%, so tackling transport in New Zealand is easier than Europe.

There is a positive here and that is if NZ is prepared to tackle transport emissions it could very easily embrace the Israeli model and become totally independent of oil from transport and develop models for use by other countries. See my next blog coming.

I understand that all countries have to get their Climate Bills through parliament. Australia is a long way from a vote and is still going through various consultative processes, Green papers followed by white papers. Australia is also an export oriented economy, with top heavy emissions from just one or two major sectors. The juggling act for countries is how to include the sector that produces most of the emissions and is the mainstay of the economy.  In the case of Australia the mining and energy sector are increasingly our major export earner, the drought partly due to climate Change has reduced exports from agriculture.

The USA will no doubt have a very complex process, if as both candidates Senator Obama and McCain say they intend to pass national Climate Change legislation, Kyoto compliant or not. (In other words will the US come up with their own Bill outside of the Kyoto accord).

The positive side of the US economy is that its exports are not so resource intensive such as raw materials, energy and agriculture. The domestic economy, which is very broad-based is powered by oil in transport and coal for energy. This is the US problem but it is a problem they have control over.

However, if the U.S could embrace alternative sources of energy and energy efficiency for power generation, and alternative transport fuels, they could find themselves in a much better place than export oriented economies.   See the US Climate Plans from Senator Obama and Senator McCain.

See Senator McCain proposed Climate Bill. and Senator Barack Obama proposed Climate Bills.

The Regional Greenhouse Gas Initiative (RGGI) has begun. Greenhouse gas regulation analysis is Kevin Poloncarz forte. He writes a lot about this perhaps too much as he says. But what he drills down into is what all companies need to know in the Clean Tech space. How will the new regulation impact on companies who are in the fossil fuel-fired electric generating facilities and the opportunities opening up in the new Clean Tech industries.

Kevin Poloncarz is an environmental lawyer and partner in Bingham McCutchen LLP specializing in providing counsel and enforcement advice focusing on air quality, climate change and toxics. This article is set to be published in the upcoming Argent Communications’ October 2008 Climate Change Law & Policy Reporter.

His article is commenting on the significance of the 1^st auction of Carbon Dioxide (C02) allowances, which started on September 25, 2008. The auction was the launch of the platform that will be used by 10 participating states to auction-off allowances, which fossil fuel-fired electric generating facilities in those states will need to acquire to comply with the first mandatory cap and trade program to take effect in the United States.

Kevin has summed up in this latest article, that, “Although RGGI is limited in scope and unlikely to require dramatic changes in generators’ emitting behaviour, the launch of a fully-fledged auction platform for the U.S.’s first mandatory greenhouse gas (GHG) trading program is significant in its own right. It will provide U.S. market participants their first opportunities to navigate the auction platform and begin using offsets and other risk management tools to meet GHG compliance obligations, as evidenced by the launch of futures and option exchanges for RGGI allowances. By availing themselves of these opportunities, before any comprehensive federal or internationally-linked GHG trading regime has come into effect, U.S. companies may begin to build some of the market infrastructure and institutional skill-set that their European counterparts developed under the European Union Emissions Trading System (EU-ETS).  In so doing, they may begin to close the experiential gap by companies that continues to grow on this side of the Atlantic, due to non-participation in the Kyoto Protocol.” He said.

This is what I call the “Learn by Doing” approach where companies become comfortable with trading offsets under an Emissions Trading system. In the beginning trades will be small but as confidence grows greater volumes of offsets will be traded and emitting behaviour hopefully will begin to change.

The article in full follows, courtesy of the Climate Change Law & Policy Reporter __ October 2008. K. Poloncarz

North-eastern and Mid-Atlantic States Hold First Auction for Allowances under Regional Cap and Trade System; Launch of Mandatory Auction Platform Spurs Trading on Futures Market

On September 25, 2008, the Regional Greenhouse Gas Initiative (RGGI) held its first auction of carbon dioxide (CO2) allowances. This move marks the launch of the platform that will be used by the ten participating states to auction-off allowances, which fossil fuel-fired electric generating facilities in those states will need to acquire to comply with the first mandatory cap and trade program to take effect in the United States.

RGGI’s first allowance auction was preceded in late August by the commencement of trading of futures and options contracts for such allowances on the Chicago Climate Futures Exchange and New York Mercantile Exchange’s Green Exchange. Together, these moves represent the further development of the United States’ carbon markets, putting in place some of the market architecture that may be needed to support future trading at the federal or international level.

Background on the Regional Greenhouse Gas Initiative and the Decision to Auction

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort of ten Northeastern and Mid-Atlantic states to reduce CO2 emissions from power plants through implementation of a regional cap and trade program. The goals of its CO2 Budget Trading Program are to stabilize regional CO2 emissions from power plants from 2009 through 2014 and then achieve reductions of 2.5% in each of the next four years. Covered facilities include fossil-fueled power plants greater than 25 megawatts in capacity.

RGGI’s model rules require that each participating state auction-off at least 25 percent (%) of its share of allowances within the regional cap, with the proceeds to be used for “consumer benefit or strategic energy” purposes. In promulgating their own rules, however, participating states have overwhelmingly moved towards auctioning-off nearly all available allowances, rather than allocating some portion of them to power producers at no cost, based on their historic emissions.

The policy decisions to adopt a near complete auction-format have been motivated to some extent by criticisms regarding the initial free allocation of allowances under the European Union’s (EU) Emissions Trading Scheme (EU ETS); according to some, “[t]he resulting transfer of wealth has been described by several analysts as ‘windfall profits’.” (Larry Parker, “Climate Change: The EU Emissions Trading Scheme (ETS) Gets Ready for Kyoto,” p. CRS-13, Congressional Research Service (CRS) Report to Congress, August 27, 2007, available at  state government documents.

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Kevin Poloncarz is an environmental lawyer representing companies in industries such as biopharmaceutical research, telecommunications, petroleum refining and winemaking in complex counselling and enforcement matters focusing on air quality, climate change and toxics. He has given me ahead of schedule an article to be published in the upcoming Argent Communications’ October 2008 Climate Change Law & Policy Reporter.

A very significant development in the United States has occurred in New York State, where the  Attorney General reached a groundbreaking settlement of disclosure claims against a major Coal-Fired Power Producer.

According to Kevin Poloncarz, “In resolving its claims of violations of state securities disclosure laws against one large coal-fired power producer, the New York Attorney General has provided a road-map for how companies in carbon-intensive sectors might disclose the financial risks posed by climate change and forthcoming regulation. Further, by allowing the company to continue relying on its voluntary reports to meet disclosure obligations, the settlement underscores the potential value of voluntary reporting, in advance of any mandatory reporting or disclosure rules. By also requiring the company to articulate a “Strategic Analysis of Climate Change Risk and Emissions Management” for its investors, the settlement seeks to increase the substantive focus on climate risk within corporate governance”.

Please read the entire article it is groundbreaking stuff.

1 Climate Change Law & Policy Reporter __October 2008 Kevin Poloncarz, Partner

Bingham McCutchen LLP A/72645668.1

New York State Attorney General Reaches Groundbreaking Settlement of Disclosure

Claims Against Major Coal-Fired Power Producer

On August 27, 2008, New York State Attorney General Andrew M. Cuomo announced a

potentially precedent-setting agreement with one of the nation’s largest utilities and operators of coal-fired power plants, Xcel Energy (Xcel). Cuomo’s office agreed to suspend its investigation of potential violations of New York State securities laws by Xcel, which was commenced against Xcel and four other large power companies last year. Xcel agreed to provide detailed disclosures of its climate risk to the United States (U.S.) Securities and Exchange Commission (SEC), in a settlement which could serve as a template for ongoing consideration of how companies should address such risk in their SEC filings.

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I am talking with Brett Callow of Brighthub. Brett is a self-employed technical consultant and writer, Director of Business Development with Knowledge Stairway (a company which provides specialized training solutions for technical recruiters) and who lives in self imposed exile in an extremely remote corner of Vancouver Island in a town where people are outnumbered by bears - well, almost.

Q1. Karla Bell: What is the purpose of Brighthub. Are you an information site aiming to inform the public about new scientific ides or are you a technology development site, or both?

A: Brett Callow

Let me answer that by quoting from Bright Hub’s website: “Bright Hub’s goal is simple: share knowledge about how the simplest scientific idea evolves into tomorrow’s technology. From advances in medicine to the construction of hybrid vehicles to the freedom of mobile computing — science and technology impacts our work, our play, our lives. With an expert writer network and an active community of life-long enthusiasts Bright Hub provides a level of technology transparency rarely seen in high tech. The team of writers and managing editors utilize deep domain expertise to focus on creating valuable information for both novice and advanced consumers. With a content inventory of thousands of science and technology articles, software and hardware reviews, buyer’s guides, blog entries and forum discussions, Bright Hub is able to provide readers with a dependable resource to make informative technology decisions.”

In addition to providing consumers with expert insight, Bright Hub also assists vendors by providing them with feedback through our reviews. For example, a well-know security company recently added some additional functionality to one of their beta products as a result of comments made by a Bright Hub reviewer.

Q2. K: Are you interested in facilitating project development or investment
in technologies.

A: Brett Callow

Neither. Bright Hub’s objective is to facilitate the sharing of knowledge and to enable writers to benefit from their contributions via the Shared Success Program which Bright Hub describe as follows: “The Shared Success Program is being introduced around the principle that empowerment economics

benefit everyone in the value chain. The network effect is powerful, leveraging each other’s strengths and learning while keeping standards high and building traffic together. Through a community of expert writers, a channel gains a strength gathered around the goal of helping users find information they are looking for through search engines within a particular science and technology discipline.”

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The New York Times ran a small story on a tiny little house, which is sustainable, cute and becoming popular. The tiny little house is a sign of the small footprint brigade taking a fresh look and a new take on Green Buildings.

According to the article, Mr Janzen spent the summer building an 80-square-foot “tiny house” out of free stuff he found on Craigslist?

Mr Jansen, said “I don’t want this life - the life of someone who’s working too hard to pay a large mortgage to live in this house.” The catalyst, he said, was watching the value of his home plummet with the rest of the real estate market, while the time and money required to maintain the property only increased. “The energy cost is enormous,” he said, “and the bigger your property gets, the more there is to do.”

An interesting blog named smallhousestyle gives designs for many tiny houses.

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GHGblog is interviewing Michael Hepworth, the VP of Business Development for Alternative Fuels Corporation in Toronto, Canada.   Alternative Fuels Corporation, (a G4G Resources Company TSX-V: GXG), is dedicated to converting natural gas, biomass and ultimately coal to cleaner and greener and more reliable synthetic gasoline, diesel and jet fuel.

The technology has been developed by The Centre of Materials and Process Synthesis at the University of Witwatersrand in South Africa, (Wits COMPS), is a new generation of Fischer Tropsch Technology. This technology can be applied in both Gas to Liquid (GTL), Coal to Liquid (CTL) as well as Biomass to Liquids (BTL). The technology offers reduced CO₂ emissions, reduced capital and operating costs as well as simplicity of operation and ease of scalability.

Q1: GHGblog.com: Could you explain how the technology converts hydrocarbons in this case municipal waste and stranded natural gas to liquid fuels?

The Fischer-Tropsch (FT) Process converts a mixture of carbon monoxide (CO) and hydrogen (H₂) to hydrocarbons. The carbon monoxide and hydrogen mixture (referred to as synthesis gas) can be obtained from coal, natural gas or biomass.  Synthesis gas is versatile in that it can be used to produce not only hydrocarbons (mainly liquid fuels) but electricity and other chemicals (methanol, ammonia) as well.

The Fischer Tropsch reaction takes place in the presence of a catalyst, usually iron or cobalt.  The temperature, pressure and catalyst determine the range of product. Fischer Tropsch can be operated in two modes: high-temperature (300 -350°C) process with iron-based catalysts or low-temperature (200 - 240°C) process with either iron or cobalt catalysts.

Q2: GHGblog.com: What are the main uses of the liquid fuels?

Right now there is no commercially viable alternative for liquid fuels in the transportation sector.

The Fischer Tropsch process produces high value, clean-burning fuels.  FT fuels can be used in conventional engines with no modification and have improved combustion which reduces emissions. The resulting fuels are colorless, odorless and low in toxicity.   FT fuels have less sulphur, nitrogen oxide, carbon monoxide and particulate matter emissions than petroleum fuels.

Markets of particular interest are fuels for diesel engines and jet fuels.

Q3: GHGblog.com: How do you see your technology reducing GHG emissions?

Our technology offers reduced CO₂ emissions, reduced capital and operating costs as well as simplicity of operation and ease of scalability.

This design is the result of an application of the process synthesis and optimization methods developed at COMPS and collaboration with other world leaders in the field.  These methods were used to identify and systemically reduce or eliminate the inefficiency present in the process. Much of the CO₂ produced in traditional FT plants is as a result of process inefficiencies. This technology enables us to smaller build plants that can handle municipal waste and biomass. With biomass it is possible that our plants will be carbon neutral.

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GHGblog has just received a copy of a diary from an EcoSecurities Clean Development Mechanism (CDM) project in Thailand. This gives us an insight into what goes on when doing a carbon credit project in a developing country on a daily basis.

Diary:  30^th June - July 2nd 2008. Project: Thailand, SPM Group Bio-gas Project.

Participants:EcoSecurities - Chanitra Dokmali (Ning) and Bernardo

8am. Pick-up at EcoSecurities offices in Bangkok to head to the pig farms in Ratchaburi province, around 2 hrs drive southwest from Bangkok.

10am. Arrived at SPM offices, where the food mill for the pig farms is located. We had a briefing meeting with the company owner, to discuss the objectives of our visit. He was quite happy that morning as he had been featured in a newspaper article regarding carbon finance for renewable energy projects, titled “From Waste to gold”. His company has received several prizes and recognitions for his pioneering work in generating renewable energy from animal manure. The project we are developing involves 4 pig farms, in which the manure is collected and processed through anaerobic digester systems in order to capture the biogas, which is rich in methane content, and used as fuel for producing electricity. This process allows the farms to reduce their dependency on fossil-fuelled electricity from the grid. The remaining sludge is dried and sold as fertiliser into nearby sugarcane plantations.

11am. After discussing an overview of the project operations with the project owner took us to SPM 2, one of the four pig farms involved in the emissions reduction project. This is the largest farm with around 33,000 pigs. The farm already has some of the anaerobic digesters operating and producing electricity. Another set of digesters involve a new design and are being tested. We had a closer look at the power generation unit, and its monitoring equipment. The system includes a heat recovery system, as the waste heat is utilized in boilers to heat water used in the in the pig houses. Then we visited one of the pig houses where the piglets are bred. There were between 8 to 10 piglets to each sow. Although the infrastructure looked simple, it was surprisingly clean and with almost no bad smell!

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Since my interview with Julia Wilhelm of Studley the market leader on Green Buildings in San Francisco, a dialogue has developed amongst Green Building advocates.

Julia did an interview on me recently on her blog greensuite on my work on Green Buildings and the Greening of the Olympics, the first green building program globally.

Following on from this work, what is emerging is an interest by some Green Building advocates to develop the link between Green Buildings / energy efficiency and Carbon Trading. We would welcome any building owners, utilities to approach us concerning this topic.

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Ecosecurities, the leading project developer of CDM projects globally has kindly given GHGblog.com access to three of their top CDM projects in Asia and Brazil.

The Clean Development Mechanism (CDM) is a regulated market under the Kyoto Protocol whereby, countries and companies in the developed world can meet their emissions reduction targets by buying carbon credits that have been generated through projects that bring about reduced or avoided emissions in developing countries. This emissions trading mechanism was the brainchild of Brazil and Emissions Trading as a concept was based on the successful U.S. Sox and Nox environmental markets to reduce air pollution in California put forward by Bill Clinton, when the Kyoto Protocol was signed in 1997. So Emissions Trading was a democrat initiative.

However, the critics are lining up using the rhetoric of some kind of out-dated belief that market mechanisms are a problem not a solution. Clearly, developing countries are responding to the incentive approach with their feet. No-one is making them do it. The Asian CDM market in 2007 was worth US$17.5 billion, an enormous 200 per cent increase in market value since 2006. Asia has so far been the global leader in generating CDM credits. In 2007, China alone provided an enormous 62 per cent of the credits on the market, while Indonesia was responsible for 10 per cent and India 5 per cent.

Now to some great CDM projects.

Bondoc is a methane recovery, swine wastewater treatment and electricity generation project located on a large pig farm in the Candelaria, Philippines. The project uses anaerobic digestion technology to use organic waste material currently treated in the wastewater ponds to produce biogas.  The biogas produced in the project’s anaerobic digester is then used to generate electricity for use on-site.

Bondoc wastewater ponds from pig farm

Bondoc is a methane recovery, swine wastewater treatment and electricity generation project located on a large pig farm in the Candelaria, Philippines. The project uses anaerobic digestion technology to use organic waste material currently treated in the wastewater ponds to produce biogas.  The biogas produced in the project’s anaerobic digester is then used to generate electricity for use on-site.

Before the anaerobic digesters were installed, the farm deposited its waste in a series of open, concrete lagoons, which then degraded anaerobically releasing large amounts of methane, a potent GHG gas, into the atmosphere.

The farm also relied on electricity supply from the local fossil-fuelled grid, but now the farm can produce renewable electricity from biogas on-site, which reduces both their emissions and costs. As the methane emissions are now trapped and processed, the project has improved the local air quality by significantly reduced bad odours, which has improved quality of life for the adjoining community. The project has also facilitated the transfer of new, clean technology, to a developing country, and will act as a demonstration project in the area to encourage the development of renewable energy solutions with the aid of carbon finance

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