Carbon Credits Program

Carbon Credits Program
Presented by: Caleb H. Dana, Jr., P.E. Eco-Systems, Inc. At the Air & Waste Management Association’s: 2008 Southern Section A&WMA Annual Meeting & Technical Conference – August 5-8, 2008 Beau Rivage Resort, Biloxi, Mississippi

Kyoto Protocol United Nations Framework Convention on Climate Change (UNFCCC) The United States signed and ratified the UNFCCC in 1992 The Framework took effect in 1994 Kyoto Protocol text was adopted unanimously in 1997 Marrakesh Accords adopted in 2001 Kyoto Protocol Convention took effect on February 16, 2005 More information: ( To set the stage regarding talking about Carbon Credits and Trading, one must start with the historical perspective of the Kyoto Protocol Agreement. This agreement was preceded by the adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992 at the Earth Summit. During the 1992 Earth Summit convened by the United Nations Conference on Environmental and Development, a rudimentary framework for a global emission trading systems was presented in a Side Show in a tent. Concern was limited to a few scientists and environmentalists. The United States participated in, signed, and ratified the UNFCCC in The Framework took effect in The Convention was ratified by 189 Countries, including the US. The Kyoto Protocol text was adopted unanimously in 1997 in December at a “Conference of the Parties (COP)”, periodic meeting. The global carbon market emerged as a result of the Kyoto Protocol. The Protocol set GHG emission limitations on its signatory countries, and established mechanisms for reducing overall GHG emissions by at least 5 percent below 1990 levels by the end of The Kyoto Protocol Convention took effect on February 16, 2005 after being ratified by all industrialized countries except Australia and the US. The Marrakesh Accords (COP7) were adopted in 2001 in order to further define how the Kyoto Agreement would be implemented and further addressing how forestry activities would be managed under the Protocol.

Kyoto Protocol The Kyoto Protocol is “An international agreement with mandatory targets on greenhouse-gas emissions (GHG) for the world’s leading economies which accept it. The Kyoto Protocol sets limits on total GHG emissions by the world’s major economies, a prescribed number of “emission units.” However, the Protocol does not set limits on GHG emissions for developing countries.” The Kyoto Protocol is basically a cap-and-trade system that allows countries that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to countries that are over their targets. The Kyoto Protocol is … “An international agreement with mandatory targets on greenhouse-gas emissions (GHG) for the world’s leading economies which accept it. The Kyoto Protocol sets limits on total GHG emissions by the world’s major economies, a prescribed number of “emission units.” However, the Protocol does not set limits on GHG emissions for developing countries.” The United States decided not to ratify the Kyoto Protocol in 2001 for several reasons including a belief that it would significantly adversely impact the US economy and because newly developing nations such as China and India were not participating.

GHG Emissions related to Climate Change
Six gaseous compounds have been found to be significant relative to their capability to capture thermal radiation in the upper atmosphere: Carbon Dioxide (CO2) – 60 % of GHG thermal capture Methane (CH4) Nitrous Oxide (N2O) Chloro-, Hydro- , Hydrochloro- (CFCs/HFCs/HCFCs), and Perfluorocarbons (PFCs) Sulfur Hexafluoride (SF6) Water Vapor (H2O) Six gaseous compounds have been found to be significant relative to their capability to capture thermal radiation in the upper atmosphere: Carbon Dioxide (CO2) – 60 % of GHG thermal capture Methane (CH4) Nitrous Oxide (N2O) Chloro- , Hydro- and Hydrochlorofluorocarbons (CFCs/HFCs/HCFCs) Perfluorocarbons (PFCs) Sulfur Hexafluoride (SF6) Water Vapor (H2O)

Kyoto Protocol GHG Emissions Reduction Targets
The reduction targets for CO2 range from -8% to +10% of the country’s individual 1990 emissions levels “with a view to reducing their overall emissions of such gases by at lease 5% below existing 1990 levels in the commitment period 2008 to 2012. These limits call for significant reduction in currently projected emissions. Future emissions mandatory targets are expected to be established for “commitment periods” after 2012 and will be negotiated well in advance of the periods concerned. The reduction targets for CO2 range from -8% to +10% of the country’s individual 1990 emissions levels “with a view to reducing their overall emissions of such gases by at lease 5% below existing 1990 levels in the commitment period 2008 to 2012. These limits call for significant reduction in currently projected emissions. Future mandatory emission targets are expected to be established for “commitment periods” after 2012 and will be negotiated well in advance of the periods concerned.

Kyoto Protocol GHG Emissions Reduction Targets
Marrakesh Accords are rules adopted with instructions regarding how to implement the Kyoto Protocol. These rules specify the Protocol’s emissions-trading system implementation procedures. Countries actual emissions have to be monitored and guaranteed to be what they are reported to be, and precise records have to be kept of the trades carried out. Accordingly, “registries” – like bank accounts of a nation’s emissions units – are being set up, along with “accounting procedures”, an “international transactions log”, and “expert review teams” to verify compliance. Marrakesh Accords are rules adopted with instructions regarding how to implement the Kyoto Protocol and specify the Protocol’s emissions-trading system implementation procedures. Countries actual emissions have to be monitored and guaranteed to be what they are reported to be, and precise records have to be kept of the trades carried out. Accordingly, “registries” – like bank accounts of a nation’s emissions units – are being set up, along with “accounting procedures”, an “international transactions log”, and “expert review teams” to police compliance. Transparency and integrity are hallmarks of an acceptable system.

Kyoto Protocol Commitments for GHG Emission Reductions
Commitments under the Protocol vary: An overall 5% target for developed countries is to be met through cuts (from 1990 levels) European Union – 8% (member states vary from 28% reduction by Luxembourg to 27% increase by Portugal) Switzerland – 8% Most Central and East European states – 8% Canada – 6% United States – 7% (US has since withdrawn its support) Hungray – 6% Japan – 6% Poland – 6% New Zeland, Russia, and Ukraine – stabilize (0%) Norway – Increase by 1% Australia – Increase by up to 8% (Australia has since withdrawn its support) Iceland – Increase by 10% Commitments under the Protocol vary: An overall 5% target for developed countries is to be met through cuts (from 1990 levels) European Union – 8% (member states vary from 28% reduction by Luxembourg to 27% increase by Portugal). This is felt to be a modest reduction considering the possible carbon reductions that are projected to be needed.

Mechanisms for Carbon Trading under the Kyoto Protocol
Three Mechanisms were established for Carbon Trading under the Kyoto Protocol: 1. International Emissions Trading (IET) 2. Clean Development Mechanism (CDM) (credits earned by sponsoring greenhouse-gas-reducing projects in developing countries). 3. Joint Implementation Projects (JI) Three Mechanisms for Carbon Trading under the Kyoto Protocol: International Emissions Trading Clean Development Mechanism (credits earned by sponsoring greenhouse-gas-reducing projects in developing countries). Joint Implementation. I will talk a little about each of these.

Carbon Credits Under the Kyoto Protocol
Under the Kyoto Protocol agreement, countries have flexibility in how they will meet the targets (i.e., they may increase “sinks” such as forests at home or abroad or pay for foreign projects that result in carbon emission reductions or greenhouse gas cuts.) It is assumed that greenhouse-gas emissions damage the atmosphere equally wherever they occur, and emission cuts help equally wherever they are made. Under the Kyoto Protocol agreement, countries have flexibility in how they will meet the targets (i.e., they may increase “sinks” such as forests at home or abroad or pay for foreign projects that result in carbon emission reductions or greenhouse gas cuts.) More than actual emissions units will be involved in trades and sales. Countries will get credit for reducing greenhouse–gas totals by planting or expanding forests (“removal units”); for carrying out “joint implementation projects” with other developed countries, usually countries with “transition economies”; and for projects under the Protocol’s Clean Development Mechanism, which involves funding activities to reduce emission by developing nations. Credits earned this way may be bought and sold in the emissions market or “banked” for future use. It is assumed that greenhouse-gas emissions damage the atmosphere equally wherever they occur, and emission cuts help equally wherever they are made.

Carbon Credits Under the Kyoto Protocol
Countries will get credit for reducing greenhouse–gas totals by planting or expanding forests (“removal units”); for carrying out “joint implementation projects” with other developed countries, usually countries with “transition economies”; and for projects under the Protocol’s Clean Development Mechanism, which involves funding activities to reduce emission by developing nations. Credits earned this way may be bought and sold in the emissions market or “banked” for future use.

International Emissions Trading (IET)
Article 17 of the Kyoto Protocol Countries with commitments under the Kyoto Protocol can acquire emission units from other countries with commitments under the Protocol and use them towards meeting a part of their targets. An international transaction log, a software-based accounting system, ensures secure transfer of emission reduction units between countries. Article 17 of the Kyoto Protocol Countries with commitments under the Kyoto Protocol can acquire emission units from other countries with commitments under the Protocol and use them towards meeting a part of their targets. An international transaction log, a software-based accounting system, ensures secure transfer of emission reduction units between countries

Clean Development Mechanism (CDM)
Article 12 of the Kyoto Protocol Because the atmosphere is equally damaged by greenhouse-gas emissions wherever they occur and equally helped by emissions cuts wherever they are made, the Protocol includes an arrangement for reductions to be “sponsored” in countries not bound by emissions targets. Emission-reduction (or emission removal) projects in developing countries are allowed to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol. Article 12 of the Kyoto Protocol Because the atmosphere is equally damaged by greenhouse –gas emissions wherever the occur and equally helped by emissions cuts wherever the are made, the Protocol includes an arrangement for reductions to be “sponsored” in countries not bound by emissions targets. Emission-reduction (or emission removal) projects in developing countries are allowed to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol. Projects must qualify through a rigorous and public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project. To be certified by the Clean Development Mechanism Executive Board, a project must be approved by all involved parties, demonstrate a measurable and long-term ability to reduce emissions, and promise reductions that would be additional to any that would otherwise occur. Options to the program are also being considered. Less red tape, for example, may be required for small-scale projects, such as renewable energy facilities below 15 megawatts of installed capacity. Another proposal is to allow afforestation and reforestation projects to be included in the scheme.

Clean Development Mechanism (CDM)
Projects must qualify through a rigorous public registration and issuance process designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project. To be certified by the Clean Development Mechanism Executive Board, a project must be approved by all involved parties, demonstrate a measurable and long-term ability to reduce emissions, and provide reductions that would be additional to any that would otherwise occur. Options to the program are also being considered. Less red tape, for example, may be required for small-scale projects, such as small renewable energy facilities. Another proposal is to allow afforestation and reforestation projects to be included.

Joint Implementation (JI)
Article 6 of the Kyoto Protocol A country with an emission-reduction limitation commitment under the Kyoto Protocol may take part in an emission reduction (or emission removal) projects in any other country with a commitment under the Protocol, and count the resulting emission units towards meeting its Kyoto target. It allows industrialized countries to meet part of their required cuts in greenhouse-gas emissions by paying for projects that reduce emissions in other industrialized countries. A country with an emission-reduction limitation commitment under the Kyoto Protocol may take part in an emission reduction (or emission removal) projects in any other country with a commitment under the Protocol, and count the resulting emission units towards meeting its Kyoto target. It allows industrialized countries to meet part of their required cuts in greenhouse-gas emissions by paying for projects that recude emissions in other indusrialed countries. JI projects earn emission reduction units (ERUs), each equivalent to one tonne of CO2, As with CDM, all emission reductions must be real, measurable, verifiable, and additional to what would have occurred without the project. To be approved for a joint implementation project, industrialized countries must meet requirements under the Protocol for accurate inventories of greenhouse-gas emissions and for detaied registries of emissions “units” and “credits”. Projects may start and receive credits during Sponsoring governments will receive credits that may be applied to their emissions targets’ the recipient nations will gain foreign investment and advanced technology (but not credit toward meeting their own emissions caps; they have to do that themselves).

JI projects earn emission reduction units (ERUs), each equivalent to one tonne of CO2, As with CDM, all emission reductions must be real, measurable, verifiable, and additional to what would have occurred without the project. To be approved for a joint implementation project, industrialized countries must meet requirements under the Protocol for accurate inventories of greenhouse-gas emissions and for detailed registries of emissions “units” and “credits”. Projects may start and receive credits during Sponsoring governments will receive credits that may be applied to their emissions targets’ the recipient nations will gain foreign investment and advanced technology (but not credit toward meeting their own emissions caps; they have to do that themselves). Under the JI there are two “tracks” by which projects can apply for approval: Party-varification and international independent body varification. National Approval Before a project will be recognized as a CDM or JI project, the project participants must receive a letter of approval from the host country. Likewise, project participants require a letter of authorization. A list of designated national authorities under the CDM is available at: and a list of countries’ designated focal points under JI is available…

Under the JI there are two “tracks” by which projects can apply for approval: 1) third-party verification and 2) international independent body verification. National Approval Before a project will be recognized as a CDM or JI project, the project participants must receive a letter of approval from the host country. Likewise, project participants require a letter of authorization. A list of designated national authorities under the CDM is available at: (

Third Party Oversight Required by the Kyoto Protocol
Third-party oversight is required by the Kyoto Protocol Independent, third-party validation or determination of project design documents and verification and certification of GHG emission reductions is a key feature of the CDM and JI. A list of accredited designated operational entities under the CDM is available at: ( Independent, third-party validation or determination of project design documents and verification and certification of GHG emission reductions is a key feature of the CDM and JI. A list of accredited designated operational entities under the CDM is available at: and a list of accredited independent entities under JI is located at: …

Scientific Assessment of Climate Change
Global Change Research Act of 1990 U.S. Climate Change Science Program (CCSP) Intergovernmental Panel on Climate Change (IPCC) Section 515 of the Treasury and General Government Appropriations Act for Fiscal Year 2001 and the Information Quality Act guidelines issued by the Department of Commerce and NOAA Scientific Assessment of the Effects of Global Change on the United States, May 2008, prepared by the Committee on Environment and Natural Resources National Science and Technology Council More information : ( Library/scientific-assessment/) Activities regarding research of climate change really began to pick up during the 1990’s. Several Acts were passed by Congress to research global warming. A summary of the research to date was published in the Scientific Assessment … You can read the report at the web site …

Scientific Assessment of the Effects of Climate Change on the United States
The IPCC concluded that it is unequivocal that the average temperature of the Earth’s surface has warmed recently and it is very likely (greater than 90% probability) that most of this global warming is due to increase concentrations of human-generated greenhouse gases. The IPCC determined that the globally averaged temperature rise over the last 100 years ( ) is F when estimated by linear trend. The rate of global warming over the last 50 years ( F per decade) is almost double that for the 100 years ( F per decade). Greenhouse Gases (GHGs) are at their highest levels in at least 400,000 years. As reported in the Assessment, the IPCC concluded that sufficient evidence existed that global warming was occurring and was due to GHGs…

Scientific Assessment of Climate Change
“Are Humans Responsible for Global Warming, A Review of the Facts”, Environmental Defense, April ( “Nature, Not Human Activity, Rules the Climate, Nongovernmental International Panel on Climate Change”, April 2008 U.S. ( Now, I am not a climate scientist, and am not going to try to debate the scientists as to who is more right or more wrong. But here are two articles that appear to discuss the issue of the real causes of the climate change, scientific theories and pros and cons, from a more scientific fact review. It would appear that there is near universal agreement that global warming is occurring; the discension is over whether it is naturally being caused mainly by sun cycles, or is a result of the GHG buildup. Everyone also agrees that from the geologic record that the earth will likely experience another ice age, but that is likely millions of years off. The real question, it seems to me, is what should be done to address climate change, whether warming or cooling. Will reductions in GHG emissions have any substantial effect on moderating global warming. Again, I am not a climate scientist, so you may read these articles and decide for yourself.

Costs for Addressing Climate Change
“The United States can enjoy robust economic growth over the next several decades while making ambitious reduction in greenhouse-gas emissions. If we put a cap-and–trade policy in place soon, we can achieve substantial cuts in greenhouse-gas emissions without significant adverse consequences to the economy. And in the long run, the coming low-carbon economy can provide the foundation for sustained American economic growth and prosperity.” … What Will it Cost to Protect Ourselves from Global Warming?”, Environmental Defense Fund ( The next issue is, if we accept that reductions in carbon emissions has some value, is “how will efforts to reduce GHG emissions affect our economy and standard or quality of life. The EDF has prepared a report regarding anticipated consequences to the economy and concluded in general that adverse effects will be outweighted by advances and greater prosperity and sustainability over the long run… The key element here, according to the EDF and others is that an effective cap-and-trade system be put in place and soon.

Costs for Addressing Climate Change …
A national policy to cut carbon emissions by as much as 40 percent over the next 20 years could still result in increased economic growth, according to an interactive Web site that reviews 25 of the leading economic models used to predict the economic impacts of reducing emissions. Robert Repetto, professor in the practice of economics and sustainable development at the Yale School of Forestry & Environmental Studies created the interactive web site. Growth rates of the U.S. GDP have been 3% historically. According to the Web site’s predictions, “With emissions reduced by 40 % of business-as-usual, even under the most pessimistic assumptions, the GDP would grow 2.4 % a year, reaching $23 trillion by 2030, and rising above 3% under favorable assumptions.” ( A Yale study of the economic impacts to the US economy also concluded that the U.S. GDP would likely grow at the historical 3% rate, and even under the most pessimistic assumptions would grow at 2.4%.

U.S. Greenhouse Gas Inventory Reports
In 1992 the U.S. signed and ratified the UNFCC which required that ratifying parties “shall develop, periodically update, publish and make available…national inventories of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol using comparable methodologies…” Inventory of U.S. Greenhouse Gas Emissions and Sinks: , USEPA #430-R , (April 2008) More information: ( emissions/usinventoryreport.htm) If you would like to take a look at what the GHG emissions look like for various industrial sectors of the US economy, here is an excellent source of information that has been prepared by the EPA. The information includes GHG emissions “trend” analysis from 1990 through 2006 for the most significant relevant sources, and discussions of each of the emission sources. The report shows that the primary GHG emitted by human activities in the US is CO2, representing approx. 85 % of total GHG emissions. (Add charts if you can)

GHG Emissions – EPA Inventory
Source: EPA GHG Emissions – EPA Inventory This chart illustrates GHG emissions by gas type for years 1990 through You can see that CO2 represents the largest component at roughly 5000 Teragrams of CO2 equivalent. One Teragram is equal to 10E12 grams or one million metric tons. (i.e., 5000 million metric tons or 5 billion metric tons).

For 2006, CO2 represented 84.8% of the emissions….

This chart shows that total cumulative GHG emissions since 1990 have increased roughly by 900 Teragrams of CO2 equivalent or about 15%.

This chart shows that Fossil Fuel Combustion results in 80% of GHG emissions (5,638/7,054). Fossil Fuel Combusting of course includes fuel usage for vehicle transportation and fuel for electrical production and heating.

A Business Guide to U.S. EPA Climate Partnership Programs
A Business Guide to U.S. EPA Climate Partnership Programs, EPA-100-B , June 2008 More than 13,000 firms and other organizations participating in climate-related EPA Partnership Programs The EPA Climate Leaders Program allows companies to create a lasting record of its GHGs emissions reductions activities and accomplishments More information: ( EPA has taken steps to develop a program and encourage businesses on a voluntary basis to join in and pursue efforts to reduce GHG emissions through the Climate Partnership Program and Climate Leaders Program.

A Business Guide to U.S. EPA Climate Partnership Programs
Addressing climate change issues and CO2 emissions represents business opportunities and advantages for becoming a Climate Leader such as: Substantial energy cost savings Improved bottom line Improved operating efficiencies Improved risk management Improved insurability Expanded market opportunities Improved job satisfaction and worker productivity Enhance brand and corporate reputation EPA is endeavoring to show that participation has bottom line improvements while at the same time helping to address global issues! Win-Win!

Climate Change Legislative Initiatives
Energy Policy Act of 1992 Required reporting of GHG emissions Climate Stewardship and Innovation Act of 2007 Requires a declining cap-and-trade system Electric Utility Cap-and-Trade Act Establishes a cap-and-trade system for electric utilities only Global Warming Pollution Reduction Act of 2007 Establishes emission and energy efficiency standards Global Warming Reduction Act of 2007 Establishes economy-wide emissions cap-and-trade program Low Carbon Economy Act of 2007 Establishes a GHG credit and allowance trading system America’s Climate Security Act of 2007 Establishes a GHG registry and trading program Congress has been active, with a number of legislative efforts passed and underway to address the issue of climate change. Each party and various congressmen have their particular ideas on how best to implement a climate change policy for the US. It is hoped that a cap-and-trade program will result from these endeavors as it is believed to be the quickest and most efficient way of incentivising the reduction in carbon emissions world wide. Projects that may not be done otherwise can earn credits for sale and thus make money from those that need credits in order to achieve compliance with the cap, such as the US acid rain cap-and-trade program achieved.

Regional Climate Agreements
Regional Climate Agreements have been pursued in the absence of Federal Initiatives ( Various agencies and organizations have also been active around the country in the absence of federal actions. The Pew Climate.org web site gives a good summary of what each of these entities is endeavoring to accomplish.

Historically Traded Volume on the US Voluntary Carbon Market
Well, has there been any significant activity in the US regarding Carbon Trading? Yes! Trading on the CCX reflects a five-fold increase during OTC shows a doubling during If this trend holds, it would demonstrate a very efficient and effective method of achieving GHG emission reductions (in a similar manner to what was achieved under the US acid rain reduction program using a cap-and-trade approach). Source: State of the Voluntary Carbon Markets 2007, Ecosystems Marketplace/New Carbon Finance, July 2007.

Voluntary GHG Markets Increasing interest in voluntary Verified Emissions Reductions (VERs) Verification protocols critical Great diversity of projects and structures Growing sophistication of both bids and offers Project values dependent on buyer preferences: Technology Vintage Location Social side-benefits So, what kinds of projects have pursued in the US under voluntary efforts? Forestry leads at 36% of projects with renewables a close second at 33%. Source: State of the Voluntary Carbon Markets 2007, Ecosystems Marketplace/New Carbon Finance, July 2007.

Carbon Trading Exchanges in the U.S.
Chicago Carbon Exchange (CCX) Voluntary Carbon Offsets Program ( New York Merchantile Exchange (NYMEX) New “Green Exchange” opened March 2008 Carbon derivatives, NOx, SO2 trading ( Where are we today in order to trade carbon credits in the US? We have two exchanges: CCX and the brand new Green Exchange. You can find out all about these exchanges at the referenced web sites….

Chicago Climate Exchange
Integrated GHG reduction and trading system CCX issues tradable Carbon Financial Instrument (CFI) contracts Types of projects: Agricultural methane Coal mine methane Landfill methane Agricultural soil carbon Rangeland soil carbon management Forestry Renewable Energy Ozone depleting substance reduction Third party verification and final check by Financial Industry Regulatory Authority (FINRA, formerly NASD) The CCX began trading in December 2003 and is the most highly developed in the US. It is generally regarded as “transparent” with high integrity, oversight, and checks and balances to assure reliability. By May of 2006, six million carbon allowances had been traded on the exchange, with a price between $3 and $5 per metric ton of carbon dioxide equivalent. You can see the types of projects that involved. There are issues though, not with integrity and transparency, but with some of the type of projects that are “given” credits, i.e., that they may not truly result in reductions of GHG emissions as intended. This critical issue must continue to be looked at.

CCX Carbon Credits Program
Achieved via qualifying GHG emission reduction projects Greenhouse Gas Emission Reductions Carbon Credit Program Eligibility Assessment Protocol Development Monitoring Reporting Verification Registration Chicago Climate Exchange protocols The Carbon Credits program starts with projects that achieve GHG emission reductions, which are then carefully verified and documented for trading on the market. Once verified, carbon credits may be traded. Carbon Credits (certified, tradable, $$) Sell on CCX through an aggregator

Mechanics of CCX Trading
CCX Registry CCX Trading Floor Trading is conducted in a similar manner as other commodities or investment instruments.

CCX Carbon Offsets Program
This pie chart gives a historical picture of the variety and percentages of the different types of projects that have been utilized for carbon emission reductions on the CCX.

CCX Offsets and Early Action Credits
This bar chart shows the cumulative trend of carbon emission reduction credits traded on the CCX market since 2003.

The Green Exchange Globally integrated marketplace for trading environmental products Began trading March 2008 Trading Platform with financial products, expertise, and clearinghouse by NYMEX with environmental markets leadership of Evolution Markets Types of trades: Carbon – Futures, Options, Swaps U.S. Emissions (SO2 and NOx) – Futures, Options, Swaps Coming soon – Renewable Energy, Voluntary Carbon Credits, CER Options, RGGI Allowances – Futures, Options, Swaps The Green Exchange is brand new; it began trading March However, it has strong backing with NYMEX and Evolution Markets.

Carbon Registries Department of Energy (DOE) Registry – National Voluntary Reporting of Greenhouse Gases Program under section 1605(b) of the Energy Policy Act of 1992 California Climate Action Registry (CCAR) Chicago Climate Exchange Registry (CCX) Regional Greenhouse Gas Initiative Registry (RGGI) Western Climate Initiative Midwestern Greenhouse Gas Reduction Accord The Carbon Trading Exchange and The Green Exchange (recently formed) In addition to the Exchanges, the US has a number of Carbon Registries. Carbon Registries are established to record and track net carbon emission levels over time. They provide for quantifiable and verifiable carbon for trade within a market. They provide an opportunity for business to voluntarily get offsets or credits for their projects that reduce GHG emissions. These have evolved in the absence of the federal leadership. If the federal government enacts comprehensive legislation, exchanges and registries will likely need to change their procedures. For instance, if federal legislation is consistent with the Kyoto Protocol, then only projects that truly achieve new carbon emission reductions and would not be done except for being able to obtain the credits on the market, would be approved, and thus obtaining the credits becomes the true driver for making projects happen to achieve new carbon emission reductions.

US Commitments to Carbon Reductions
Two States: New Mexico and Illinois 284 U.S. Cities: Chicago, Boulder, … 542 Universities and Colleges: Colby, … 27 States have Renewable Energy Portfolio Standards - Renewable Energy Certificates (CERs) Commitments for carbon emission reductions are being made voluntarily through the CCX and various Registries Through the CCX trading platform, states, counties, cities, municipalities are committing to 6% reductions in GHG emissions by 2010 U.S. registries include CCX, DOE, CCAR, and RGGI Well, with carbon trading being voluntary in the US currently, is anybody actually committing to carbon emission reductions and spending money on purchasing credits? Yes! 2 states, 284 cities, 542 colleges, regional initiatives that I have talked about. The CCX is conducting a voluntary program to achieve 6% reductions in GHG emissions by 2010, and they are signing up states, counties, cities, etc. now. The registries also typically have voluntary commitment goals that are being pursued under their initiatives.

Carbon Trading and Forestry
The IPCC reported in its third assessment that 10-30% of human-induced global GHG emissions are due to Land Use, Land Use Change, and Forestry (LULUCF). The IPCC concluded that globally, changes in forest management could induce future carbon sequestration adequate to offset an additional 15-20% of CO2 emissions. Within the U.S., LULUCF activities in 2004 resulted in a net carbon sequestration of million tons CO2 equivalent. This represented an offset of approximately 13 percent of total US CO2 emissions, or 11 percent of total GHG emissions in 2004 (EPA, 2006). Source: Forest Carbon Trading and Marketing in the United States, Ruddell, Walsh, and Kanakasabai, Oct., ( Now I want to highlight Forestry, since it currently is playing a big role in Carbon Trading and there are opportunities in MS. Note what the IPCC says: … The report noted here – Forest Carbon Trading …. Has an excellent summary of issues and opportunities and may be found at the web site indicated.

Non-governmental organizations involved with developing voluntary carbon markets in forestry in the U.S.: CarbonFund The Climate Trust National Carbon Offset Coalition Powertree Pacific Forest Trust AgraGate Climate Credits Corp These organizations work with established registries and buyers to market forestry offset credits for carbon emission reductions There are a number of organizations that are helping private businesses plan projects and put together the information needed to qualify forestry projects for carbon emission reduction trading. They then interface with registries and buyers to make trades happen.

The Kyoto Protocol authorized only afforestation and reforestation activities and excludes soil carbon storage, sustainable forest management, and avoided deforestations. The CCX is the only exchange platform for trading forestry offset credits in the U.S. The Registries that are currently active in the U.S. include the CCX, the DOE’s 1605(b) program, and the CCAR. However, these are all in the development phase and lack direction due to the absence of mandatory emissions reduction requirements and an established price of carbon emission reductions. Forestry credit issues: baseline setting, additionality, leakage, and permanence “Carbon Credits: A possible source of new income for Missisippi forest landowners”, Randy Rousseau, Tree Talk - Winter 2008 Several issues may be noted in regard to types of forestry projects, carbon credits, and trading. The article referenced at the bottom here is an excellent article summarizing opportunities for forestry carbon credits here in MS. It may be found on a web search of the information provided here.

American College and University President’s Climate Commitment (ACUPCC)
Agreement with signatures from 542 colleges and universities as of May 7, 2008 Objective is to pursue “Carbon Neutrality” Agreement calls for: Institutional body to monitor and guide the process Conduct annual emissions inventory Formulate a carbon neutrality action plan Develop a financing program to implement the plan Incorporate “sustainability” into school’s academic experience First signatory to achieve carbon neutrality was the College of the Atlantic in December of 2007 Colby College, Maine, joined the commitment in May 2008 As mentioned earlier, a group of colleges and universities have joined together in a commitment to become “Carbon Neutral”, i.e., no net emissions of GHGs from their activities. College of the Atlantic was the first to achieve this in December of 2007 as reported. I thought that I would talk a little about Colby College in Maine since they have published a summary of their efforts to-date.

American Colleges and Universities Role in Reducing Carbon Emissions Thesis paper by Jamie O’Connell, 2008 Colleges and universities play a unique role in society as centers of research and progressive thought. These institutions have a responsibility of educating and preparing the next generation of leaders in every aspect of society. The United Nations International Panel on Climate Change (IPCC) has stated that emissions must be reduced by 50 to 85 percent below 2000 levels by 2050, with peak CO2 occurring before 2015, to hold temperature increase to within 2.0 to 2.4 degrees Celsius of the pre-industrial era (Dautremont-Smith et al. 2007a, IPCC 2007)

American Colleges and Universities Role…
Colleges and universities comprise a $317 trillion industry that spends billions on energy consumption and fossil fuel products (Dautremont-Smith et al. 2007b) Given the role of higher education in preparing students to find solutions to climate change, the potential impact on markets for clean energy and sustainable products, and the importance of tanking immediate climate action, Colby College embarked on a study of the feasibility to achieve “carbon neutrality” and the timeframe over which it could be reached.

What is Carbon Neutrality?
Carbon Neutral is a term used to describe any organization, entity, or process that has a net greenhouse gas (GHG) emissions level of zero (Dautremont-Smith et al. 2007a) Net emissions are equivalent to the gross emissions minus any carbon offsets A carbon offset is any activity that reduces carbon emissions so as to exactly compensate for a carbon emitting activity elsewhere (Dautremont-Smith et al. 2007a) Thus organizations may reduce or eliminate emissions where possible and offset carbon emissions where reduction or elimination of emission is not an option, or when it costs less to purchase offsets than to reduce emissions

Process Steps to Evaluate the Feasibility of Carbon Neutrality
Conduct and create a greenhouse gas emissions inventory and establishment of an emissions baseline Identify, investigate, and evaluate options for reducing or eliminating emissions from individual sources Conduct modeling to predict and evaluation future emissions under different reduction scenarios Develop timeframe and costing models for emission reductions for each source and for selected reduction scenarios Evaluate the role of offsets in achieving emissions and develop offsetting options Prepare an implementation plan and costs for the selected approach

Conducting Carbon Emissions Inventory
The World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) have published the “Greenhouse Gas Protocol: a corporate accounting and reporting standard” The standard is the most widely accepted set of standards for both calculation of GHG emissions and deciding which carbon sources should be included in an inventory The Campus Carbon Calculator version 5.0, an excel-based document created by an environmental non-governmental organization Clean-Air Cool-Planet was utilized. The program contains a series of spreadsheets that comprise three general modules: data input, emissions factors, and summary.

Conducting Carbon Emissions Inventory
Basic data is collected from the college’s activities and loaded in. The calculator then uses these variables to calculate GHG emissions, and offsets based on conversion factors stored in the emissions factors module. All emission and conversions factors came from the US DOE, EPA or the USDOT. The gross emissions, net emissions, and emissions by source for all GHG emissions are converted into metric tons of carbon dioxide equivalents (MTCDE) and can be viewed in the summary module.

Defining the Scope of Emissions at Colby College
Not always clear which emissions are the responsibility of – or controllable by – the institution pursuing neutrality College rented housing not owned by the college Solid wastes leaving the grounds Non-owned vehicle energy consumption for off-site students Emissions from energy production for energy used on-campus

Defining the Scope of Emissions at Colby College
Adopted from the Greenhouse Gas Protocol: Scope 1, 2, and 3 category Emissions: Scope 1 Emissions: defined as “all direct sources of GHG emissions from sources that are owned or controlled by the institution” Scope 2 Emissions: encompasses emissions “associated with the generation of imported sources of energy” Scope 3 Emissions: includes “all other indirect sources of GHG emissions that may result from the activities of the institution by occur from sources owned or controlled by another company After categorizing emissions into Scope 1, 2, or 3, an institution can then define its operational boundary, or the sources and emissions for which it is responsible

Emission Sources and Category

Gross Greenhouse Gas Emissions, Energy Use, and Building Area at Colby College from 1990 through 2007 A switch to “green electricity” in 2003, produced by biomass and hydroelectric power, caused a 34 percent drop in emissions and energy use. The addition of two buildings receiving a Leadership in Energy and Environmental Design (LEEDTM) certification from the U.S. Green Building Council’s LEED Green Building Rating SystemTM. The new Alumni Center uses geothermal heating, a carbon-free source of heat. The Diamond Building provides for more energy efficiency.

Gross Greenhouse Gas Emissions, Energy Use, and Building Area at Colby College from 1990 through 2007

Energy Use per Square Foot of Building Space at Colby College

Greenhouse Gas Emissions by Source at Colby College 1990 through 2007

Percent contribution to gross greenhouse gas emissions by source at Colby College in 2007

Summary of Greenhouse Gas Reduction Strategies at Colby College and Their Impact on 2007 Gross Emissions

Offsets A carbon offset is any activity that reduces carbon emissions to compensate for carbon released by a different activity (Dautremont-Smith et al. 2007a) and may be used as a complement or a substitute for on-campus reductions Carbon offsets must be quantified and certified by third parties and thus must be credible and must also be “additional” Additional means that for an emissions reduction project to count as an offset, the reduction in carbon must not have otherwise occurred without the purchase of the offset (Kollmuss and Bowell 2007). “Leakage” is also another concept inherent in counting as an offset. Leakage means that emission reductions resulting from a project are offset by emissions increases resulting from moving essentially the same action to another location. Emission reductions must also be cataloged and tracked in order to not be “double-counted”.

Offsets Carbon offsets used to fulfill regulatory obligations, such as the Regional Greenhouse Gas Initiative (RGGI), or the Clean Development Mechanism (CDM) will be overseen by a regulatory body. For voluntary carbon offsets, a third party must be engaged to verify that standards are met. Offsetting activities considered by Colby College included: Composting Renewable Energy Credits (RECs) Forest Preservation

Cost to Offset 2007 Gross Emissions by Source at Colby College

Forecasting Future Carbon Emissions
Evaluation of future facilities and expansions at Colby College Evaluation of future community plans that could affect Colby College Identification and evaluation of actions available to the college to reduce or eliminate carbon emissions Development of likely scenarios for future activities and emissions

Future Projected Greenhouse Gas Emissions at Colby College from 2007 through 2017
Scenario I – represents business as usual with no community or college initiatives Scenario II – represents business as usual for the college but with the new proposed waste to electricity facility at the Norridgewock Landfill built and on-line in 2011 Scenarios III – V show the potential impact of various levels of implementation of solar hot water on emissions Scenarios VI – VII show the potential impact from emissions modeling if existing boilers at the co-generation facility are converted to biomass boilers. Scenario VI also assumes that waste is brought to al landfill with methane gas recapture and electricity generation Scenario VII assumes that the waste is brought to a mass burn incinerator with electricity generation

Future Projected Greenhouse Gas Emissions at Colby College after 2007, through 2017

Gross Greenhouse Gas Emissions and the Cost of Offsetting at Colby College in 2017

Gross Greenhouse Gas Emissions and the Cost of Offsetting at Colby College in 2017
Discount rate of 3% used Does not include forest carbon sequestration Converting to biomass for boiler fuel at Colby is anticipated to have a payback time of between 3.4 and 3.9 years and cut fuel costs between 45 and 46 percent The question is not so much can Colby achieve carbon neutrality, but when should Colby achieve neutrality and by what means. Colby College can achieve carbon neutrality at a reasonable cost and over a short timeframe

Recommendations Switch from residual oil to biomass at the cogeneration facility – top priority Monitor, encourage, and support the methane gas to electricity facility for the Landfill Continue with the purchase of green electricity Future building should be LEED certified and use carbon-free sources of energy such as biomass, geothermal, solar thermal and PV electrical

Recommendations Continue to refine the plan for carbon neutrality and prioritize actions Improve measurement techniques and data collection Scope 3 emissions should still factor into the decision making process Reducing emissions should be favored over purchasing offsets when possible Carbon sequestration on the college-owned forest lands should be further studied and pursued for carbon offsets if allowable More information: (

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