Presentation on theme: "Laura Sands The Clark Group, LLC. What is the marketplace doing? What is Washington doing? Why should we care and what can we do about it?"— Presentation transcript:
Laura Sands The Clark Group, LLC
What is the marketplace doing? What is Washington doing? Why should we care and what can we do about it?
Source: Step 1: Supplier Assessment We will provide our more than 100,000 global suppliers with a brief survey to evaluate their own companies sustainability. The questions will focus on four areas: energy and climate; material efficiency; natural resources; and people and community... We asked our top-tier suppliers in the U.S. to complete the survey by October 1, 2009, and are working with our other suppliers to determine an appropriate timeline for them to complete the survey.
Step 2: Lifecycle Analysis Database Were helping create a consortium of universities to collaborate with suppliers, retailers, non- governmental organizations and government officials. The consortium will help develop a global database of information on products lifecycles – from raw materials to disposal... Step 3: A Simple Tool for Customers The final step of the index is to provide customers with product information in a simple, convenient, easy to understand manner so they can make choices and consume in a more sustainable way...
6 Retailers are beginning to evaluate the environmental and social performance of vendors and products Kroger has prioritized expanding its green living and sustainable offerings to consumers Costco has begun surveying its current and potential dairy vendors to assess animal welfare practices and outcomes Walmart has developed its Sustainability Index which will be released in July, it is inviting other national retailers to participate Safeway has developed initiatives on food safety, nutrition, and sustainability. In addition, its Animal Welfare Council periodically audits vendors
PHASE 1 PROJECTS U.S. Dairy Footprint: Sources of GHGs and Phase 1 Projects Total Emissions: 28 Million Metric Tons CO 2 e Dairy Feed Systems Crop Production 64% soil NO 2 24% fertilizer 12% fuel use 5.8 million 21% Milk Production 16.5 million 59% 59% enteric methane 35% manure methane 6% electricity Farm Energy Audit Program Cow of the Future Dairy Power Dairy Underground Processing 2.0 million 7% 75% electricity 2% refrigerant 23% fuel D-CREE Non-Thermal (UV) Prototype Next Generation CIP Footprint measured in metric tons of CO 2 e* Packaging 1.9 million 7% 65% raw material formation 35% container Dairy Delivery LCA Transport/ Distribution 0.8 million 3% 100% Diesel E-SMART Retail 1.0 million 3% 72% energy 28% refrigerant 7
Yikes, its going to be costly and close down the farm!
emissions cap carbon storage or sequestration offsets allowance s methane capture
13 Cost of Compliance Emissions Reductions / Offsets & other flexibility measures
All studies from 2009 and based on analyses of economic implications of HR2454 for agriculture. StudySignificant Findings USDAAn offset market will create opportunities for the agricultural sector. Annual net returns to farmers range from about $1 billion per year in to almost $15-20 billion in University of TennesseeNet returns for virtually all major crops are positive under a properly constructed cap-and-trade program. However, if carbon emissions are regulated by EPA, net farm income is projected to fall below baseline projections. Nicholas Institute of Duke University The agricultural sector as a whole benefits from cap-and- trade policy, with net gains of about $1.2 billion to $18.8 billion depending on the price of carbon. Texas A&M UniversityFarm level results differ by farm type and location. For cash reserves, 27 farms had higher and 71 had lower ending cash reserves. For net worth, 63 farms had higher and 35 farms had lower real net worth as a result of cap-and-trade.
Production costs rise minimally until fertilizer allowances are phased out in % rise in cost impacts for Corn and Soybean and a 1.9% rise for Wheat until GHG offsets mitigate the increased production costs and create additional revenue Net Revenue Increases for all three commodities studied – Corn, Soybeans, and Wheat – for: a) No-Till Adopters b) All Producers (Net Overall)
Source: Informa Economics (2009).
Net returns for virtually all major crops are positive under a properly constructed cap-and-trade program. $1.9 billion growth in annual returns over baseline projections from corn $600 million annually for soybeans Source: 25x25.org
We can make it go away!
In 2007, the Supreme Court ruled that EPA has the authority and potential obligation to regulate greenhouse gases (GHGs) under the Clean Air Act.
April 2009 EPA issues endangerment finding, declares GHGs pose significant harm to human health and welfare September 2009 EPA issues final mandatory GHG reporting rule December 2009 EPA finalizes endangerment finding starting the rulemaking process for greenhouse gas regulation April 2010 EPA and NHTSA finalize rule to control GHG emissions and fuel efficiency for light-duty vehicles May 2010 EPA finalizes permitting for GHG emissions from large facilities EPA and NHTSA to begin work on additional GHG and fuel efficiency standards for heavy-duty and light-duty vehicles
Framework for agreement known as the Copenhagen Accord On February 1, the UN posted countries that have signed up with emission reduction commitments 92 countries (40 developed and 52 developing) accounting for 83 percent of global emissions and 75 percent of global population Includes the United States as well as China, India and Brazil Source: Peterson Institute for International Economics (2010).
EPA regulates GHG emissions under the Clean Air Act Energy only bill moves through Congress this year with possibility for some climate amendments A revised cap-trade or other GHG bill emerges (power-plant only, cap-and- dividend) Kerry-Lieberman or similar comprehensive climate-energy legislation emerges/passes by 2013
Cap and Trade with Offsets Cap and Trade with No Ag Offsets Cap and Dividend Carbon Tax SupportersKerry Lieberman BoxerCantwell Collins Corker Ag Offsets?YesNo Mechanisms for Offsetting Costs to Consumers Allowances and Offsets AllowancesDividendNo Mechanisms for Offsetting Costs to Farmers Allowances and Offsets AllowancesAnnual Approps No
... the issue of cleaning up the air and energy independence should not die and you will never have energy independence without pricing carbon, Graham argues. Senator Lindsey Graham New York Times, Feb 27, 2010 We are more dependent on foreign oil today than after 9/11. That is political malpractice, and every member of Congress is responsible.
The future economy of America and the jobs of the future are going to be tied to cleaning up the air, and in the process of cleaning up the air this country becomes energy independent and our national security is greatly enhanced. -- Senator Lindsey Graham New York Times, Feb 27, 2010
Maybe the marketplace will forget….Can we make it go away?
Regional Initiatives: California (AB32 law – cap by 2012) Regional Greenhouse Gas Initiative Western Climate Initiative Midwestern GHG Reduction Accord
Recent court decisions have allowed suits against major GHG emitters to go forward: Connecticut v. AEP Kivalina v. ExxonMobil Bottomline: In the absence of federal action, companies have full liability for GHGs and courts are allowing cases suing for both $$ and injunctions to enforce control technology to move forward.
Corporate America is on board to pass climate policy that ensures a market approach. This paired with energy needs will drive climate policy alongside traditional environmental concerns. 33
Run! (Just kidding)
USDA analysis projecting high levels of afforestation on cropland used EPAs model and assumptions Legislative language analyzed reflected long-term desire by environmental groups to severely limit offsets by type and volume Projected scenarios are only as good as the assumptions made. Change the assumptions by changing the legislative language – not by boycotting the whole process Leaving the playing field ensures that others will decide the policy
The difference between a good deal for ag and a bad one lies in who writes the bill or regulation
Strong Offset Title Legal Offset Registry Protect Ags Baseline Ag Offset Commission
Clean Energy Partnerships Act (CEPA) Introduced November 2009 Sponsors: Senator Stabenow (MI); Senator Baucus (MT); Senator Klobuchar (MN); Senator Brown (OH); Senator Harkin (IA); Senator Casey, Jr. (PN); Senator Begich (AK); Senator Shaheen (NH)
Voluntary offsets program for agriculture and forestry USDA (not EPA) as the lead agency on all agriculture and forestry projects List of eligible ag and forestry offsets Flexible policies for sequestration using means like short-term contracts
Stackability of credits from other conservation or stewardship program payments Avoided conversion of conservation practices Generous crediting for holders of early action offsets Interim rules to fast-track offsets Carbon Conservation Program to incentivize carbon practices including early adopters or new offset types
Contains most of Stabenow/CEPA language on offsets Sunsets exemption for performance standards (indirect regulation) on offsets – like methane capture from manure – after 2020 Creates a more restricted international offsets program
... We are writing to request your assistance in ensuring that future assessments of an offset market accurately represent the policies being proposed, particularly for modeling of the energy and climate legislation recently proposed by Senators Kerry and Lieberman. Letter sent to EPA & USDA by: Ag Carbon Market Working Group American Farmland Trust International Biochar Initiative National Association of Wheat Growers National Association of Corn Growers National Farmers Union National Milk Producers Federation The Fertilizer Institute
Oh, come on, whats the worst that can happen.
According to USDA, climate variability could mean: An increase in extreme weather events, such as heavy downpours Less frequent but more intense precipitation Increased drought frequency and severity Changes in season length, timing and conditions Implications for agricultural production: Changes in crop yield Variations in plant tolerance Changes in the water requirements of crops Prevalence of crop disease, weeds, and pests Loss of effectiveness of herbicides and pesticides Shifts in areas where food is produced How to deal with risk?