Carbonflow Policy Paper 1. Supporting the Principles of Cap and Trade, Harmonization / Global Linkages, Early Action / Offsets, Inclusion of Energy Efficiency and Land Use Credits, Enact and Learn. Carbonflow, Inc. is actively working on the development of rigorous and transparent systems for the reduction of costs and increase in abatement potentials under the global Kyoto based cap and trade and flexible mechanisms.  We and the signers of this paper advocate for harmonization of US legislation, state, regional, and federal, with global carbon abatement mechanisms, as part of the solution to ensure high levels of actual, permanent, and verifiable abatement at a manageable and fairly distributed cost to the economy.

The emerging U.S position on legislation for global climate change in a comprehensive U.S. Cap and Trade system has been summarized to generally include the following agreement and discussions.[1] While we recognize these measures are subject to change and are in a fluid dialogue, it is useful to recognise the major points of debate:

1.    Address carbon emission reductions by cap and trade, with a baseline year of 1990 in line with the international community.

2.    Adopt a domestic Cap and Trade Climate Change bill that includes a ‘60-80′% reduction in greenhouse gas emissions by 2050 on 1990 levels, and argue for similar deep cuts internationally under the Kyoto Mark II (to apply 2012-2017).¹

3.    Adopt interim targets in line with the European Commission new action targets for Kyoto Mark II adopted in December 2008, for a 20-40% reduction in GHG emissions by 2020.[2]

4.    Include more ‘aggressive auction schedules’ than those in the process followed during the first phase of the European Union Emissions Trading Scheme (EU-ETS).

5.    Ensure transparency, rigor, and mitigation of trade effects around the verification of CDM or other offset projects and criteria for “additionality” and/or limit their use, geography, and scope.[3]

6.    Ensure cap and trade interacts with the domestic roll-out of national and local programmatic initiatives and performance-based rules.

7.    Target offset use, domestic or international, around key carbon wedges of significant size and of criticality to significant local industries and constituencies.[4]

President Barack Obama has indicated he will pursue deep cuts in domestic greenhouse gas (GHG) emissions and that he is prepared to argue for the same deep cuts in international emissions. The cleantech industry and the carbon market industry fully supports this intention. We expect that the international community will welcome U.S participation in the next round of talks on the Kyoto Mark II program to reduce global GHG emissions in Copenhagen, Denmark in December 2009.

We believe we can summarize the major objectives and constraints of most parties, albeit in varying degrees, as follows:

Objectives:

1.    Meet the global IPCC goals for abatement in the long term

2.    Catalyze fast action in the short term

3.    Harness industry and private sector activity

4.    Provide economic stimulus support and support local job growth

5.    Quickly establish a clear, consistent, stable regulatory regime

6.    Fit within broader environmental mandates

7.    Minimize collateral damage to global and local economies and trade

8.    Provide transparency and environmental rigor throughout the process

We have established a list of Principles for inclusion in US policies which we consider would support meeting these objectives:

Principle 1 Cap and Trade - The primary rationale for market mechanisms (and cap and trade in particular) is that this is the fastest way to squeeze carbon out of the economy to achieve long term abatement targets at the least cost. It is a carrot AND stick approach. It provides a middle ground between strict command and control and carbon tax.  True command and control is difficult to implement in a multi-lateral global framework without significant economic collateral damage, and a carbon tax does not address the critical trade issues surrounding carbon nor ensure that abatement levels will actually be reached. Cap and trade has the capacity to harness vast amounts of investment and of committed people to address climate change in a very short time frame, without new direct taxes. Government can use auctioning of some or all emission permits as a means of generating revenue to pay for the system costs and invest in low carbon initiatives.

As described below, cap and trade has long been recognized as providing the most flexible mechanism to enact the command and control objective of ensuring abatement occurs, while simultaneously ensuring the correct pricing of carbon externalities at the least cost.  While some economists have argued that theoretically a carbon tax would yield less economic loss to the economy, a more sober look shows that it would only be true in a single country model. Given the size and inherently global nature of carbon, the currency and trade impacts of pricing carbon through a tax or command and control would in practice mean a carbon tax would have to be completely integrated with global trade arrangements through the WTO in order to manage leakage issues It would likely cause a much higher degree of economic loss than cap and trade even then, once the mispricing of capital investment and rent seeking impacts of differing effective carbon tax rates in different industries and jurisdictions was taken into account.

It should be understood that auctioning a larger proportion of emission permits relative to those freely allocated does not necessarily mean a higher permit price or higher abatement levels. The actual abatement and prices are determined by abatement targets/allowances, the volume or auctioned permits, industry’s inventory reduction potential, and development potential of low carbon offset projects. Auctioning simply defines the general level of revenue collection to the government administering the cap.  It should also be noted that we recognize that to the extent cap and trade is enacted with a high level of auction, cap and trade effectively functions as an indirect carbon tax, in the long run paid by consumers, on a variable rate and variable tax basis which automatically minimises the penalty on the most carbon friendly businesses in an industry.

Principle 2 Harmonization / Global Linkages - A significant risk in establishing cap and trade, or any type of large scale abatement mechanism, on a regional basis is that it a) can result in different and higher prices of carbon locally than in our trading partners and b) does not include large portions of global GDP and emissions, without which achieving global abatement goals is simply not possible.  Harmonization of and linkages between individual schemes mitigates these effects to a large degree.

In fact, since the impact of increasing levels of atmospheric CO₂ affects all global citizens, it is highly dangerous from an economic point of view to regulate carbon unilaterally either nationally or regionally, without harmonization with other regulations. One targeted effect of cap and trade schemes is to create a new cost in the industrial supply chain, pricing in the carbon externality.  However, in a competitive global supply chain environment, higher local carbon prices without linkages to other schemes can have the effect of pushing production and jobs to lower carbon price regions, effectively pushing carbon offshore with no net reduction.  Worse, unlinked markets without globally fungible offsets have the potential to push GDP activity to more carbon intensive regions (an example being pushing manufacturing production from California to China), leading to the worst case scenario of expensive domestic abatement, limited global abatement, and at the same time costing domestic production and jobs.  Linkages effectively enable companies to purchase carbon costs from offshore jurisdictions, still paying the price of carbon, but having the option to keep jobs and production home.

A consistent and transparent market price for carbon can be achieved most cost effectively through a combination of policy harmonization targeting similar abatement levels across jurisdictions, and where abatement levels are lower, allowing linkages between those jurisdictions and schemes, based on globally fungible offsets.

Harmonization might be achieved through a range of options, including setting, either directly or indirectly, overall caps at levels similar to those of our key trading partners, or creating sectoral carbon intensity based targets that set relative levels for the most affected industries, or a combination. The challenge of achieving either policy outcome should not be underestimated, and will put pressure on global verification capabilities.

Linkages between schemes can be achieved by allowing a broader range of offsets (such as those from CDM or JI) or credits from other schemes to be used to achieve compliance with the emission cap. This can enable the price of carbon to achieve parity across geographies (including those not currently under an emission cap). During the early years of a scheme’s operation carbon prices can be both high and volatile, and linkages with mature schemes based on the free trading of carbon can provide an effective price and supply safety valve. This is an issue US companies are already facing from geographic and sectoral variances between caps under AB-32, WCI and RGGI.

At heart, the science tells us that carbon is a global problem, and that from the environment’s perspective it does not matter where in the world emission or abatement occur, just whether or not they do.  We need our policies, whether they be local, state, regional, national, or multi-national, to reflect this fact.

Principle 3 Early Action / Offsets - In addition to a significant role in the elimination of greenhouse gases, offset projects and credits support the equalization of carbon prices, enhance employment security for high carbon cost geographies, provide a financing avenue for carbon abatement activities which may be critical given the current economic climate, and provide a path for early action by industry. They encourage employment in the nascent cleantech sector, encouragement which has been sorely lacking due to the uncertainties surrounding operational details of the proposed schemes. This would in turn obviate industries’ demand for a safety valve price, as offset credits can provide an additional source of permits in early commitment periods. Finally, offset projects provide a means by which developing nations can engage with schemes in the US. By financing the export of and investment in cleantech manufacturing and services (as with the CDM), the US can engage with its developing country trade partners, and provide an avenue to advance sectoral based carbon intensity targets and commitments in a phased approach, so bringing developing economies closer to full participation in cap and trade schemes.

Offset credits, rigorously validated and verified, provide the best mechanism for rapid and low cost linkages between markets to equalize carbon price and protect domestic production and jobs.

Early action and offset projects also provides an avenue to increase global verification capacity to adequate levels prior to later commitment periods, reducing overhead costs and providing additional cleantech employment. The regulation of carbon and Measurement & Verification is a cross border problem, and so must include a vastly greater number of regulation points to manage leakage than would be the case for a purely local environmental protection regime. International trade in goods faces similar issues, and in that case 3^rd party verification has proven to be the least cost and most reliable path.

For these reasons it is essential that upcoming legislation includes the recognition of early action emission reductions and of their bankability for future compliance periods, and addresses a path for harmonization of standards for 3^rd party verification.

Principle 4 Inclusion of Energy Efficiency and Land Use Credits in the U.S. Cap and Trade - The sectors making the largest contributions to global carbon emissions are driven by energy intensity (and thus carbon emissions) per unit of economic activity or the increase or decrease in the carbon sinks from land use, land use change and forestry. It is generally accepted that if energy intensity per unit of economic activity and the size of the major carbon sinks are moving against us, it may well be virtually impossible to meet abatement targets, no matter how stringent the caps on emitting sectors.

One major avenue for supporting reduced emission intensity in the energy driven sectors is to include demand-side energy efficiency projects with their resulting emission reduction credits in cap and trade schemes. The effect of double counting can be eliminated by adjusting the size of the cap, effectively by exchange of project based emission reduction credits for emission permits on a one to one basis. Energy efficiency projects have the added benefits of providing significant early action reductions, as well as anchoring a large part of the potential for growth in cleantech jobs.  If programmatic and performance based rules are harmonized with the credit markets to address additionality issues, we may well be able to utilize the carbon credit markets to provide the financing necessary for changes in energy efficiency and land use activities, which are notoriously difficult and expensive behaviours to change.

Agriculture and land use constitute some of the largest sources of emissions, while at the same time providing huge opportunities for reductions. Current farming practices -driven by various government policies, subsidies and the industrialization of agriculture in the 20^th century - are major contributors to global warming.[5] The EPA’s latest inventory of U.S. Greenhouse Gas Emissions and Sinks[6] estimates that agriculture accounts for over 500 million tons of CO₂-e per year, while land-use, land-use change and forestry capture over 880 million tons in carbon sinks.

Incentives provided by cap-and-trade should reward and accelerate the transformation towards lower-emissions farming and a more sustainable food chain. Soil management and soil carbon sequestration deserve particular attention due to the major impact they will have in adding large amounts of reductions to the current sink pool. Thus, it is essential to encourage and support the creation of rigorous protocols and verification methodologies which will jump-start these changes to farming practice. It is also essential that agriculture, land use and soil sequestration be included in upcoming legislation as legitimate sources of offsets, and that the regulations which impair sustainable agriculture be revised.

That being said, energy efficiency, agriculture, and land use abatement has proven to be one of the most difficult and costly on a per unit basis to reliably manage measurement & verification from a carbon perspective, and that issue must be addressed.  The reality is that these sectors, given the relative inelasticity of demand in energy and food, and the stickiness in land pricing, have always been relatively difficult for policymakers as they attempt to drive consumer and business uptake in a cost effective manner.  Including them in carbon offset and management systems represents the potential for a real breakthrough in driving activity, and so despite the complexities, we believe they must be included.

Principle 5 Enact and Learn - The final principle is that we must enact and learn.  The change must be long term, measured, and deliberate.  While we are all concerned with meeting long term goals and catalyzing fast action, that must be balanced with the need for change and abatement to be global, not just local or regional, and that the real constraint is that as a nation and a globe we only have so much GDP to spend on environmental action.

It is an oft forgotten fact in the discussion of the Kyoto experience that 1) the abatement levels reached have been primarily what we expected (albeit not as exceptionally high as many would like), 2) the price collapses in carbon are a prima facie case that industry met its commitments at lower costs than some had feared, 3) CDM has had a positive impact on job protection, and a moderating impact on carbon abatement costs in the developed world, and that 4) seemingly small design differences in the system and can have outsized impacts on economic activity, and so phasing of system design to allow policymakers to learn is of more importance than had previously been understood.

Given the ubiquitous nature of carbon - it touches all people, and the sheer magnitude of the problem - based on IPCC targets we are looking at policy prescriptions imposing costs as a percentage of GDP on a scale not seen globally since the Second World War, and so it is critical that the policy design allows each industry, policymakers and regulators time and the flexibility to adjust as we learn. Compared to our ideal rapid abatement scenarios, we would advocate bias in system designs towards 1) faster starting and less aggressive targets with higher prices on lower volumes in the early years as policymakers, industry, and regulators learn how much the industry can actually do, with 2) broader and more multi-lateral inclusion in the early days when volumes are low coupled with tighter verification requirements as volumes rise, with 3) rapidly escalating caps, more aggressive abatement targets and lower prices on higher abatement volumes in later years.  This likely means a framework and principles approach to legislation, leaving regulators with greater rather than lesser flexibility, and is far superior to a prescriptive approach where the economic and trade impacts of early design flaws last for a significant period of time.

Again, we believe we can summarize the major objectives and constraints of most parties, albeit in varying degrees, as follows:

Objectives:

1.    Meet the global IPCC goals for abatement in the long term

2.    Catalyze fast action

3.    Harness industry and private sector activity

4.    Provide economic stimulus support and support local job growth

5.    Quickly establish a clear, consistent, stable regulatory regime

6.    Fit within broader environmental mandates

7.    Minimize collateral damage to global and local economies and trade

8.    Provide transparency and rigor throughout the process

With these objectives and principles, it is now time for action.

________________________

Neal Dikeman

________________________

Karla Bell

For more information contact: Neal Dikeman, CEO/Co-Founder: dikeman@carbonflow.com

Cell:1-415-336-2814 and Karla Bell CoFounder/Marketing Director  karla.bell@carbonflow.com,

Cell: 1-415-307-5342, 660 3^rd Street, San Francisco, CA 94107

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[1] Richard Rosenzweig, Robert Youngman and Eric Nelson of Natsource writing in Point Carbon in an article titled “The Progress So Far”, December, 2008

[2] Brian Kenety, Third World Network, ” Europe sets new targets”

[3] The clean development mechanism (CDM) is one of the Kyoto protocol’s project-based flexible mechanisms that allows for carbon credits to be generated from emissions reduction projects in developing countries.

[4] Landfill methane use, Animal waste & wastewater methane use, Coal-mine methane; Agricultural and rangeland and sequestration and management projects; Land-use and forestry projects; Reduction of sulphur hexafluoride from electricity transmission equipment and other activities, were the activities targeted in the Lieberman-Warner proposal.

[5] Michael Pollan, “The Food Issue - An Open Letter to the Next Farmer in Chief, NY Times, Oct 12, 2008

[6] http://www.epa.gov/climatechange/emissions/usinventoryreport.html

DNV has had its accreditation reinstated with the CDM Executive board, which was temporarily suspended at the end of December 2008.

DNV was one of the first organizations to be accredited according to the CDM, and has so far validated close to 50% of the registered projects worldwide. Following the findings of the spot check in early November, the CDM Executive Board decided to temporarily suspend DNV’s accreditation for the validation and verification of CDM projects.

“We took the spot check findings very seriously, and we have allocated our best resources to correct them. Through these actions we have now further formalised and thus improved the documentation of our processes for validation and verification of CDM projects. Today we are better able than ever to carry out this work,” says DNV’s CEO Henrik O. Madsen.

During the suspension period, validation and verification work relating to ongoing projects continued as usual. No projects could, however, be submitted to UNFCCC for registration or requested for issuance of certified emissions reductions. Due to the fact that the on-going projects were progressing normally during the suspension period, only a limited number of projects experienced a delay in their validation and verification processes.

“We have been in close contact with our customers all the way and are grateful that our customers have shown patience with us during this time,” says Mr Madsen.

The reinstatement also means that DNV again is allowed to do Joint Implementation (JI) and Voluntary Carbon Standard (VCS) work as well.

Campaign Diary for Energy Efficiency and Agricultural Offsets to be in included in the U.S. Cap and Trade and revised Kyoto Protocol December 2009. This is a campaign progress report.

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April 24th - Monday April 27th, the Commonwealth Club in San Francisco is hosting a panel discussion on cap & trade and other market mechanisms. Panelists include Josh Margolis, CEO of Cantor CO2e and Eileen Tutt, Deputy Secretary for Climate Change and Environmental Justice, Cal EPA. Tickets are $18. Program begins at 6:30pm at 595 Market Street, 2nd Floor. Reception to follow at 7:30pm. http://tickets.commonwealthclub.org/auto_choose_ga.asp?area=1
March 13th, Sydney - Listen to  Bill Joy, a longtime KP Limited Partner, joined KPCB as Partner in January 2005. He is advocating that the skills of Silicon Valley be put at the disposal of Carbon Valley. Bill helps entrepreneurs advance the Internet, develop wireless innovations, and find new ways of using large scale computing to solve the most difficult problems. He also looks to help entrepreneurs who have discoveries and inventions that can solve energy and resource problems, and helps them apply 21st century advances in physics, chemistry and the natural sciences to help create abundance. Bill Joy was Chief Scientist of Sun Microsystems. He has been called the “Edison of the Internet.”

March 9th - Great interview on Charlie Rose with Stevan Chu “A conversation with Steven Chu, United States Secretary of Energy”. He is talking about green buildings, weatherization packages, energy efficiency and renewable energy.

Feb 24th - Carbonflow policy document is attached. Energy Efficiency in the U.S Cap and Trade and revised Kyoto Protocol

Feb 18/ 19th - The Carbon Collaborative hosted by San Francisco City and Chaired by David Pascal went  very well. Over 60 companies in the Carbon Markets and  Clean tech space in California turned up. The meeting on the Wednesday afternoon flowed into a cocktail party for meet and greet and the substantive discussions took place the following Thursday morning. Nothing yet has been concluded but it is clear the Mayor, Gavan Newsom of San Francisco is interested to develop a policy that supports the Clean tech sector and the carbon markets. There will be future meetings of this group with break out sessions into various topics of interest to the group. See blog role for more details on this 1st successful meeting of the Carbon Collaborative. Carbonflow released it’s policy document at the meeting. See main blogrole, which essentially calls for 4 things

1. Harmonization of the U.S Cap and Trade with the Global consensus on Climate Change.

2. Require transparency and audibility across all carbon markets

3. Include more sectors in the U.S Cap and Trade and the revised Kyoto Protocol

4. Those sectors should include Energy efficiency and Agricultural offsets into the Cap and Trade and the revised Kyoto Protocol

Feb 17th, San Francisco - DNV has had its accreditation reinstated, which was temporarily suspended in December 2008. DNV has approximately 50% of the carbon market auditing business and it would be difficult in the long run for the CDM Executive Board to function effectively without their assistance. So reinstatement was probably a given in my opinion.

Feb 12, Sydney - Carbonflow policy document finally got finalized in time for the San Francisco City Carbon Collaborative next week. It basically says 4 things 1. Harmonize U.S Cap and Trade with Global Agreements Post Kyoto 2. Insure Transparency and auditability across all markets 3. Include Energy Efficiency in the Cap and Trade. 4. Agricultural offsets also.

Feb 11th, Sydney - The fires around Melbourne, Victoria are very depressing. Nnow the issue of who is to blame is emerging - well definitely arsonists, but beyond that the environmental lobby is under attack for preventing back-burning and clearing around houses. Australia is a tricky place. The death toll is now at 181. ABC presenter Michael Cathcart continues to have the best coverage on the fires. Nick Xenophon all credit to him won $2 billion dollars in the Australian Stimulus package for the ailing Murray-Darling - well done - it just happens to be our food bowl.  I am not sure what we got on energy efficiency and renewables - will check later today.

Feb 9th, Sydney - I am disappointed in face of the terrible fires in Victoria, Australia over 100 dead, temperatures are over 45degrees centigrade for over a week - records have been hit on all sides - still there is no renewable energy and energy efficiency in the Australian bailout package of 42 billion. Thinking of doing a post on this ‘Jobs, Jobs, Jobs, for Solar and Energy Efficiency, Mr Rudd”. Instead there are calls for more base-load power stations to be built to deal with peak use of air-conditioners in Melbourne and Adelaide.

Feb 9th, Sydney - Posted article on San Francisco City becoming the next big thing not only head-quarters for Silicon Valley but Carbon Valley. See this ghgblog.com and cleantech blog about San Francisco city

Feb 7th, Sydney - Waiting to hear about the Voluntary Market submission of soil carbon methodology. About a month from now expect to hear. Meanwhile post on biochar has produced project developers in Uganda seeking assistance for their projects. Happy to pass them on. the more projects that get picked up with new methodologies around soil carbon the better.

Feb 6th, Sydney - Writing the CF policy document on the U.S. Cap and Trade. Everyone has a view so hopefully it will be ready in time to put out for the City of San Francisco Business Forum on the 18/19th of February. The City of San Francisco has held a number of policy meetings around the Cap and Trade, which I have attended. Very interesting and now the City wants to become a hub to the carbon market, like silicon Valley only Carbon Valley. A lot of international carbon market players are interested to come to SF. Great city, Great location.

Feb 4th, Sydney - The Turnbull Biochar story has got picked up. A company wanting to do BIochar in Uganda sent an email wanting advice. So we have have responded. Sent email to Mr Turbull. He needs to connect up globally on soil carbon.

January 26th, Sydney - Australia day- Spent the day, listening to all the radio talk shows - picked up an item on Malcolm Turnbull and his support for soil carbon and bio-char and energy efficiency in buildings in particular. Did a post.

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Prologue, San Francisco - January 14th 2009

This campaign emerged during the 2nd half the year 2008. Carbonflow, a company I spent 3 years getting going was finally funded in June 2008, the timing was perfect just before the meltdown. We even raised further funds during the height of the melt-down, something that would fore-shadow the hype around green business, reaching fever pitch around inauguration on 20th January 2009.

Even the board seemed slightly surprised at the second offer of funds October 2008. Then January 2009, the board was also happy to report that Start-ups looking for B round funding were getting the same rates as the A round, with the exception of the Clean Tech sector. This was definitely the right sector to be in.

I then moved from a generalist position to the marketing role within the company, something I had done before for many environmental campaigns sometime ago. I am known for being behind the development of the Green Olympics, when I worked for Greenpeace and simultaneously working as the Environmental Spokesperson for the Sydney Olympic bid (SOBL), a knack of representing two organization seamlessly, I am not quite sure how that happened! - I call it ‘inside outing’.

I was talking with Tilde last night from Climatebiz, the on-line media organization affiliated with Ecosecurities, the largest project developer of carbon credits in the existing Kyoto markets. She and I were reflecting on the state of journalism and how much it had changed, something she also has experienced.

Once upon a time you held a press conference took your press release, background papers in the Press kit to the Press Conference or faxed it out. You did the speech, the presentation talked to the media and hopefully it was covered in the major newspapers. Neal, CEO of Carbonflow a wiz at internet marketing launched Carbonflow on the internet. He uses Linked in and his own blog Cleantech.org to great effect. He is 20 years my junior and has come up with a “carbon trading” game, which I have suggested we launch at Copenhagen in December 2009. So here we have old-fashioned campaigning meeting up with the internet savvy generation. The mix took a while but is now working well.

I was confronted with the online world, one that I had been avoiding. I wanted to write an article and post it into the red letterbox somewhere on the front of the computer but it wasn’t there. Some one should magically take the article edit it, find the captions, the photos and print it in the newspaper, newsletter. I started a blog and not only write it but do all the other things as well, including upload it.

I am a Founder of a carbon software company, Carbonflow but that does not mean I am technologically competent. However, I can imagine what software can do and have for the carbon markets and believe it is the future for their success.

In August 2008, the Beijing Olympics were on and the Beijing Village won ‘Leed’ accreditation from the  U.S. Green Building Council. The reason this legacy continues, is that colleagues and I lobbied successfully to change the Olympic Charter to include Environment along with Sport and Culture. The motto became a “healthy mind, in a healthy body, in a healthy environment”. So because of the Sydney Green Olympics, where I created the 1st Green Building legislation and with the changes to the Olympic Charter, both of which led  to a legacy where all future bidding cities had to have an environmental program. So fast forward to the  Beijing Games, and the Olympic Village received the U.S. Green Building Councils “Leed” award. It rolls on and London will also have to do the same thing in 2012.

A journalist called Lindsay Riddell from the San Francisco Business Chronicle, did a story and linked me to it and then I got approached by Julia Wilhelm of Studley Green Leasing, who picked up the article for her blog. www.greensuite.com. This led to an invite to the Womens Sustainability network, a very helpful group of women in the sector. So i discovered a very lively and active San Francisco community in the Green Building Space. Attorneys, leasing agents and so on.

So I got to thinking about Green Buildings again and energy efficiency and the need to include it in the U.S. Cap and Trade. President Barck Obama is talking about an 80% cut in greehouse gases on 1990 levels, which can not be done without energy efficiency as power utilities represent on average 40% of greenhouse gas emissions globally. The other big sector not so far represented in the Kyoto markets is soil carbon. This is an area I am relatively new two, but given that we may already be past the tipping points of +2 degrees, we need strategies that not only concern future emissions but strategies that can remove the existing carbon build up, which is what soil carbon can do.

So the campaign to include energy efficiency and agricultural offsets like soil carbon in the U.S Cap and Trade and hopefully into the revised Kyoto Protocol was born.

President Obama has made the claim that going “Low Carbon” is no longer a seminar subject for caring greens and that the “Green Race is on”. “It is a real live competition to beat the oil regimes and make profits”.

The U.S is positioning itself to be a world leader on Climate Change. Every energy investor and green entrepreneur knows that America is now the place to do business.The Guardian in England on Friday 7 November 2008, announced that, “BP has dropped all plans to build wind farms and other renewable schemes in Britain and is instead concentrating the bulk of its $8bn (£5bn) renewables spending program on the US, where government incentives for clean energy projects can provide a convenient tax shelter for oil and gas revenues”.

The Europeans now look tardy, so do the Australians and everybody else. Europe is being out-manoeuvred and outpaced by the U.S. The Kyoto Protocol had a greenhouse gas reduction target of 5% below 1990 levels. Barack Obama is proposing to cap U.S. emissions at 80% below 1990 levels. Astonishing!

In the Alternative Energy Weekly, 9th of February an annual survey of U.S. investors at the Vail Energy conference, where 68% of those surveyed think there will be a national Renewable Portfolio Standard (RPS) in 2009,  while 55% expect CO2 legislation to be passed in 2010 and 39% think it will be implemented by 2013.

According to Carbon Finance, “The International Energy Agency estimates $45 trillion will have to be invested in clean energy alone over several decades.”  The Wall Street Journal and the Australian owned by Rupert Murdock, believe the U.S is preparing the country for a new green world order.  “Twenty three U.S. states have their own cap-and-trade schemes for capping carbon emissions, making a move to a national scheme very politically possible, although requiring harmonization, which is a practical issue, a legal and soft-ware issue.

Before the U.S. Cap and Trade is legislated, the stimulus package also includes provisions for renewable energy (RE) and energy efficiency (EE). President Obama in his campaign for the stimulus package to include clean energy investments, said that “America will not be held hostage to dwindling resources, hostile regimes and a warming planet,” he said, on his sixth day in office. The US would no longer “bankroll dictators” but would create its own energy from the Sun, Wind and Soil.

The stimulus package is still to be finalized this February 13th on the quantum for Renewable Energy and Energy Efficiency. Renewable Energy World have noted the differences between the House-passed bill and the Senate version in debate involving the different funding levels for various technologies and programs. The bills are still in discussion. The two bills for Energy, Efficiency and Transmission are $53 billion for the Senate, $ 48.9 billion for the House.

Metrics from Renewable Energy World - Senate version (House version in parentheses)

- $14.4 billion for energy efficiency and renewable energy programs ($18.5 billion in House version, which includes $6.2 billion to expand existing weatherization activities and $7.9 billion for energy-related grants to states)

- $10 billion to cover the subsidy costs of federal loan guarantees for renewable energy systems and electric transmission projects ($8 billion in House version)

- $6.5 billion for federal power marketing administrations to build new transmission systems (same in House version)

- $4.6 billion for R&D on carbon capture and sequestration ($2.4 billion in House version)

- $4.5 billion to modernize the nation’s electricity grid with smart grid technology (same in House version)

- $7.8 billion for environmental remediation and various other activities ($6.4 in House version)

- Tax breaks for large-scale renewable projects ($ 11 billion Senate and House)

Additionally, two executive orders have been passed to require stricter energy efficiency standards on vehicles and to allow states like California to take the lead on higher standards for Climate Action than the Federal government, which is good for Governor Arnold Schwarzenegger. The public discourse is becoming vigorous.

Michael Moore and Ralph Nader want to buy out Detroit and redevelop the whole car industry to produce electric and hybrid cars. They are calling for executives to be replaced by those that know how to produce energy efficient and alternative fuel vehicles. Sounds like a good idea. Texas has a proposed $ 5,000 dollar subsidy for citizens who buy electric hybrid cars.

In San Francisco, from February 23-25, 2009, more than 800 of the world’s clean technology sector leaders—representing over $3 trillion in capital—together with entrepreneurs, scientists and policy-makers, will convene in San Francisco for Cleantech Forum XXI. They promote themselves as “the largest annual assembly of global leaders of the clean technology sector, driving job and wealth creation, addressing climate change and resource scarcity and stimulating global economic growth during uncertain economic times”.

San Francisco is preparing itself for the next big thing and many silicon valley entrepreneurs are behind the next wave “Carbon Valley”.  Many clean-tech investors are dot-com billionaires such as Paul Allen, of Microsoft, and Vinod Khosla, of Sun. They know how quickly new businesses can grow.

Groups are forming to accumulate intellectual property and technologies in the alternative fuels area.  Look at the biochar and bio-diesel industries. Mainstream companies are investing heavily in the future, which is what has to happen.  See www.bestenergies.com

Americans have made it clear this is about business. American Democrats in the political spectrum are closer to European conservatives. Recently that message has got through and Conservative Leader David Cameron in Britain is proposing an ambitious strategy for making Britain a low-carbon economy. It has put the Conservative Party way ahead of the field.

Ironically, Barack Obama will be the most forthright proponent of deep cuts in Greenhouse Gas emissions in Copenhagen for the meeting of the Conference of the Parties December this year.

The Office of Economic and Workforce Development for the city of San Francisco is sponsoring a Carbon Collaborative on February 18/19th 2009. The Carbon Collaborative will explore opportunities to accelerate local economic activity within emerging environmental markets. Key areas of focus for this initiative include
emissions trading, emissions reduction project development, project verification and certification, and climate policy. The purpose of this exploration is to identify opportunities that will further establish San Francisco as a dominant center of activity within the coming low-carbon economy.

For Further Information contact the City of San Francisco,

Office of Economic & Workforce
Development
City Hall, Room 436
1 Dr. Carlton B. Goodlett Place
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California’s Green Building Regulations, take effect on  July 1, 2009. The Green Building Regulations require a 15% reduction in overall energy use, which is equivalent to achieving the LEED® silver rating for new construction, below gold and platinum standards. The Green Building Regulations only set a floor, not a ceiling, and do not prevent municipalities, such as cities and counties, from enacting more stringent standards than the state or in my opinion would not prevent allowing more aggressive offsets to be undertaken within a U.S. Cap and Trade system. This would give financial incentives in the form of carbon credits for larger reductions than the baseline Green Building Regulations as the cost increases with greater reductions, the first reductions are often the easy things to do like changing light bulbs.

Aris Evia, LEED® AP and David Heckadon, LEED® AP of Gordon and Rees based in San Francisco are very active in the Advocacy for Green Buildings

The State of California Building Standards Commission (”Commission”) adopted the California Green Building Standards Code (”Green Building Regulations“) to apply to all new construction statewide. Prior to California’s adoption of its Green Building Regulations, the standard for green and sustainable buildings in California and across the nation was and is still set by the U.S. Green Building Council (”USGBC”) through its Leadership in Energy & Environmental Design (”LEED®”) levels of building certification. According to the USGBC, buildings nationwide account for 70% of electricity consumption, 39% of energy usage, 12% of potable water consumption, 40% of raw materials usage, 30% of waste output and produce 39% of associated greenhouse gases (”GHGs”) like chlorofluorocarbons (”CFCs”), hydrochlorofluorocarbons (”HCFCs”), and carbon dioxide (”CO2″).

The LEED® standards for rating new construction, existing buildings and commercial interiors are, from highest to lowest: platinum, gold, silver and certified. The LEED® rating system is based on the achievement of a certain number of credits, or points, towards LEED® certification: the higher the points, the more prestigious the rating. California’s Green Building Regulations are the approximate equivalent of achieving LEED® silver rating for new construction. The LEED® ratings will still remain the most applicable standard for nationwide market transformation in construction of both office buildings and homes, because they encourage and accelerate global adoption of sustainable green building and development practices through the creation and implementation of universally understood and accepted tools and performance criteria. However, California’s Green Building Regulations are just another example of California leading the charge on green and sustainable construction.

California’s Green Building Regulations are an important piece of the state’s ambitious goal to reduce the state’s CFCs, HCFCs, CO2 and other GHG emissions by 30% by 2020 as required by Assembly Bill (”AB”) 32, Chapter 488, Statutes of 2006, authored by then Assembly Speaker Fabian Nuñez (D - Los Angeles). Last October 2007, Governor Arnold Schwarzenegger vetoed AB 1058, authored by Assembly Members John Laird (D - Santa Cruz / Monterey) and Ted Lieu (D - El Segundo), which would have established green building construction best practices and made them an official statutory part of the California Public Resources Code.

The Governor’s veto message to the Legislature stated that he supports green construction standards and shares the goals of AB 1058, but believes that building standards should not be in the state’s statutes, but instead set by the Commission, presumably because the Governor desires a more phased approach to green building regulation and to inject more public participation into the lawmaking process.

California’s Green Building Regulations, which are 60 pages long, do not take effect until July 1, 2009. These standards will remain voluntary until the Commission completes its work on mandatory regulations which it hopes to have in place by late 2010 and early 2011. The highlights of the Green Building Regulations are set forth in the following goals:

• 15% reduction in overall energy use for all new construction by employing such strategies as solar energy, Energy Star-certified appliances, highly-reflective roofs, and elevators and escalators that move only when passengers are present;
• 20% reduction in water use for all new construction through low-flow toilets, waterless urinals and dual plumbing for potable and graywater;
• 50% reduction in water use for landscaping by utilizing such approaches as native plants, drip irrigation systems, and bioswales; and
• Use of environmentally sensitive materials like eco-friendly flooring, carpeting, paint, coatings, thermal insulation, acoustical wall and ceiling panels, and other recycled building materials.

The Green Building Regulations also identify various site improvements, i.e., parking for hybrid vehicles and improved and comprehensive storm water plans. Importantly, the Green Building Regulations do not specify how to make the reductions, but instead, suggest a variety of green and sustainable construction practices. In practice, a LEED® Accredited Professional (”AP”) may be in the best position to advise construction companies as to green and sustainable construction practices, because a LEED® AP has demonstrated a thorough understanding of green building practices and principles and is a building professional with the knowledge and skills to successfully steward the LEED® certification process.

The Green Building Regulations only set a floor, not a ceiling, and do not prevent municipalities, such as cities and counties, from enacting more stringent standards than the state. For example, San Francisco’s recent Green Building Ordinance is the approximate equivalent of achieving LEED® gold certification. Also, in April 2008, the City of Los Angeles became the largest U.S. city to enact mandatory green building standards for private development. The City of Los Angeles’ mandatory green building standards program applies generally to new development and remodels of non-residential development over 50,000 square feet, or 50 residential units, and requires compliance with the criteria for a LEED® Certified rating.

The most common argument against green and sustainable building practices are the upfront costs of implementing such measures and using such materials. However, supporters of green building respond that although a building may cost more to build on the front end, the sustainable building will perform better, i.e., consume less energy, be more water-use efficient, etc., thus leading to a greater return on investment (”ROI”) and a higher net operating income (”NOI”) associated with the building.

Another major issue with green building initiatives is that they inject yet another layer of risk into construction projects, and raise new issues for developers, builders, and design professionals. Perhaps the most obvious and immediate issue is whether California’s Green Building Regulations will elevate the standard of care for an architect or an engineer. A corollary of this issue is whether developers, builders and design professionals will expose themselves to more risk when they promise to deliver high-performance green buildings. From a contractual point of view, developers, builders and design professionals are now faced with the issue of whether to include and incorporate language into their contracts to require them to design and construct a sustainable building. Indeed, although green and sustainable building practices are an easy rallying point and have made important strides in recent times, the green building movement has raised the stakes and created new and still developing issues that the construction and real estate industries must now face.