Changing one’s ways or implementing new initiatives is difficult. It’s inconvenient. This seems especially true in the U.S. in recent years. Thus, the reluctance to implement smarter, cleaner strategies. Businesses in other nations have demonstrated that clean approaches – in operations and also in business strategies – have been successful in meeting the challenges of the global recession. Now there is a U.S. industry that can be a model for companies across the business spectrum to add value while addressing sustainability concerns, and that is the automobile industry.

For decades “Big Auto” did things the same old way, ignoring the fact that technology and consumer preferences were changing and that more people no longer wanted to drive gas guzzlers, whether because of rising gasoline prices or concern with the environment. Perhaps they thought they can affect consumer attitudes with advertising.

The results for U.S. auto makers were disastrous. By failing to be more sustainable, U.S. automakers weakened their bottom line and lost their lead position in global sales. GM was rescued from potentially going totally out of business by a federal bailout with oversight that insisted the company make the type of cars that people had requested for years. Chrysler, besides getting bailout money, was taken over by a European buyer, infusing their sustainability experience. While Ford was not bailed out, they were on the verge of bankruptcy and also began to build more fuel-efficient cars that they had been fighting for decades. Although some Americans are unsure about climate change, Big Auto finally learned that addressing sustainability helps consumers get more value from their car, which everyone supports. All 3 firms have improved sales and the bottom line. Even SUV sales have improved recently, but for models with better gas mileage.

Which other U.S. industries have not addressed changing technologies and consumer preferences and can use the U.S. auto industry as a model? One that comes to mind is the power industry, as major electricity producers have fought new regulatory initiatives and renewable energy. Power companies have the opportunity to gradually replace their oldest, dirtiest power plants with cleaner energy, but many appear reluctant to do so.

An example is the new draft mercury rules for power plants. The US EPA, after listening to industry and environmental sectors, crafted new rules with an economic analysis that estimates both avoided deaths and emergency room visits that could be caused by this rule, based on current scientific knowledge, and the overall national economic gain. Instead, power companies are lobbying against this bill and even pushing Congress to pass a bill preventing the US EPA from passing new rules. Some have intimated that plants may shut down and perhaps potentially deprive areas of electricity.

It may seem counterintuitive, but smart federal rules that represent compromises between industry and environmental groups and based on current health-based, scientific knowledge and economic analysis, may be the best thing for the power and all industries. Such efforts result in a “level playing field” for all companies and a more satisfied public, both in terms of health cost savings, energy independence, energy source choices and risk, and environmental concerns. With all the debate in the last few years about federal health care legislation and record health insurance costs, it is certainly non-partisan and in everybody’s interest to enact laws that can reduce factors that lead to fatalities and the need for health care, based on current knowledge.

There is also the case of “unwanted consequences” by squelching smart legislation. An example for all industries is federal climate change or “carbon” legislation, which did not pass Congress. Failure to enact uniform legislation does not mean that greenhouse gas (GHG) emissions are not regulated. Instead they are regulated in a “quilt” of rules in different states, regions, and even cities. The Northeast U.S. has the “RGGI” rule for GHG emissions from power plants there, while California’s new AB-32 has demanding rules for many industries. And then there are rules that only indirectly affect carbon emissions, such as “green building” rules and renewable energy standards. Even federal GHG rules are not gone. First, the GHG Mandatory Reporting Rule (40 CFR Part 98) requires a variety of industries to report (not reduce) their direct emissions. Finally, the US EPA will be required to pass legislation to reduce GHG emissions through the Clean Air Act (CAA). Required? Yes. Several courts have ruled that GHGs are a “pollutant”, and the CAA requires the US EPA to regulate all pollutants. But, the CAA is not the ideal way to legislate reductions of compounds with no direct, health-based effects. Rules based on the CAA may impact some industries harder than others compared to specific GHG-based rules (theory of “square peg in a round hole”).

The writing is on the wall for many U.S. industries, including the power industry. Change positively with the times, seek consumer preferences, and work with new technologies and together with the government and there is a chance to benefit from the available transition to clean energy and benefit the bottom line. A New Year’s Wish for 2012.

Get more useful information in our blog: www.CCESworld.com/blog
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This Environmental News for You is meant to provide background on draft rules. CCES experts can assist you in strategizing to comply reliably with these new and other regulatory standards.

June 28, 2011
Important: Please note that this is not a legal opinion. I am not an attorney, but an engineer experienced in technical greenhouse gas (GHG) emitting activities.

Last week large companies with a large “carbon footprint” could heave a sigh of relief as the Supreme Court issued a ruling in AEP v. Connecticut that states cannot bring their own lawsuits against any entity (in this case, several power companies) claiming their emissions of greenhouse gases (GHGs) is a public nuisance. The 8-0 decision (Justice Sotomayor recused herself) dismissed a lawsuit by the State of Connecticut based on federal common law. The Court found that Congress had passed the Clean Air Act to entrust the USEPA to decide how best to regulate GHGs or any other pollutant. While the USEPA has not regulated GHGs aggressively (yet), GHG is classified as a pollutant and pollutants are regulated by the Clean Air Act. Therefore, it is not for a federal court to issue its own rulings.

Three important notes. First, it is important to note that this decision does not prohibit all climate change or any environmental nuisance lawsuits. It is just that such a lawsuit cannot occur should it desire to usurp or replace legislation existing in the Clean Air Act. For example, in the past the Supreme Court has allowed lawsuits by states against entities in other states for air emissions causing adverse impacts across state lines when there was no federal legislation to regulate the activity. This decision should not affect such lawsuits; only those that cover activities already regulated by Congress.

Second, this decision was limited to lawsuits brought on by states. It did not address either way the standing of potential nuisance lawsuits by citizens or other non-states.

Finally, the decision appears to state that if Congress were to remove the USEPA as the agency entrusted to regulate GHG emissions and not provide a replacement, then such nuisance lawsuits by states would be allowed again. If a state is unhappy with the pace or severity of regulation by the USEPA (say, the USEPA decides not to regulate GHGs), it can challenge this through the administrative process, not through the courts. In addition, of course, a state is able to develop its own regulations for GHGs.

While this decision may be seen as a victory for the private sector and a reverse to activist states, some environmental groups applauded the decision too because it re-established the USEPA as the main agency to regulate climate change in the U.S. This includes apparent support for the Tailoring Rule of the Clean Air Act which went into effect this year. While some in Congress have attacked this rule and several states have had a difficult time coordinating their permit and other programs to enforce it, the Supreme Court’s unanimous decision does establish the USEPA (through a Congressional vote) as the sole originator of federal environmental regulations.

CCES is available to help you perform any technical evaluation necessary to understand and to comply cost-effectively with technically-complex GHG and air regulations. We have worked with many environmental attorneys for complete compliance assistance.

May 24, 2011

Last month, the USEPA issued its periodic update report on where the US stands in terms of our overall greenhouse gas (GHG) emissions inventory, and trends since statistics began to be kept in 1990. It is important to step back and see where our GHG emissions derive and trends in recent years to be able to determine best steps forward.

http://www.epa.gov/climatechange/emissions/usinventoryreport.html.

This covers GHG emissions through 2009.

Total U.S. GHG emissions in 2009 were 5,618 million metric tons (mmMT) of CO2e. In the baseline year of 1990, US emissions were 5,328 mmMT, topped off at 6,203 mmMT in 2007. The decline since 2007 is mainly recession related. Still, this represents a 5.5% rise above baseline. The scientific community is looking for a 70-80% decrease in GHG emissions from baseline by 2050 to avoid the worst physical impacts of climate change.

Where do our GHG emissions derive? The largest segment is fossil fuel combustion (5,209 mmMt in 2009). 41% of this total comes from electricity production. While CO2-free, renewable sources and natural gas combustion have grown in the last decade, coal-fired electricity generation has grown only slightly in that time. Coal still accounts for over half our electricity generation nationwide. Therefore, growth in CO2 emissions from electricity generation is due mainly to increased demand of a growing population for more gadgets. As for CO2 emissions from fossil fuel sources, the largest segment is transportation, 33% of the total, nearly all of it gasoline and diesel fuel combustion. Transportation emissions rose about 16% since 1990, due mainly to more vehicle miles driven and no improvement in overall vehicles’ miles per gallon. The next largest segment of is from industrial sources, about 26% of the total. But this represents a 12% decline from 2008 and a greater decline since 1990, mainly because of the recession, the decline in manufacturing in the U.S., and efficiency improvements. Finally, the residential and commercial sectors came in at 22% and 19% of the total, with the vast majority being electricity usage. This represents a 25% rise in total emissions since 1990, due to increased demand for appliances, air conditioning, lighting, etc.

While the focus of many climate change studies is CO2 emissions, one must not forget emissions of other GHGs, such as methane (CH4). Remember that CH4 is 21 times more potent than CO2 as a GHG. The inventory details that the largest source of CH4 emissions is natural gas systems (CH4 leaks). Methane emissions in this sector rose by about 17% since 1990 and 4% from last year alone, probably because of the increase in production (number of wells). CH4 emissions from landfilling, the 3rd largest source, decreased by 20% since 1990, mainly due to greater efforts to capture and use CH4. Finally, CH4 emissions from manure management, while relatively small, has increased by 55% since 1990, mainly due to the proliferation of larger farms which tend to use liquid systems to manage manure, which causes greater CH4 emissions.

May 3, 2011

This blog has provided many reasons for a company to go “green”, including “The 8 Purely Business Reasons to Go Green”, found on our website: www.CCESworld.com. Well, now a pretty viable 9th one has come up. A recent published study from the University of Minnesota shows that among S&P 500 companies those that emit lower quantities of greenhouse gases (GHGs) have a higher value, based on stock price, than those that emit more carbon. Those companies that the market believes are more efficient, effective, and business savvy are indicative of their carbon emissions. And what’s more important to a CEO and the corporate suite than stock price?

Well, if this is true what aspects of sustainability have the biggest impact on stock price? Is it the savings of fuel usage and reductions of other operational expenses? Is it new revenue associated with products to address consumer “green” demands? Is it confidence that a company with good environmental, social, and governance (ESG) performance will grow, weather business storms, and have great value?

Business publications are beginning to document environment and sustainability data and posting it up for the public to see. Bloomberg now posts ESG performance data for its customers to use to make investment decisions. This is a premium of information for investors, as currently sustainability and ESG data are not required by the SEC.

Another area of concern to investors is risk. A company with a robust sustainability program with an energy and fuel savings program will normally succeed in energy and financial risk reduction. Reduced need for energy, as well as obtaining fuel from multiple, diverse sources will reduce your risk of being short of fuel and not being able to make or transport your product, a key risk that could depress one’s value.

What is the relationship between sustainability and business growth? If a company begins to manufacture or re-brand some products as “green”, and is successful and grows revenue and profit, is it because of its sustainability program or because of smart business acumen – successfully responding to changes in the market? Perhaps both.

Therefore, there is not a clear picture on exactly how ESG initiatives impact shareholder value, although recent studies do show this correlation. However, good business data can provide information for strategic planning to give sustainability leaders the proof that their initiatives are resulting in positive business successes. More research will be needed to better pinpoint the relationship.

As has been written in several previous Environmental News for You the new Mandatory GHG Emission Reporting Rule (40 CFR Part 98) is in effect. There has probably never been a rule in the history of the USEPA with such stringent requirements for monitoring, emission estimation, and reporting. In addition, the USEPA released a draft revision of Part 98 on March 22 covering several industrial categories not covered by the initial rule because estimating emissions from those types of facilities was considered too complex to begin by the preferred start date of Jan. 1, 2010. But those categories will have to meet even more stringent technical requirements beginning on Jan. 1, 2011.

USEPA’s New Attitude

The main reason this rule has been so complex for so many facilities so far is that the USEPA wants to evaluate GHG emission values that are “accurate”. Traditionally, air emissions inventories or requests for permit limits tend to be conservative, submitted rates slightly higher than the probable actual emission rate. It is better to err high than err low. If one is wrong low, then actual emissions may exceed its permitted or submitted emission rate, a non-compliance situation. It is better to submit an emission rate for a permit slightly higher and unlikely to be exceeded. Generally, most agencies understand this. Developing “accurate” emissions takes greater precision and effort.
The USEPA does not want to see conservative values as it compiles a national GHG emissions inventory for two reasons. First, it will use the inventory findings to shape future GHG emission reduction regulations, such as which industries to focus on and how to regulate them. Accurate emission rates are needed to properly evaluate potential reduction policies. Second, although there is debate in Congress, the USEPA is working on the assumption that there will be a future GHG cap and trade system. Affected facilities will have to meet GHG emission reduction goals (caps) from a baseline. If they do better, they can earn credits (to trade and make revenue). If emission rates being submitted now become the baseline and a company begins with a high baseline due to submittal of conservative emission rates, it can earn more credit revenues without having to do as much (its “real” emissions are already lower) compared to a company that submitted “accurate” GHG emissions data.

Therefore, Part 98 has many requirements for facilities to use monitoring, if possible, or exacting emission calculations otherwise. Even for something relatively simple like estimating GHG emissions from stationary combustion sources, Part 98 Subpart C requires a facility to use their own fuel-specific high heating values (HHVs) if they are provided by the vendor or if the facility performs its own evaluation – even though the HHV of most fuels do not differ much from lot to lot or over time. For many processes, Part 98 requires complex data collection of many sources to determine GHG emissions. For example, if one cannot monitor directly for CO2, Subpart X (petrochemical production) requires data collection to determine a carbon material balance around the petrochemical reaction to determine difference which is presumed to be GHG emissions. Flow rate and carbon content data with accurate equipment and specific laboratory protocols must be performed for every feedstock and waste stream of the production process. Many firms do not routinely measure the flow or composition of every stream; they must scramble to do so and ensure each measurement meets QA/QC criteria.

Key Additions to 2010 Revisions of Part 98

On March 22, USEPA Administrator Lisa Jackson signed new draft sections of Part 98, adding seven (7) industrial categories that were included in the original draft Part 98 rule of about a year ago, but taken out of the final rule published on Oct. 29, 2009. The industrial categories now included are:
– Petroleum & Natural Gas Systems (Subpart W) – CO2 Injection, Geologic Sequestration (Subp. RR)
– Electronics Manufacturing (Subp. I) - Fluorinated Gas Production (Subp. L)
– Imports and Exports of Equipment Pre-charged with Fluorinated GHGs or Containing Fluorinated GHGs in Closed-cell Foams (Subp. DD)
– Use of Electric Transmission and Distribution Equipment (Subp. OOa), and
– Manufacture of Electric Transmission and Distribution Equipment (Subp. SS)

These proposed subparts also have extensive data gathering requirements in order to develop an “accurate” estimate of GHG emissions. For example, in Subpart W, natural gas transmitters will be required to measure and quantify leaks at compressor stations by counting components (valves, flanges, pumps, etc.) and by measurement. Not an estimated count or assumption of leak rate, but actual measurements. The draft rule does encourage the use of an optical camera to quickly detect CH4 leaks for loss estimation rather than monitor every component. Note that the rule does not require a facility to repair leaks to reduce GHG emissions, just find them to compute emissions.

As this is issued, we are in the public comment period for these draft subparts, so feel free to review and comment. However, the USEPA is serious about finalizing these changes promptly so that such affected facilities are fully aware and can establish their systems to collect necessary data according to the complex technical requirements and be “up and running” by January 1, 2011.

In summary, the existing and proposed new subparts are very complex technically and require a comprehensive effort to fully prepare to meet all requirements now or by the beginning of next year. Read the new draft subparts and begin to prepare right away! And if you have processes already affected by the rule, double check to ensure you are developing “accurate” emission rates required.

Get more useful information in our blog: www.CCESworld.com/blog
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This Environmental News for You is not meant to be a complete discussion about Part 98 and its proposed changes. Work with professional technical and legal experts to prepare. CCES experts can assist you in preparing for GHG emission calculations and helping you comply fully with its complex requirements.