Cap-and-Trade Model Appears Liable to Fraud

The cap-and-trade model has become under increasing pressure as it has surfaced, once again, that the model is open to fraud. It appears that the European Union's Emission Trading Scheme has been defrauded billions of dollars.

The fraud issue appears to be related to monies actually within the scheme, but to VAT payable on the transactions. Companies / traders were buying / selling across the various EU borders to avoid VAT, particularly in Denmark where VAT stands at 25% (compared to the EU average of 21%). The trades were occurring for the sole purpose of reclaiming VAT which invariably boosted ETS activity. It is known as carousel fraud and has happened in lots of different industries over the years across the EU. The ETS is the latest.

The carbon tax option is starting to look better and better...

Embarrassment for Canada: Hoax at Copenhagen

The Yes Men have once again struck a hoax and this time their victim was the Canadian Government. At yesterday's Copenhagen summit, a number of fake press releases were circulated which stated that Canada will make drastic GHG emissions cut.

Greenpeace accuses Canada for derailing the negotiations, playing-off richer and poorer countries, and hiring lobbyists in Washington to support the tar sands.

Canadians do not have a cultural attachment to the tar sands as compared to forestry and the seal hunt. We have tremendous natural resources and yet our government continues to derail international negotiations.

Mikhail Gorbachev and former Canadian PM Kim Campbell, along with other prominent individuals, to urge the Canadian government to take the lead on climate change.

Canada's position is being exposed and this will make the Canadian government more vulnerable. Over 74 percent of Canadians want action on climate change. There will be a political cost if Canada does not act now.

In the meantime, uncertainty continues to prevail for many industrial and manufacturing sectors in Canada as clear targets have not yet been established.

The Story of Cap and Trade

Two years ago, Annie Leonard released The Story of Stuff, an educational on-line video about rampant consumerism. Now she has done it again. Her latest release, The Story of Cap and Trade, will surely raise some questions as it criticizes how cap and trade functions.

She begins with a refreshing demonstration of enthusiasm for the upcoming conference in Copenhagen, expressing that the fact that world leaders are getting together to talk about climate solutions is a huge triumph and potentially an important step in right direction. But she harshly warns that cap and trade should not be the only solution considered. Cap and trade has been strongly promoted by many well-intention people, but its designers comprise a surprising amount of Enron and Goldman Sachs representatives who have essentially created a carbon stock market. While this may sound disconcerting, it can also be argued that because cap and trade is supported by those who actually have wealth and power, it stands a better chance of being pushed through.

Ideally, this market will be capped such that each country gets a certain number of pollution permits. Each year such permits will become fewer and so more expensive. Those who do not need them will sell to those who do and therefore total emissions will remain under the cap. According to Leonard, “the devil is in the details.”

Detail number one is that initial permits will be free in what is more accurately a “cap and giveaway” system. The more an individual company has historically polluted, the more permits they will receive. Europe has tried this, and according to Leonard it resulted in unstable permit prices, higher gas prices, increased emissions, and the polluters made money. This can be disputed from all angles but for more information on the EU ETS, check out their site.

Rather than creating a system in which polluters profit, Leonard advocates that funds instead be used to promote a clean energy economy, provide dividends for citizens to afford energy while transitioning to new fuel sources, and to compensate for ecological debt, which mainly occurs as first world countries benefit at the expense of environmental degradation in the third world. While these solutions certainly sound good, they are a bit too vague to provide a clear view of realistic alternatives to investing in cap and trade.

The second “devilish” detail is in the concept of offsetting. It is very difficult to guarantee that offsets are truly serving their vital function. For example, Indonesian indigenous forests have been cut down and replaced with palm oil trees, and somehow this destruction has been valued as a false offset. Additionally, some companies can receive credit for offsetting simply by not expanding as much as they claimed they had planned to. Expanding less certainly does not actually offset any carbon emissions.

Thirdly, Leonard portrays cap and trade as a dangerous distraction. She argues that people are eager to accept whatever is proposed and so are neglecting alternative solutions that exist. Leonard claims that it weakens our ability to effectively utilize strong laws like the Clean Air Act, which already lists carbon dioxide a pollutant that can be regulated by the EPA. Cap and trade does more to protect business as usual than it does to demand solid caps, strong laws, citizen action, or carbon fees – all of which offer truer solutions to climate change. Basically, its creators want to sacrifice nothing, get rich, and save the planet if possible. Leonard admits that cap and trade may serve as an important first step and it is certainly better than nothing, but she insists that we cannot solve the climate change problem with the same mindset that got us into this mess. She has indeed raised some valid concerns about cap and trade; however, Leonard fails to provide adequate arguments in favour of other solutions. She does not explain with any degree of detail how a carbon tax would work. Carbon taxing, like cap and trade, has several benefits but also its own set of faults and imperfections.

Please see the Western Climate Initiative's (WCI) section on cap and trade which can provide you with a introductory background on how cap and trade works.

Adapted from Strategic Sustainability Consulting - http://www.linkedin.com/news?viewArticle=&articleID=92183403&gid=983557&articleURL=http%3A%2F%2Fwww%2Esustainabilityconsulting%2Ecom%2Fblog%2F2009%2F12%2F7%2Freview-annie-leonards-the-story-of-cap-and-trade%2Ehtml&urlhash=uL5C&trk=news_discuss

Berlusconi Gets Smacked

I know this has nothing (directly) to do with the environment, but seeing Berlusconi's bloodied face made me smile today. His latest political gaffes, including doodling women's underwear at the recent climate change talks, continues to embarrass Italians (including myself). One starts to wonder whether, given his track record, whether it was fabricated. One starts to also start to feel thankful for having a leader such as Harper...

Climategate and the Precautionary Principle

Thomas L. Friedman wrote a thought-provoking op-ed piece in The New York Times about the recent climategate shenanigans and smartly applied it to the precautionary principle. The precautionary principle, as used in the environmental sphere, should be considered alongside risk management, i.e.: if an action or policy might cause severe or irreversible harm to the public or environment, in the absence of a scientific consensus that harm would not ensure, the burden of proof falls on those who advocate taking the action. The precautionary principle has been invoked many times and continues to be applied, for example, in the European Union's ban on GMOs and hormones (from meat products).

The climategate "scandal" has fuelled climate deniers and has cast a shameful image on those climate scientists who have manipulated data. But this still is no reason to stop any action on climate change. As Friedman points out in his article, what would be the choices?

If we prepare for climate change by building a clean-power economy, but climate change turns out to be a hoax, what would be the result? Well, during a transition period, we would have higher energy prices. But gradually we would be driving battery-powered electric cars and powering more and more of our homes and factories with wind, solar, nuclear and second-generation biofuels. We would be much less dependent on oil dictators who have drawn a bull’s-eye on our backs; our trade deficit would improve; the dollar would strengthen; and the air we breathe would be cleaner. In short, as a country, we would be stronger, more innovative and more energy independent.

But if we don’t prepare, and climate change turns out to be real, life on this planet could become a living hell.

Climate Change Host Denmark Proposes Ambitious Targets

Reuters reported today that Denmark, the host country for the upcoming climate change summit in Copenhagen, is proposing that global greenhouse gas emissions should be cut by 50 percent below 1990 levels by 2050. A draft of the text states that to meet the 2050 target, industrialized nations will have to slash emissions by 80 percent over the next 40 years.

Danish Prime Minister Rasmussen stated that he hopes the 192 nations attended the climate summit will approve a five-to-eight page "politically binding" agreement that spells out emissions reduction commitments for each nations.

US President Obama will have the opportunity to speak at the conference where he will announce his country's climate change commitments: reducing carbon dioxide emissions by 17 percent below 2005 levels by 2020 and by 83 percent by 2050. Developing countries have criticized these targets as too low, particularly since the baseline is 2005, rather than 1990.

China has stated it will reduce its "carbon intensity" --emissions per unit of GDP --by 40 to 45 percent below 2005 levels by 2020. But even with these cuts, China's overall emissions are projected to double by 2030 given its accelerating growth.

Are Quebec's Climate Change Targets Ambitious? Est-ce que les cibles Québécois sur les changements climatiques ambitieux?

Now that the dust has settled after Jean Charest's fiery speech at CORIM (see blogpost dated 23 November) where he announced that Quebec will reduce its greenhouse gas (GHG) emissions by 20% between now and 2020, many are asking whether this target was the easy way out. After all, Quebec is "blessed" with abundant hydroelectric power and therefore a target of -20% reduction is not such a big effort. As well, the Kyoto targets which calls for a 6% GHG emissions reduction between 2008 and 2012 (1990 baseline) has not been achieved in Quebec (except as projected for 2012). Some achievement.

The problem is that many people living in urban centres, where the majority of the population resides, do not visually see or feel the impact that climate change is having on their daily lives. But the reality is that record floods, record fires, loss of evergreen forests in Western United States, people living in low-lying countries/regions, such as in Bangladesh who are already moving more inland, and pine beetle impacts due to the warmer climate in Western Canada which is devastating forest cover, are real examples which demonstrate that a threat to the future of civilization is already occurring. How can the population at large be forced to change their behaviour which is to reduce their consumption of fossil fuel? Do cities and municipalities have a large-scale plan to tap into geothermal energy and build smart grids which would truly drive sustainability? It is important to change the light bulbs but what is much more important is to change the laws and policies which, compared to other Western industrialized countries have gone way further than where Quebec stands at this point (Sweden -40%; Norway -30%; United Kingdom -34%; Japan -25%; Germany -25%). The key players at the summit have also agreed to arrive with targets and timetables.

Over the last few years, several countries have witnessed the emergence of innovative new business groupings to offer support for a progressive public policy agenda on climate change. These include the Corporate Leaders Group in the UK and EU, the US Climate Action Partnership (US CAP) and Business for Innovative Climate and Energy Policy (BICEP) in the US, Empresas pelo Clima (EPC) in Brazil and Climate Change Business Forum (CCBF) in Hong Kong. The debate that will undoubtedly emerge in the next few weeks is what the public policy priorities should be, post-Copenhagen, to speed delivery of the low-carbon economy. In Quebec, the it appears that the business community, led by the CPEQ, was misquoted in Le Devoir (see 23 November blogpost) as they do not endorse any targets for Quebec. The Quebec Minister of the Environment, Line Beauchamp, endorsed Quebec's position in Poznan last year, as supporting a global target based on scientific consensus which demands that the international community control a temperature rise by 2 degrees Celsius and therefore supports a global target of -25% (IPCC). So it begs the question: how did Quebec come up with its -20% target? Based on what? What would happen if the target were -40%? Is the CPEQ showing sufficient leadership? Any leads to solving these mystery questions is requested!

From an investment perspective, climate change may also present opportunities. Investors are starting to look more closely at companies in order to ensure that they have clear strategies for responding to climate change and reporting on risk assessment processes. Investors are also playing a much more proactive role in public policy debates on adaptation to the effects of climate change, highlighting a need to develop long-term policies which enable companies to plan and invest appropriately.

It is expected that many world leaders will be attending the Copenhagen summit to negotiate a new deal. So what needs to happen for success? Expectations have been scaled down, not surprising, due to the challenging situation, feet-dragging and inertia. A likely scenario is that near-term reductions and simultaneous instructions to country negotiators to complete a new deal will be handed out in Copenhagen for final completion at the next meeting which will take place in Germany in March 2010.

News has it that Obama will attend the summit and that he will further put a reduction number on the table. And both India and China have recently accepted to commit to binding targets.

Back on the farm, Canada continues to not take this issue seriously and, as a result, it affects our country enormously. The Canadian government has been so focused on the economy that it has practically shunned the environment debate. It doesn't hurt to remind our federal leaders that Kyoto is an international law that is binding on all signatory countries, including Canada. But the federal government continues to believe that efforts to reduce GHG emissions will destroy the economy. It is many years since Sweden has implemented its carbon tax and their economy is thriving. And they stand at 8% below 1990 levels!

Under international and US pressure, Prime Minister Harper has agreed last week to attend the Summit. PM Harper needs to provide moral leadership. This is what distinguishes Canada from a host of other countries. What is at stake is not just our global reputation (let alone our national symbol, the red maple leaf) but also our economic prosperity (France has indicated that it will penalize Canadian products due to carbon dumping). We have brought the Montreal Protocol and UN Peacekeeping to the international fora. The trade-off between short term profits (i.e.: the tar sands) and the risk factors to a dire crisis is not a suitable trade-off. In Al Gore's new book, Our Choice: A Plan to Solve the Climate Crisis, he noted that gas derived from tar sands gives the Toyota Prius the environmental footprint of a Hummer. And the risks to Canada's North has already begun (see Globe and Mail, 28 Nov 2009, A10).

We need to deal with this problem now as the consequences, as predicted by all the top scientists, will be dire. If we fail, the problem will be handed over to the next generation to solve.

Let's start by tackling the root case: our excessive use of fossil fuel. We have the opportunity to embark on a truly sustainable path and personally, I believe in human ingenuity and resilience. How will you act?

Radio Interview on Sustainability Issues

I was interviewed today by Chris "Zeke" Hand on CKUT 90.3 FM radio in Montreal on a couple of sustainability issues. To hear the broadcast, click on the player below or download one of the links.

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Quebec and Greenhouse Gas Emissions reduction target/ Québec et la réduction des émissions de Gaz à effet de serre

On Saturday 21 November, Louis-Gilles Francoeur published in Le Devoir an article where he stated that the CPEQ (Quebec Environment Chamber of Commerce) and the NGO Equitere propose a GHG emissions reduction target of 25% compared to 1990 levels. This proposal took the form of a joint letter signed by the CPEQ and Equiterre and, according to the journalist, further endorsed by Quebec's Environment Minister Line Beauchamp. This position is forward-looking and ambitious.

As I am writing this blogpost, Quebec's Premier Jean Charest, is speaking at a luncheon at CORIM where he will officially announce Quebec's GHG emissions reduction targets. You can bet that the Harper Conservatives are watching closely!

Climate Change and Canadian Mining: Opportunities for Adaptation

Tristan Pearce from the University of Guelph provided the EIA Concordia students a formidable opportunity to discuss how climate change is impacting Canada's north: impacts on communities (food shortages), impacts landscape (i.e.: loss of ice roads), and impacts on mining activities (i.e.: increased storm activities) through the report published for the David Suzuki Foundation.

The report highlighted many important issues but I was struck by the fact the perception gap that exists within many Canadian mining companies: only 25% of senior executives and management viewed climate change as a problem in contrast, 100% of day-to-day workers in those same companies perceived climate change as a threat. If you are obviously sitting in a Toronto corporate office and have very little contact with operating facilities (apart from the occasional site visit), then you do not readily "see" the changes which are occurring.

Should the Canadian mining industry ramp-up its efforts to better adapt to climate change? If so, what should some of those methods be? (i.e.: alternative routes?).

Thanks once again to Tristan Pearce, Maude Beaumier and James Ford for this great presentation and stunning visuals!

Canadian Securities Administrators scrap changes to corporate governance rules

While the most sustainable companies are fast-moving forward and implementing indexes and benchmarks as regards ethical sourcing (see Walmart example), KPIs and are using this period of economic downturn to sharpen and strengthen their governance frameworks, Canadian securities regulators have placed governance issues on the back-burner. The Globe and Mail recently reported that "regulators agree with corporations which say they are currently too busy dealing with the financial crisis". Who are those corporations? Corporate governance oversight is urgently needed in Canada! Now is the time to act.

Climate Change Radio Interview

I was interviewed, along with environmental journalist Felix Von Geyser, on Mark Brooks' show Off the Hour, CKUT 90.3 FM in Montreal on the topic of climate change.

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Environmental Impact and Business Sustainability

I teach a course at Concordia University entitled Environmental Impact Assessment (EIA). EIA is a planning process used throughout the world to ensure that the environmental impacts of proposals are identified, predicted, mitigated and evaluated, and that this evaluation influences the final decision(s) concerning proposals and proposed development in such a way as to represent the interests of the stakeholders involved.

On November 3rd, Claude Perras, Director Sustainable Development and Community Relations from Rio Tinto, was the class' featured guest speaker on the topic of "Interactions with Communities before a Project". Claude outlined how Rio Tinto engages in mutually-beneficial partnerships in order to fulfil community priorities and Rio Tinto's strategic objectives, and to ensure long-term sustainability of the business and the community. He outlined how Rio Tinto works in order to obtain a social license to operate. Claude's presentation was quite innovative as he aptly demonstrated how there has been a paradigm shift within the company (and in many other forward thinking companies) whereby a new business model has been created. This model has shifted from value protection to value creation, it builds alliances between the business and the NGO sectors, and the project teams are now thinking long-term about their impacts on the community, and legacy issues.

When some of the students raised questions and issues regarding corruption and methods of doing business in those countries who do not have a full democratic regime, Claude responded that Rio Tinto is a signatory of the UN Global Compact.

A question was raised by a professor from Concordia where he asked "how can Rio Tinto call itself a sustainable company if it is in the business of extracting non-renewable natural resources?" A company such as Rio Tinto has the resources and willingness to be sustainable. Unlike some other mining companies (i.e.: PDAC members), Rio Tinto recognizes the full benefits of conducting business in a socially responsible manner. Any further comments as to why Rio Tinto recognizes those benefits would be appreciated.

Next week, one of the authors of the report entitled "Climate Change and Canadian Mining: Opportunities for Adaptation", published by the David Suzuki Foundation, will be speaking to the same EIA class. More to follow...

Climate Change Nuisance Claims

In late September 2009, the Second Circuit Court of Appeals ruled that U.S. federal courts can decide common law actions that allege private emitters of greenhouse gases (GHGs) are liable for creating a public nuisance. This landmark decision, State of Connecticut v. American Electric Power Company Inc., overturns an earlier 2005 judgment, which had dismissed the case on the grounds that it presented a non- justiciable political question – in other words, a question that politicians rather than the courts should decide. This decision suggests a greater willingness by a least one U.S. court to consider common law climate change claims and could therefore result in an increase of public nuisance claims against large emitters of GHGs.

The public nuisance action was brought by two groups of plaintiffs: eight U.S. states and the City of New York (the States) and three land trusts (the Trusts), against six electric power companies that own and operate fossil-fired plants in 20 U.S. states (the Defendants). At the time the action was filed, the Defendants were responsible for approximately 25% of the U.S. power sector’s carbon dioxide (CO2) emissions and 10% of all annual CO2 emissions from human activities in the U.S. To mitigate this impact, the action seeks to hold Defendants jointly and severally liable for creating, contributing to or maintaining the alleged public nuisance of climate change. The State plaintiffs seeks action from each Defendant to abate the nuisance by having them cap their CO2 emissions and then by reducing these emissions by a specified percentage each year for a minimum of 10 years.

Although plaintiffs will be challenged to prove that the emitting companies caused the alleged public nuisance, it nonetheless further opens the floodgates within the sphere of climate change and liability.

In Canada, a court recently found that the system of parliamentary accountability established by the federal Kyoto Protocol Implementation Act, which requires that the Minister of the Environment prepare and implement an annual Climate Change Plan, was not open to judicial review.

It ain't over 'til the fat lady sings.

Carbon Markets - Marchés du Carbone

The development of the Canadian carbon market is slowly starting to take shape albeit at a different paces depending on the provinces. In Alberta, the land of the Canadian Prime Minister Harper, the situation appears to be troubling as was recently reported in the Calgary Herald (Carbon trading market pays off for Alberta farmers, October 19, 2009). The system appears to be questionable since farmers are receiving lots of money simply for not tilling their land. Is a similar Canada-wide system in the cards?

Then you have the black liquor subsidy in the U.S. which can potentially dole out millions of dollars to pulp and paper mills to continue polluting at the expense of Canadian producers.

Let's not forget the series of ecological disasters, such as the under-reported oil spill in the Gulf of Mexico where two oil tankers collided. The result: 20,000 gallons (approx. 75,000 litres) of bunker fuel (No. 6) oozing in the Gulf of Mexico.

It is difficult not to be cynical when these types of developments occur. Whether we are on the right trajectory remains to be seen (hopefully in Copenhagen).

Measuring well-being/ Mésurer le bien-être

The debate over the use of alternative indicators is staring to gain substantial ground. As a post-grad student, we covered the basic principles of measurement as is practised in environmental and ecological economics. The classic work of Herman Daly, exemplified in his 1989 book For the Common Good, elevated the issue to a higher order. But it wasn't until Nicholas Sarkozy, President of France, established the International Commission on the Measurement of Economic Performance and Social Progress that this debate had infiltrated the public policy debate at a higher level.

The European Commission held a conference in 2007 to discuss Beyond GDP which aims to continue work on measuring well-being beyond the GDP notion. Adequate indicators are needed to address global challenges such as climate change, poverty, resource depletion and health. The Canadian Index of Well-being is far from producing the same results as in Europe but has nonetheless also entered the public domain, albeit at a slower pace.

The Financial Times published an opinion in September by Joseph Stiglitz entitled Towards a better measure of well-being. Stiglitz notes that "no good accountant would ignore the depreciation of a company's capital, but the standards GDP measure not only does that but also takes no account of resource depletion and environmental degradation. Our increased awareness of the scarcity value of environmental resources makes this lacuna especially troubling".

GDP --Gross Domestic Product -- is widely used by economists to measure individual countries' economic performance. However, its value as an indicator for the standard of living is considered to be limited. GDP also does not show how a country's wealth is distributed. This indicator was created in the wake of the 1930s great depression and experts agree that it alone cannot reflect the economic performance of modern society.

The United Nations has developed an alternative measurement called the Human Development Index which measures life expectancy, literacy, education and the standards of living for countries worldwide and in which GDP is a contributing factor in the calculation. WWF's Ecological Footprint measures human demands on nature thus it attempts to include the environmental distortions that the latter does not measure.

Moving towards a low-carbon economy, preserving biodiversity, promoting resource efficiency and achieving social cohesion are today as important as economic growth.

New Book - Climate Cover-Up

Starting in the early 1990s, three large American industry groups set to work on strategies to cast doubt on the science of climate change. Even though the oil industry’s own scientists had declared, as early as 1995, that human-induced climate change was undeniable, the American Petroleum Institute, the Western Fuels Association (a coal-fired electrical industry consortium) and a Philip Morris-sponsored anti-science group called TASSC all drafted and promoted campaigns of climate change disinformation.

The success of those plans is self-evident. A Yale/George Mason University poll taken late in 2008 showed that — 20 years after President George H.W. Bush promised to beat the greenhouse effect with the “White House effect” — a clear majority of Americans still say they either doubt the science of climate change or they just don’t know. Climate Cover-Up explains why they don’t know. Tracking the global warming denial movement from its inception, public relations advisor James Hoggan (working with journalist Richard Littlemore), reveals the details of those early plans and then tracks their execution, naming names and exposing tactics in what has become a full-blown attack on the integrity of the public conversation.

Leveraging four years of original research conducted through Hoggan’s website, DeSmogBlog.com, Hoggan and Littlemore documented the participation of lapsed scientists and ExxonMobil-funded think tanks. Then they analyzed and explained how mainstream media stood by — or in some cases colluded — while deniers turned a clear issue of science (and an issue for public safety) into a partisan argument that no one could win.

This book will open your eyes, it will raise your ire and, most especially, it will inspire you to take back the truth — to end the Climate Cover-up.

ACES: Implications for Business in Canada and Quebec -PROJET DE LOI Waxman-Markey: les conséquences sur l’industrie canadienne et quebecoise

The American Clean Energy and Security Act (ACES) HR 2454 or the Waxman-Markey bill, named after its two major supporters Henry A. Waxman and Edward J. Markey of the Energy and Commerce Committee, was passed in the US House of Representatives on 27 June 2009 and is now being considered by the Senate. Its major mandate is a cap and trade system though it does have other green practices scattered throughout (Clean Energy, Energy Efficiency and Transitioning to a Clean Energy economy).

Recent discussion on the viability of a cap and trade system in the U.S. has increased dramatically and, after more than one month of analysis, debates etc. since it was first introduced, the purpose of this blog is to take a somber second glance and offer some advice to our Canadian (and provincial) policy-makers.

With the future of the planet hanging in the balance, with the world watching for what the United States will do, and with Congressional action likely to have a major influence on whether we’ll see a global climate agreement at Copenhagen, this is probably the most important exam the current members of Congress will ever take.

The basics of a cap and trade are fairly simple. It is a way to limit emissions through a credit system. Every business acquires a certain amount of credits; depending on the type of system these credits are either auctioned off or given away by the government. These credits represent the amount of carbon that businesses can emit. If the business cannot adhere to the limit of emissions their credits allow, they must buy credits from companies who are below their cap. Thus the companies who are responsible and limit their emissions are rewarded and those who are not as environmentally friendly are punished.

Power plants, factories and other major emitters would need to obtain permits for their emissions or invest in “offsets”, such as newly planted trees or local CDM projects, which reduce the amount of carbon dioxide in the atmosphere.

One point that I would like to raise — the claim that carbon taxes are better than cap and trade — is, in my view, just wrong. In principle, emission taxes and tradable emission permits are equally effective at limiting pollution. In practice, cap and trade has some major advantages, especially for achieving effective international cooperation. Any further thoughts on this are welcome (I still will not be convinced).

With this particular cap and trade system only 28% of the credits would be auctioned off over the next ten years. The other 72% will be given away for free, especially to heavy users of coal and other fossil fuels to help them cope with the change. The auctioning of the 28% will generate an estimated $276 billion, which will be distributed to a range of places. Low and middle income families will receive money to help them deal with the increases prices passed down as a result. Big carbon emitters will also receive money on top of getting a good chunk of the free credits. The proposed bill would essentially let polluters buy huge amounts of offsets rather than actually cutting their emissions – up to 2 billion tons of emissions annually, close to a quarter of all U.S. emissions.

The bill also includes strict energy efficiency standards and requirements for wind, solar and other renewable sources. The opportunities in this realm are tremendous and we are already seeing banks and venture capitalists jumping on this new green bandwagon.

Unfortunately, one of the provisions which were inserted late in the House debate seeks to penalize imports from nations that fail to cut their emissions in step with the United States. This can be a blow for China and India in particular. But it will encourage Canada to step up to the plate and take action.

The bill contains other provisions to defend U.S. manufacturers and their employees from lower-cost foreign competition -- including free emissions permits for energy intensive industries vulnerable to foreign trade, such as steel and aluminum.

Then there are the freebies:

• The bill as it stands rights now gives away 35% of the allowances to the electricity industry every year for the first decade – that's about 90 percent of the credits they would need. Even if the energy source for the electricity generated is coal or heavy fuel. To try to avoid the sort of windfall that dragged down the EU’s carbon trading system, the bill would require U.S. utilities to pass the savings on to consumers, according to a summary of the bill’s allocations segment, and the freebies would be phased out between 2025 and 2030.
• Manufacturers in steel, cement, aluminum and other energy-intensive, trade-sensitive industries would get 15% of the allowances for free for the first 10 years.
• Natural gas distributors would get 9% for free for the first five years, and would also have to pass the savings on to consumers.
• The auto industry would get 3% for free for the first five years.
• Oil refiners would get 2% for free for the first 10 years.

Of the remaining allowances, 15% would be auctioned from the start with the proceeds going to help low- and middle-income families, according to the summary of the bill's proposed allocations.

Lawmakers have indicated that more giveaways are to come. For example, utilities that in the future are able to make use of so far unproven carbon capture and storage technology could get up to $100 billion in bonus pollution permits.

The bill’s renewable electricity standard (RES) also took a serious whack to the knees. Some of the swing Democrats complained the RES wouldn’t be fair to states that lack the wind power of Texas and the sunshine of California. The original draft of the bill called for utilities to provide 25% of their power from renewable sources by 2025. The compromise cuts that to 15% by 2020 and as little as 12% if the state make up the difference with energy efficiencies.

A recent analysis concluded that the U.S. climate bill would give states that are heavily reliant on greenhouse-gas emitting fuels, like coal, more carbon credits on a per capita basis than those that use clean fuels. This will undoubtedly influence the final outcome of the bill.

Intergovernmental Panel on Climate Change (IPCC) suggested that industrial economies would have to reduce emissions 25-40 percent below 1990 levels by 2020 to keep warming to 2 degrees. The bill’s greenhouse gas reduction targets already falls short of what the IPCC recommends and now it falls even shorter: Emissions would be cut to 17 percent below 2005 levels by 2020 (the initial goal was 20 percent); 42 percent below 2005 levels by 2030 and 83 percent below 2005 levels by 2050. Considering the mandates being implemented in California and 21 other states (for instance, buildings will use net zero energy or have net zero carbon emissions by 2030), these reductions do not seem extreme. Waxman-Markey caps emissions at only 3.6 percent below 1990 levels by 2020 –pitifully short of what the scientific community say is necessary.

Earlier this year, Sen. Barbara Boxer, chair of the Senate Environment and Public Works Committee, announced several principles she said are necessary in acceptable climate legislation. Among them are “certain and enforceable” short-term and long-term emission targets and a “transparent and accountable market-based system” for cutting emissions.

Waxman-Markey falls short here, too. “Transparent” is an adjective no one can honestly apply to the House bill with its complex trading system, allowance allocations, exemptions and other machinery. The emission reductions contemplated outside the cap are not “certain”.

International Dimension

Climate change is a global problem that requires a global solution. With little more than three months left before the international community convenes in Copenhagen, however, there has been little apparent progress. At the last G8 meeting in Italy, the 17 biggest economies failed again to agree on specific targets and timetables for emissions reductions.

The European Union today remains the most advanced region in the world when it comes to environmental protection. Not only has the EU signed-on to the Kyoto Protocol, they have also implemented strict green building standards, emissions limits for cars, and the EU Emissions Trading Scheme (existing cap and trade system in place). Interestingly, they implemented all of these environment-saving standards with their economies intact…

The US has always lagged behind Europe and other developed nations when it comes to environmental conservation measures. Though this bill is flawed it is a positive step forward in its intent and power to reduce emissions. Nation-wide opinions need to change on the role of sustainability in the U.S. (and Canadian) society and hopefully the success of this bill can be the catalyst.

The Obama administration is working on several fronts to demonstrate U.S. leadership, including its ongoing attempt to reach a bilateral agreement with China, EPA’s decision to regulate greenhouse gas emissions, and its endorsement of carbon emission standards for vehicles. But nothing President Obama can do between now and December will have the political power of strong climate legislation from Congress. Climate stabilization and the clean energy economic necessary to achieve it must become the law of the land.

From the standpoint of the rest of the world, particularly developing nations, the U.S. is the country most responsible for the greenhouse gases in the atmosphere today. The U.S., Canada and the other industrialized economies have exhausted the environment’s capacity to tolerate the fossil fuels that developing countries hoped to use to lift their people from poverty. The standard by which much of the rest of the world will grade the outcome is whether the U.S. will meet its moral obligation to cut greenhouse gas emissions and find adequate sources of clean energy.

The Waxman-Markey bill fails this test. China wants developed economies to cut their emissions in the 30-40 percent range by 2020, a level it feels is justified since the industrial nations’ unbridled greenhouse gas emissions over the past 200 years have brought-on this crisis. The European Union has committed to a 20 percent reduction from 1990 levels by 2020. The Waxman-Markey cap doesn’t come close.

While Waxman-Markey sets the stage for additional emission reductions through carbon offsets and other measures outside the cap, those cuts are not mandatory. It’s the mandatory reductions under the cap that are likely to count most. America’s climate goals will set the bar for other countries, especially in Canada. So what are the chances that we will inherit a watered-down version of the Waxman-Markey Bill?

Extending the Reach to other sectors: Transport, Homes, Agriculture... Canada and Quebec: Please Take Note

In the United Kingdom, a July 15 White Paper, the Department of Energy and Climate Change rolled out a raft of policies making up the UK's Low Carbon Transition Plan — an economy-wide strategy aiming to slash emissions and help the UK meet its five-year carbon budgets, goals it set in last year's Climate Change Act.

So how does the newest plan from across the pond stack up to the U.S. climate legislation currently before the Senate?

In the UK, the power and heavy industry sectors, which account for a full 50% of emissions, have been subject to carbon caps under the EU ETS since 2005. But up to now, no umbrella policy has explained how the UK will reduce emissions and increase efficiency in non-traded sectors that together generate the other half of UK emissions: transportation, homes, workplaces and agriculture.

The new low-carbon transition plan closes the gap, extending low-carbon policies to cover the entire scope of the UK economy. That includes a stronger push for home energy efficiency and small-scale renewable power production; tighter vehicle emission standards and investments in developing low-carbon cars; and support for sustainable agricultural practices.

Likewise, Waxman-Markey bill/ ACES seek to provide a comprehensive framework for jump-starting the U.S. transition to a clean energy economy. It too shoots for energy efficiency in homes, buildings, transportation and agriculture.

The differences between the two are often stark, though, starting with the very goals they’re seeking to achieve: ACES aims to cut emissions by 17% below 2005 levels by 2020 — a far less demanding baseline and target than the UK’s 34% below 1990 levels.

Improving the energy efficiency of buildings is a key element of both plans. In the UK, building codes will contribute to emissions cuts under a regulation requiring that homes built after 2015 meet a standard of zero net emissions. Similar provisions in ACES set a target for buildings to use 30% less energy, working up to 50% less by 2015.

If the bill is about promoting renewable energy, it is even more about catalyzing energy efficiency, a goal likely to save companies far more money than cap-and-trade will cost them. If ACES makes a kilowatt-hour cost more, it also offers ways for companies to use fewer of them. So, while electricity rates may increase modestly, the actual bills that businesses pay will go down.

For most companies outside the manufacturing sector, the majority of electricity used comes from the facilities they own and lease: Heating, ventilation, air conditioning, lighting, computers and other machines in buildings are collectively responsible for nearly 40 percent of all energy use and a similar percentage of total greenhouse gas emissions in the United States. In some U.S. cities, buildings are responsible for three-quarters of all emissions.

Energy use can be significantly reduced in commercial buildings with little or no upfront cost.

The bill establishes a national building code mandating energy improvements for new and substantially renovated buildings (Section 201), and it creates a Retrofit for Energy and Environmental Performance (REEP) program for upgrading existing buildings with energy improvements (Section 202).

REEP creates mechanisms for public funding, loan guarantees, interest subsidies and other credit support to help owners make energy improvements. Requiring owners to enhance efficiency while providing the means to do so represents a balanced solution that will put a big dent in greenhouse gas emissions.

Meanwhile, information technology industry groups are pushing for a LEED standard for data centers, the country’s most energy-hungry buildings. The market took a high-profile leap forward recently when Yahoo! announced that it was shifting its climate strategy from buying offset to investing in data center energy efficiency. The company's new goal: reduce its data centers' carbon intensity by at least 40% by 2014.

In the transportation sector, the UK pledges government support for green vehicles, and it mandates that cars sold in the UK after 2020 emit 40% less carbon dioxide per kilometer than cars did in 2007. ACES complements Obama's tough new fuel economy standards — fleets must average 35.5 miles per gallon by 2016, cutting emissions 30% — by laying preliminary groundwork for more transportation efficiency, through investments in plug-in hybrid electric vehicle (PHEV) production and support for electric vehicle infrastructure.

Agriculture provisions are sparse in both plans, since the sector is responsible for only about 6-7% of emissions in each nation.

While the UK plan sets no hard mandates for farmers, the government will encourage them to undertake voluntary efforts for reducing emissions through more efficient use of fertilizer, better management of livestock and manure, and reduced energy use. In ACES, few provisions address emissions reductions from farming and land use, except with regard to funding for emissions-reducing agricultural practices financed by domestic offsets under the ACES cap and trade program.

Leadership

There were many reasons that 212 House members voted against the Waxman-Markey American Clean Energy and Security (ACES) bill. Some members are climate deniers. Some wanted a stronger bill. Some simply don’t want to give President Obama a victory. But others, including some of the 44 Democrats who voted “no”, did so because they were worried about re-election.

That’s no surprise, of course. The Center for Public Integrity counted 2,340 lobbyists from 770 companies trying to influence the climate bill last year. But the fact that some freshmen Democrats hid in the bushes on this vote left idealists like me wondering what’s happened to the idea of leadership.

The standard that will determine whether a climate bill passes the leadership test is whether it truly serves the public interest as well as, and if necessary rather than, the collection of special interests. Waxman-Markey shows too much deference to the coal lobby, the farm lobby and the big polluters who would like to see EPA’s regulatory authority rolled back.

On climate change – the mother of all environmental, economic, energy, public health, national security and international relations issues – responsible members of both parties need a gut check. They need to man-up. They need to inoculate their constituents against flat-earthers and demagogues by educating the voters about why climate action is so urgent an issue, why it’s time for the United States to seize the opportunity of a clean energy economy, and why every American, present and future, stands to benefit from the change.

None of this is meant to argue the House should not have approved Waxman-Markey. It was the first carbon pricing proposal to pass either house in Congress. That significantly increases the chance a bill will reach the President before Copenhagen. It lays the foundation for firmer action. But firmer action cannot be years away. It must be taken now, by the Senate.

Whether the bill meets the standard of climate science, is strong enough to trigger an international deal, prescribes goals that will be enforced and met, and shows that courage still resides in Congress – those are the standards by which we should judge success.

Congress is writing not only climate legislation. It is writing the latest and most important chapter in the history of the relationship between human civilizations and the natural environment. It is being asked to reaffirm the obligation of each generation to those that follow, to demonstrate the willingness of the world’s richest nations to protect opportunity for the poorest, and to prove that the species that claims to be the most intelligent has the common sense to care for the life-support systems on which decent lives depend.

Republicans and climate change deniers’ answer to energy security is to produce more oil, coal and gas in the U.S. and they claim “we have ample supplies”. The “drill baby drill” policy was a prominent plank at the Republican National Convention and its still being used, most recently by Wyoming Republican John Barrasso in a Senate Environment and Public Works Committee hearing.

The real question today isn’t how much carbon we have left in the ground; it’s how much we can put into the sky. The answer is: No more.

As a former Saudi oil minister said, “The stone age didn’t end because we ran out of stones.” It ended because we found a better way to do things. There is no mandate that we must extract all the fossil fuels we find and burn all the fossil fuels we can extract. However, there is definitely a limit on how much we can burn – and we have reached it.

If fiscal conservatives would like to make the marketplace even more efficient, they should repeal all subsidies for fossil and nuclear energy (subsidizing mature industries is corporate welfare) and give the money back to consumers to help them adjust to carbon pricing.

Opportunities for renewable power generators

The minimum renewable content requirements will drive a substantial increase in demand for hydroelectricity.

The U.S. Department of Energy estimated that there are up to 30,000 megawatts of potential energy at 5,677 undeveloped sites across the nation, more than half of which already have dams.

Newly added to the equation is the emerging market for so-called carbon credits. The credits are part of a strategy to place “caps” on damaging greenhouse gas emissions while allowing companies that can’t meet the restriction to buy credits from ones that achieve significant savings. The cap would be gradually lowered to reduce overall emission levels.

Hydroelectric power is a prime candidate to sell credits because it is largely emission-free. The credits typically would be granted only for new or additional power.

The market for the credits is tiny now but legislation is moving forward that would create caps and a national market that could ultimately reach $120 billion a year.

Even without a national cap-and-trade law, markets such as the Chicago Climate Exchange now allow companies to voluntarily limit their carbon emissions and lower their carbon footprint by purchasing credits, traded on the market like stock.

This added incentive has made building or upgrading hydroelectric facilities a more alluring prospect. And the potential benefits for Hydro-Quebec and BC Hydro, with the right vision and attitude, can be unparalleled for both the company and society.

Rising Insurance

In March this year, the Association of British Insurers claimed that estimates of climate change-related damage are too low and need to be updated in line with recent scientific predictions that temperatures could rise by between four and six degrees by the end of the century. Premiums for businesses and householders in areas that see increased risks of flooding as a result of climate change could more than double. These developments are not just occurring in the UK but in the U.S. http://www.businessgreen.com/business-green/news/2238829/insurers-forced-disclose and other regions as well.

Yesterday’s tornado activity in Mont Laurier is a taste of the forthcoming challenge. Man-up Canada, man-up.

(large chunk of source: http://solveclimate.com/ - thanks!)

Emissions Trading: Unknown Currency

The EU-ETS will expand its coverage by including more industries. It currently applies to power plants, factories making iron and steel, cement, glass, lime, bricks, ceramics, pulp and paper. From 2013 petrochemicals and aluminum will be brought into the scheme. After 2012, more greenhouse gas emissions will be traded – nitrous oxide emissions (from acid production) and perfluorocarbons (from aluminum) will be traded along with carbon dioxide. At the moment, only the Netherlands trades greenhouse gases other than CO2.

From 2012 all planes landing and taking off from EU airports will be part of the trading scheme. Polluters will be able to buy carbon credits to cover up to 50% of their emissions, from projects outside the EU that are dedicated to clean technology.

The European Commission would have preferred all allowances to be auctioned to polluters as a general rule, but governments won exemptions for some power companies in central Europe, as well as for heavy polluting industries. The Commission estimates that roughly half of all allowances will be given away for free in 2013.

Some heavy polluters will be entitled to free allowances if they are deemed likely to lose out to competitors outside Europe. The Commission will publish a list of sectors at competitive risk at the end of the year. Steel, cement and ceramics are likely to be in line for free allowances, rather than having to buy their allowances.

The money raised from selling allowances will go to national governments. But some – 300 million allowances – has been earmarked to help build carbon-capture and storage plants, or “innovative” renewables, such as offshore wind power (source: European Voice).

The United States will soon pass climate change legislation and Canada will follow soon afterwards. The voluntary market is up-and-running and will likely take-off once legislation comes into effect. Other news:

- Federal regulators are preparing to launch "a very serious look" at requiring corporations to assess and reveal the effects of climate change on their financial health, according to a commissioner on the Securities and Exchange Commission

- The oil giant Exxon Mobil, whose chief executive once mocked alternative energy by referring to ethanol as “moonshine,” is about to venture into biofuels

In the meantime, if you would like to learn more on how you can quantify and monetize your carbon, training on carbon markets, how to match it with local (CDM) projects and offsets with renewable technologies, tackling major carbon challenges and other “advantages” that carbon has to offer to your company (i.e.: unknown currency), please call me to arrange a meeting.

Fashion trend: green is the new black

A friend of mine, who manufactures and distributes woman's handbags, recently asked me how he can embark on the green wave. He would like to sell the handbags as "environmentally friendly" or "5% of the sale of this handbag will go to such-and-such environmental group". I asked him the following: is this something you feel you WANT to do or NEED to do? Is there any recycled content in the pleather handbags? Where do you source your materials? Have you ever done a life-cycle analysis (LCA) on your handbags? How familiar are you with green advertising standards?
After a lengthy discussion on "consumption" and the every-day, fast-paced fashion and shopping society we have evolved into, his idea of going green, albeit noble, was somewhat abandoned as he perceived the risk as too high (i.e.: his handbags are nowhere green). But his products can be transformed to be "green" with the right formula and initiative.
In the next blog entry, I will write what the standards are, how to differentiate between a truly green product vs. greenwash, and how this can be strengthened from a policy perspective. In the meantime, for those wanting more specific information for their products, feel free to contact me.

The YES Men: New twist to environmental liability

On 3 December 2004, an unprecedented news item hit the BBC airwaves where a Dow Chemicals spokesperson claimed that the company will accept full responsibility stemming from the Union Carbide Bhopal catastrophe. At the time, I lived in Brussels and as I stood in my living room, the shock and euphoria hit me at the same time. It was soon revealed that the BBC interview was a hoax. And it wiped $1 billion off of Dow's stock price.

Who was behind this hoax? The YES MEN of course! They have since played numerous hoaxes on corporations, most recently in Calgary at an oil and gas conference. They have made a movie which has proved to be a hit at the Berlinale.

What kind of a message do you think this sends to the world?

Packaging and the environment --- Les emballages et l'environnement

Canada, along with its' provinces and territories, is passive when it comes to packaging waste as compared to the efforts undertaken in the European Union. The European Directive 94/62/EC on packaging and packaging waste aims to harmonize national measures in order to prevent or reduce the impact of packaging and packaging waste on the environment and to ensure the functioning of the Internal Market. It contains provisions on the (1) prevention of packaging waste, on the (2) re-use of packaging and on the (3) recovery and (4) recycling of packaging waste. There are specific provisions for all four elements and quantitative targets. I had participated at some of these past stakeholder consultations, where I represented Tetra Pak Europe and Alcoa Europe, and industry throughout the supply chain was ready and willing to take action. There was not much choice because legislation was forthcoming. We are not talking about "voluntary" guidelines: producers putting packaging on the market had to recycle X% amount per year, every year. And we all had to pitch-in. All packaging placed on the market in the Community and all packaging waste, whether it is used or released at industrial, commercial, office, shop, service, household or any other level, regardless of the material used, was affected.

Recovery organisations were established, reporting guidelines implemented, best practice was shared across the supply chain and in packaging trade associations, communication to consumers was enhanced and new opportunities were created. The objective of the Directive is to decrease the amount of final waste going to landfill. And it's working.

When I mention this objective to my counterparts in North America, particularly in Canada, I usually get one of the following answers: "we have a lot of land in Canada so we can create landfills in remote areas", or "our population density is not comparable to Europe so we don't have the same pressing need to recycle and recover packaging waste", or " the current market for recycled material has collapsed", or my favourite "we recycle all our packaging waste in Quebec as we are the greenest province". Groundwater contamination, litter, sustainable consumption, etc. are never considered.

I invite all readers to take a look at the Recyc-Québec site and to ask some fundamental questions: Where are the targets outlined? How much packaging has been placed on the provincial market? And how much of it has been recycled? Landfilled? The often quoted number is 60% recycled. From what? Compared to what year? The numbers and efforts remain fuzzy.

In early 2006, Coca-Cola bottlers wanted to withdraw the deposit fee on some of their packaging in Quebec. It was barely noticed in the media and the government reached a deal with the company to continue the programme. The deposit fee on most packaging in Quebec is .05 cents. This is very low compared to other jurisdictions and, although it provides some incentives to consumers to return their aluminum can, the credibility and viability of the system is now at stake. In the Montreal area, we have these green open boxes which will be replaced because, due to weather conditions, most of the used packaging winds up on the street. I usually add my empty wine bottles in the bin, including those with a deposit fee (some wine bottles have it, others don't...?) because I know it will be collected by the homeless on the street. I don't think this logic applies to suburban areas. The government-owned liquor store SAQ, which has ceased to distribute plastic bags to consumers since the start of the year, does not have a recycling program in place for its used wine and beer bottles. And this is government owned! Maybe it would be more effective if it were privatized?

The Canadian Council of Ministers of the Environment (CCME) is having a stakeholder consultation on packaging (comments can be submitted until 29 May 2009). The Packaging Association of Canada (PAC) does not mention how much packaging waste is recycled in Canada nor in the individual provinces. The environment section on their site does not have one mention of what the impact of packaging waste is on the environment nor how their member companies are working on new packages that are "designed for the environment" nor any mention of LCA or packaging waste studies. The most depressing aspect is that many companies, such as Nestlé, Coca-Cola, Unilever, P&G, Tetra Pak, Heineken, Danone, etc. are undertaking significant efforts as regards packaging waste in Europe but are silent on this side of the Atlantic because of the lack of regulations in Canada. In such a case, how would Corporate Responsibility be measured?

What are our home grown companies, such as Liberté, doing as regards packaging waste? In this case, the biggest environmental impact is the packaging content itself (i.e.: yogurt - dairy production) hence the packaging waste side of the equation should be easy to deal with so why are efforts to recycle and recover more of its packaging not done? One can applaud the efforts being done by Rona as regards its eco/ green products. But they too missed the boat on the recycling and recovery side. Their efforts are applauded when it comes to FSC and other initiatives. The challenge is to put those efforts in numbers, such as via yearly measurable and verifiable targets.

The market potentials are huge and the environment gains are even bigger. It's time to show some leadership.

For more info:

Grace Barrasso

Environmental liability - La responsabilité environnementale et la réparation des dommages environnementaux

I read with dismay the article in the Globe and Mail regarding how the people in the town of Shannon, Quebec contracted high levels of cancer due to the contamination of the water supply with the chemical solvent trichloroethylene (TCE) a "probable carcinogen". The town is located near the Valcartier military base and a class-action suit has been launched by as many as 2,000 people. Who is reponsible? Answer: the federal government. The federal government, and more specifically the Department of Defense, knew about the TCE contamination as far back as 1978 but did not take any remedial action. SNC Technologies, who has also been named in the class-action suit, dumped daily 45-gallon drums of TCE over many years in large manufactured lagoons that eventually contaminated the nearby soil and underground water supply.

This is an environment and health disaster more so as the perpetrator is our government, the people who are supposed to protect the interests of their citizens and nation. Canada has a poor history of using the precautionary principle which can be described as follows:

"The precautionay principle is a culturally framed concept that takes its cue from changing social conceptions about the appropriate roles of science, economics, ethics, politics and the law in a pro-active environmental protection and management".

O'Riordan and Cameron further note the following on the precautionary principle:

"...it is a rather shambolic concept, muddled in policy advice and subject to whims of international diplomacy and the unpredictable mood over the true cost of sustainable living". A few sentences later, the authors note: "Precaution continues to evolve because of the peculiar requirements of adjusting to global environmental stresses and strains".

Due to the continuing and relentess destruction of our natural and physical environment (toxification of ecosystems, huge gamble with future climate, soil erosion, etc.), global environmental change stimulates the precautionary in three ways, according to O'Riordan and Cameron: (1) the requirement of collective action, (2) the requirement of burden sharing, and (3) the rise of global citizenship.

An example of this outcome is found in the judgement of the Supreme Court of Canada over St. Lawrence Cement Inc. in November 2008. In this case, St Lawrence Cement was ordered to pay a $15 million in damages to a Quebec City neighborhood (Beauport) even though the company was in environmental compliance. The class action lawsuit concerned dust and noise pollution which, according to the company, met all EHS standards and regulations but nonetheless caused the neighboring resident's proprty values to decrease. This confirms that a no-fault liability regime does exist in Quebec --as it exists in the European Union through the Directive on Environmental Liability.

Under the EU Directive, all installations listed under Annex III and are subject to the Integrated Pollution Prevention and Control Directive (IPPC) are liable for environmental damage. In Canada, this is equivalent to those companies and installations listed in the National Pollutant Release Inventory (NPRI). Although Canada does not have an Environmental Liability Directive, the Supreme Court's judgment has paved the way for the establishment of a similar regime.

So what is a company to do? From a risk management point of view, my advice would be to include the following:

- integrate sustainability at the core of the business

- re-examine EHS policies and procedures and look at ways to go beyond the current regulatory requirements

- biodiversity mapping around the operating facilities

- expand community relations and stakeholder engagement

- change the corporate mindset from a "need to do" to a "want to do", especially for management

- employee education and training on environment across the company (incorporate this particularly within HR)

- outreach with customers and suppliers regarding products being used in the supply chain (substitute those hazardous and toxic substances as required under REACH)

As I write this post, "The Chemical Company" Dow comes to mind . A word of caution to Dow Agro Sciences where the company is seeking seeking a $2-million settlement from Canada over Quebec's ban of the company's weed killer 2,4-D (see Montreal Gazette article). In a recent e-mail exchange with Megan Durnford who released a film regarding the pesticide ban, she wrote that "Dow AgroSciences is concerned about its investment rights. What about Canadian childrens' right to grow up in a safe environment? If Dow has its way, there will be a big chill on anti-pesticide activism across Canada".

Forget about the Love Canal tragedy. Citizen action being undertaken today pale in comparison. Canadian industry should not ignore these tell-tale signs and start to live up to their obligations.

Watch this space...

Air pollution and wood burning: the case of Montreal

The debate in Montreal on whether to use wood-burning stoves or not continues. The fact of the matter is that wood-burning stoves not only contributes to smog alerts in the city, it is hazardous to health and the environment. Forget about the romantic feel of wood burning in the fire; burning wood releases a cocktail of toxins in particular one called polycyclic aromatic hydrocarbons (PAHs), a known carcinogen. In industry, PAH emissions are highly regulated due to their known cancer risk, and therefore environment, health and safety standards are strictly applied. It is easy for governments to regulate a specific point source, such as iron and steel foundaries, but less easy to regulate a whole city and individual citizens. Action is required if the City of Montreal is serious about reducing smog alert days. Industry is taking action and therefore citizens should be doing the same.

Green Buildings in Canada: new frontier -- Bâtiments Verts au Canada: nouvelles frontières

As mentioned in a previous blog, commercial (i.e.: office buildings, shopping centers) and residential buildings (i.e.: single family dwellings, apartment buildings) have significant environmental impacts. In the U.S., it is estimated that commercial and residential buildings consume approximately 65 percent of all electricity generated, 12 percent of fresh water supplies and 40 percent of all raw materials, as well as contributing about one-third of all greenhouse gas emissions.

In Canada, buildings generate approximately 30 percent of total greenhouse gas emissions. The Human Development Report notes that “with 0.5 percent of the world’s population, Canada accounts for 2.2% of global emissions - an average of 20.0 tonnes of CO2 per person. These emission levels are above those of High-income OECD countries. If all countries in the world were to emit CO2 at levels similar to Canada’s, we would exceed our sustainable carbon budget by approximately 799 percent”.

The potential for efficiency gains via Green Buildings is therefore huge as it reduces or eliminates the negative impact on both the environment and the occupants. Despite numerous environmental, economic and social benefits, green building represents only a small fraction of new construction.

Challenges of the current marketplace: what are the barriers?

The “2030 Challenge”, which sets targets adopted by the Royal Architecture Institute of Canada and American Institute of Architects, aim to have all new buildings be carbon neutral by 2030. Although this is technically feasible, important barriers exists which pose challenges to the targets.

Public policy at all levels of government is an important barrier but one where the most gains can me made through, for example, integrated use of building codes, zoning regulations, tax-based incentives, tax shifting, preferential treatment for green developers (such as fast-track permitting), demand-offset programs, preferred purchasing and government-supported research and development and educational programs.

The bulk of opportunities rests on the existing building stock.

Another significant policy opportunity in the United States (which can filter through to Canada) rests in the Kyoto mechanism of cap and trade. Already in the U.S. a number of public utilities are required to purchase certain amounts of renewable energy (which promotes the uptake of Renewable Energy Certificates - RECs).

Large corporations are taking notice. One of the leaders is Honeywell, which has developed a number of energy-saving technologies, helps building owners offset the purchasing price of these new technologies by the energy savings the owner will generate. This is an example of a successful flexible mechanism.

The Canada Green Building Council (CaGBC) also is aware of the huge opportunities. For example, the Leadership in Energy Efficiency and Design (LEED), and more specifically the third generation of LEED 2009, focuses on carbon markets. Although there are many critics of the LEED rating system and the U.S.GBC is working on improving the methodology, it remains a powerful tool. A more integrated strategy to get real estate developers/ owners, building/civil engineers, financial community, governments, etc., to switch-over would have to be developed. Once a strategy is developed, the next step would be to register the project(s), compile the various subsidies available, consolidate the information, and get an aggregator/player that will buy all of the small credits and sell them as one chunk to an institutional investor. The Building Owners and Managers Association (BOMA) also has a number of comprehensive programmes and the two competing but complimentary organizations should develop methods to broaden and enhance cooperation.

There would also be potential huge gains for the Montreal Stock Exchange to have “buildings” identified as one of the 17 sectors under the Clean Air Act.

The banking and financial community have a tremendous role to play as regards green mortgages, green retrofit requirements and the creation of a host of other incentives to drive the market for green buildings while pursing profitability goals.

The Bank of America has entered an agreement on carbon trading with the Chicago Climate Exchange (CCX). As an indirect emitter, the bank has entered into a voluntary but legally binding cap and trade program in order to offset its emissions from buildings (as a large building owner) and employee business travel. The objective for the bank is to buy allowances on the free market in order to be carbon neutral. A reduction schedule was established, using 2000 as a baseline, and 4 percent reduction was achieved in its first phase (2003-06). The incentive to embark on this initiative was the then-pending Lieberman-Warner bill (now dead), early action credit in a federal scheme (which was and continues to be accredited and audited), and a mindset of not if there will be a regulation but when. As a CCX manager commented during a telephone discussion: “making reductions today is cheaper than any future federal scheme”.

A carbon market minimizes the societal cost of cutting emissions by allowing entrepreneurs to find the cheapest way to curb greenhouse gas emissions.

The aggregation and quality of off-sets are important and these techniques can be more aptly deployed on the municipal level. Some key areas include direct emissions reductions, credits for transport benefits, fuel switching and proven renewable technologies usage, boiler efficiency and cooling upgrades, and finally, material substitution and improvement of building materials, including local regional materials. Private equity should be linked with construction equipment and engineering firms which will provide a better balance as regards risk management.

Many banks lack the understanding of overall benefits although some in Canada are ahead of the game, such as Vancity Bank in Vancouver and TD Bank.

The advantages for the greater uptake of green buildings can positively affect numerous industrial sectors, including cement, forestry, aluminum, and utilities (in the latter, many need to overcome their protectionist attitude).

A more hemispheric and holistic approach is required as opposed to regional standards and variations which can further erode an already fragmented carbon market. The essential elements for an effective policy and regulation as concerns the building sector would have to be determined. With the right vision, the potential rewards would be enormous.

Grace Barrasso