The transition to a low carbon world: Manufacturers need to prepare
With prospective climate change legislation and policy discussions in the United States and Canada, intensive international negotiations culminating later this year, and ongoing stakeholder interest, companies are scrambling to develop or boost their climate change strategies. For heavy manufacturers, it is now clear that climate change regulation would have a significant impact on business. The US Environmental Protection Agency’s mandatory reporting under the Greenhouse Gas (GHG) Rule and the Ontario draft Greenhouse Gas Emissions Reporting regulation and guideline now have a reporting threshold of 25,000 tonnes from combustible emissions per facility.
The definition of facility
As defined in the Regulation, a facility means all buildings, equipment, structures and stationary items that are owned or operated by the same person or entity and are located either (a) on a single site; (b) on two or more integrated adjacent sites; or (c) on two or more non-adjacent sites, if the activities carried out at all of the sites consist of:
- Natural gas storage, transmission or distribution
- Oil or gas production or processing
- Oil transmission
- Electricity transmission
How much is 25,000 tonnes?
25,000 tonnes is equivalent to emissions from annual energy use of about 2,200 homes. It is also equivalent to just over 58,000 barrels of oil consumed or 131 railcars’ worth of coal.
How do I know if my facility is over the threshold?
It is recommended that a carbon audit be conducted. This is a cost effective way of measuring and recording the CO2 emissions of a facility or organization. A carbon audit is also the first step in building an effective carbon strategy.
Those most likely to be affected
Although the regulation will apply across a broad range of industry groups, the following industries are most likely to be affected by the new emissions reporting obligations:
- Heavy Manufacturing
- Extractive industries and metals production
- Electricity generation
- Pulp and paper production
- Refrigeration industry
- Petroleum industries
- Chemicals manufacturing
The importance of measurement
Comprehensive monitoring and measurement is required under both regulations. Such data will play a key role in establishing the historical "baseline" emissions of various industry segments. Organizations will need to carefully assess their emissions at the facility and asset level to ensure that they in fact trigger a mandatory monitoring requirement. They should also consider the potential importance of establishing an accurate historical baseline and the potential long-term implications of understating those emissions.
Nearly a third of the world’s energy consumption and 36% of carbon dioxide (CO2) emissions are attributable to manufacturing industries. The large primary materials industries, i.e., chemical, petrochemicals, iron and steel, cement, pulp and paper, and other minerals and metals, account for more than two-thirds of this amount. (Material is sourced from the International Energy Agency 2007, Tracking Industrial Energy Efficiency and CO2 Emissions. http://www.iea.org/Textbase/npsum/tracking2007SUM.pdf)
Overall, industry’s use of energy has grown by 61% between 1971 and 2004, showing that substantial opportunities exist to improve energy efficiency and reduce CO2 emissions. These significant savings potentials can also bring financial savings. Improved energy efficiency contributes positively to energy security and environmental protection.
Resources wasted equals profits lost. Whether that waste comes in the form of a pile of unusable scrap metal on the assembly line or as excess heat in a manufacturing facility, it is inefficiency in business operations, and where there are inefficiencies, there is room for improvement.
Linking carbon metrics to asset management
It is important that an organization links ongoing asset management to energy and carbon metrics. This will ensure the organization:
- Reduces energy costs and eliminates service outages by identifying and eliminating energy inefficiencies in operations
- Identifies and replaces those assets that are most inefficient and have the largest carbon impact
- Prioritizes asset purchase decisions that have the best return on investment and carbon reduction
- Remediates energy issues by taking action on energy issues
- Links energy metrics with asset information to manage energy as a part of service management processes, such as condition monitoring and maintenance
For many organizations, the most important carbon risks and opportunities may lie outside of their owned operations. Between 40 and 60 percent of manufacturers’ carbon footprints often lie in their supply chains. It’s important for companies to realize that carbon regulation may have significant implications for supply chain costs in carbon- and energy-intensive industries.
So today, we’re announcing that we will lead the creation of a Sustainability Index. The Index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products.
If we work together, we can create a new retail standard for the 21st century.
— Mike Duke, President and CEO of Walmart, Sustainability Milestone Meeting, July 16, 2009
Cap and trade, also known as emissions trading, is a market-based mechanism that will reduce GHGs as well as facilitate operational efficiency, technological innovation, economic growth and job creation. In a cap and trade system, the government sets a limit or cap on the total amount of GHGs that can be emitted from regulated facilities.
The Ontario Government has been working with other North American jurisdictions to develop an integrated approach to emissions reporting and cap and trade. In June 2008, Ontario signed a Memorandum of Understanding with Québec to collaborate on a regional cap and trade initiative. Last year Ontario also joined the Western Climate Initiative (WCI), a consortium of seven US states and Québec, Manitoba and British Columbia, whose aim is to reduce GHG emissions independently of their federal governments.
On September 22, 2009, the EPA introduced the United States’ first GHG reporting system, which is due to take effect on January 1, 2010. Earlier this year the Obama administration introduced the American Clean Energy and Security Act to establish a cap and trade system. Also known as the Waxman-Markey Bill, it was passed by the House of Representatives on June 26, 2009, and is now awaiting debate in the Senate.
The transition to a low-carbon economy will bring challenges for competitiveness but also significant opportunities for growth. Carbon management is a core element of preparation for the new economic environment. Ignoring climate change or the carbon agenda will damage economic or business growth. Addressing energy usage and GHG emissions is a pro-growth strategy whose cost is proportional to the timing of actions. The internalization of carbon as a critical factor in economic growth is a unique challenge — and one which we urge all manufacturers to take seriously.
— The New Age of Carbon — Stephen Stokes, Kevin O’Marah
Where to start
Where does an organization start? We encourage taking small steps. It is important that an organization sequence projects properly and find those that have pay back in the short-term. Do things you can do quickly and build momentum, rather than get bogged down on big projects. Take the savings and invest it in future projects. Those steps may include creating a:
- Carbon Audit
- Energy Audit
- Product Footprints
- Strategy that integrates; carbon, energy and sustainability
Julie Matthews is Director, Carbon Advisory Services Group, for e3 Solutions Inc (www.e3solutionsinc.com). e3 Solution’s industry-leading software and services help top organizations across North America measure, monitor and verify their environmental and carbon footprints. Linking the utility room to the boardroom, e3’s Enterprise Carbon Management software delivers the comprehensive greenhouse gas monitoring, management and reporting capabilities today’s organizations need.