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From Japan: Eco Products Exhibition 2009

It’s that time of the year again where the world gets together to see what we can do about solving energy and climate problems. That’s right, I’m reporting from Tokyo! This is bigger than that thing going on in Denmark.

This year’s Eco Products Exhibition (Dec 10 to 12) was well attended by over 180,000 from all over the world and representative from over 1500 companies, NGOs, and other organizations (note: only 40,000 showed up in Copenhagen, so you know where the party really is!). Eco Products is the largest fair of its kind in Asia and features the most energy efficient technologies for homes, offices, and industries. Here are couple of the highlights.

Ecotwaza
Bringing back the old is the way to go. In pre-industrialized Japan, people were able to live off the resources that were available to them. Instead of the non-stick Teflon pans that are used in the modern kitchen, traditional cast iron (nambu tetsu) was used. Even today, these pans still have numerous advantages over high tech kitchenware. They are extremely durable, conduct heat quickly and evenly, and are completely benign to the environment.

This product and many others are now being marketed by Ecotwaza. I was able to catch up with Reina Otsuka and Nanao Sonobe from this novel company based in Tokyo. They kindly took some time from their busy schedule to talk about their work and their hopes for a sustainable future.

Ms. Otsuka, the president, says the idea of Ecotwaza came while she was studying at the University of California at Berkeley when she realized the number of great environmentally friendly technologies that Japan had to offer but had not been able to market well due to various barriers.

A full version of this interview will be up in a couple weeks.

Zephyr
Can dolphins fly? Apparently Zephyr thinks so. They are developers of the Air Dolphin, a small wind turbine with a tail shaped like that of a dolphin.

In contrast to the big megawatt size turbines that we hear about in the media, these small sized devices are ideal for residences and rural regions that do not have good access to the grid. It has a rated power output of 1 kW with a maximum output of 3.2 kW. Much like the residential solar PV, these generators also require power inverters. In their demonstration, the Sunny Boy was used.

Ricoh
How many times can you reprint paper? According to Ricoh, about a thousand times. They have a developed a plastic sheet that is printed using a thermal printer. With exposure to some heat, the printed sheet becomes blank again. Ideal for applications like ticketing and office documents, this technology is claimed to save paper and energy. It would still be interesting to do a life cycle analysis on the equipment and supplies needed to keep it going.

Cleantech Blog Readers – Unite! Let’s Color the Volt

Ok, I couldn’t resist.

GM is running a contest to name the silver green color for the Volt. Winner gets to go to the LA auto show and drive a pre-production Volt.

So if any of you have a few minutes to amuse yourself, add your color name idea in the comments to this post, or email it to me, and we’ll take the best ones (we’ll run a poll if time allows) and submit them as the Cleantech Blog submissions. (Or just submit straight to GM if you want to try yourself).

For the record, if we win, we’ll auction off the right to represent Cleantech Blog at the LA autoshow and give the proceeds to a green non profit.

Regards,

Neal Dikeman

On Energy Subsidies

by Richard T. Stuebi

as posted to Huffington Post

To an economist, subsidies are powerful and dangerous things. They are powerful because they work. They are dangerous because they encourage economic actors to take actions that have direct impacts that are often unanticipated and unwanted, and at the expense of other positive actions that could otherwise be taken but aren’t due to resource constraints.

In the case of energy, subsidies are legion, though hard to identify. A recent report by the Environmental Law Institute (ELI), “Estimating U.S. Government Subsidies to Energy Sources”, attempts to do just that.

The ELI report estimates that the U.S. government subsidized energy with $101 billion during the period 2002-2008, with $72 billion to fossil fuels and $29 billion to renewable energy.

$29 billion to renewable energy sounds fairly impressive, particularly when renewable energy represents only about 10% of overall U.S. energy supply. However, underlying these statistics are three important observations:

  1. The fossil fuel industry is over a hundred years old and is still receiving sizable subsidies even though enormously profitable, whereas the renewable energy sector is young, developing and (by most accounts) worthy of encouragement by public support to make more financially attractive to market participants.
  2. Most of the subsidies for fossil fuels are permanently embedded in the tax code, whereas the renewable subsidies tend to have finite durations that undercut their effectiveness in providing clear incentives for long-term investment or behavioral decisions.
  3. About half of the renewable subsidies are for corn-based ethanol, prompted by support from the agricultural community, but at questionable cost-effectiveness and impact on greenhouse gas emissions.

So, the amount of funding support received by renewable energy is less impressive than initial impressions would suggest.

The forces supporting the preservation of fossil fuel energy subsidies are unbelievably strong, so the topic of energy subsidies is a potent political boogeyman that few have dared to touch. However, that may be changing.

In a September 10 statement to the Senate Subcommittee on Energy, Natural Resources, and Infrastructure by Alan Krueger (Assistant Secretary for Economic Policy and Chief Economist) of the U.S. Department of Treasury , the Obama Administration is clearly aiming to unwind several provisions of beneficial tax treatment that the U.S. oil and gas industry receives.

As Krueger concludes, current tax subsidies for the oil and gas industry “divert resources from other, potentially more efficient investments and they are inconsistent with the Obama Administration’s goals to reduce [greenhouse gas emissions] and build a new, clean energy economy….Removing these subsidies will have a very small effect on the price of oil and gas, the production of oil and gas, and domestic jobs. In fact, removing these subsidies could actually make our economy more efficient by reducing distortions in the tax code.”

On a global basis, as widely reported from the recent G-20 meeting in Pittsburgh (see Washington Post article), world leaders pledged to phase out fossil fuel subsidies in the “medium term”. As bad as the situation in the U.S. is, energy subsidies in developing economies are arguably much worse: according to estimates by the International Energy Agency (IEA), $310 billion per year is spent on subsidizing energy, mainly transportation fuels.

Of course, these subsidies are implemented in the name of aiding the poor citizens in these countries, but they cause massive distortions in public sector budgets, national trade balances, private sector investments and behavior, global security, and environmental protection. And, frankly, the main beneficiaries of the subsidies are urban upper- and middle-income citizens, as the poor are much too poor to afford cars anyway.

Removing subsidies on fossil fuels will not, in itself, drive the world economy to full implementation of desirable energy efficiency and renewable energy options. But, it will definitely help: a step in the right direction. Let’s hope that our leaders can summon and sustain the political will to overcome the inevitable opposition and phase these fossil energy subsidies down and out, so we can get on with building the clean energy economy in a more efficient manner.

As the Fellow for Energy and Environmental Advancement at the Cleveland Foundation, Richard T. Stuebi is on loan to NorTech as a founding Principal in its advanced energy initiative. He is also a Managing Director at Early Stage Partners, and is the founder of NextWave Energy.

Our First Cleantech.org Carbon Webinar Series with DNV – this Thursday

We are really excited to present our first Professional Education Webinar, part of a Webinar Series with DNV, called Carbon Projects 101, How Carbon Offset Projects Work.

Details are below, but we have a special promotion running, our friends at NetSuite.org have sponsored a 100 attendees to receive a discounted price of $95, a$200 savings. There are still a few left!

The Details:

DNV is the largest verifier in the carbon world, verified the 1st CDM project in carbon, and the 1,000th, and literally wrote the book on what counts in carbon.

Carbon offsets are one of the largest parts of the global cap and trade market and the fight against climate change – billions of dollars a year now. And carbon trading is arguably the largest cleantech market. So Cleantech.org partnered with the biggest verifier in the Kyoto, Det Norske Veritas, to bring you the “how to” and “skinny” on carbon offset projects.

– Do you work in an energy company or technology company looking to monetize carbon reductions?

– Are you interested in buying or trading carbon, and want to understand what’s underneath?

– Have you been buying RECs and want to understand the difference?

– Are you an investor trying to sort through the carbon chaff?

– Are you a policy analyst, attorney, or consultant and have clients or bosses asking questions on how it works?

Then you should register for Cleantech.org Professional Education Online.

Vol I, Carbon Projects 101: How Carbon Offset Projects Work

CDM, JI, Voluntary Carbon and the coming US Market

August 27th, 11 am PST online webinar – 3 hours, Dr. Mark Trexler

After registering and paying, you will receive a registration confirmation and a Go To Meeting web address to login. Email info@cleantech.org with any questions. Large group discounts are available.

The Instructor: Dr. Mark Trexler – A leading authority on the carbon markets and policies, Dr. Trexler is Director, Climate Strategies and Markets at DNV. He was President of Trexler Climate + Energy Services, acquired by leading carbon project developer and asset manager EcoSecurities in 2007. Prior to that Dr. Trexler was a research associate at World Resources Institute. He holds a PhD in International Environmental Policy and MPP at UC-Berkeley.

About DNV – DNV (Det Norske Veritas) is an independent foundation founded in 1864 whose purpose is the safeguarding of life, property, and the environment. With global headquarters in Oslo, Norway, DNV has approximately 300 offices in 100 countries with 9,000 employees. DNV’s core competence is helping organizations to identify, assess, and manage risk. DNV’s various business units – ranging from healthcare to energy to aerospace – all focus on safely and responsibly improving business performance for their customers. For more information visit. www.DNV.com

BlogRoll Review: Coal, Corn, and Creativity

Coal Revolt

In the US, several state governments have made efforts to stop the construction of new coal plants. Even major creditors like BofA are refusing to finance these projects.

Now, city governments are getting into the act. Maria Energia says:

The city decided to make the switch to avoid paying more for fossil fuel electricity in the future, when carbon regulations (both California’s state regulations and federal ones, like a cap-and-trade policy) increase the cost of doing business with fossil fuels. Not to mention the “costs to society,” like higher medical bills for lung-related diseases such as asthma.

Green electrons are better than brown ones!

Corn Debate

While there is strong evidence that ethanol produced from fermentation of corn sugars is not likely to reduce GHG emissions, there is greater hope that ethanol produced from cellulosic could be a sustainable solution for creating biofuels. Yet, there are many uncertainties in this process.

On company, POET, claims they have a cellulosic breakthrough. Robert Rapier at the R-Squared blog conducted an extensive interview with POET’s VP of Science and Technology Dr. Mark Stower on their process.

This is really a fascinating and technically rigorous analysis of the corn ethanol debate. Great discussion on the socioeconomic implications as well. Thanks a lot, Robert!

Creative Sustainability

Patents are certainly a necessary aspect for innovation but in some ways it has been a hinderance when it comes to solutions needed for sustainability. In order to accelerate the transfer of ideas, other modalities of information sharing may complement and overcome some of the limitations of the existing patent system.

Joel Makower discusses these concepts through the GreenXchange.

** Also, the Green Agenda notes that the military is becoming increasingly concerned about the consequences of climate change.

** CleantechGreentech talked about PG&E’s effort to power homes with cow dung.

** It’s getting windy in Israel.

The Colorado Cleantech Opportunity

By Joel Serface – July 2, 2009

In June, I took a great camping trip to a truly unique feature that many outside the state of Colorado know little about. It was the Great Sand Dunes National Park – the tallest sand dunes in North America with the backdrop of the Sangre de Cristo Mountains. I arrived at the perfect time of the year when the temperature was warm enough to simulate a beach environment (small waves included), but before the snowmelt ceased over the course of the summer. It was a fantastic experience, but few other than Coloradans knew about this well-kept secret nestled in the interior of a beautiful state.

I found this a good analogy for the Colorado cleantech opportunity. While I have been in Colorado for only a year, I feel that I arrived at that perfect time when all the conditions were right for a unique experience that could only happen here and that few outside of the state know about. Could it be the perfect time for everything to converge in Colorado allowing it to become the leading cleantech state?

When I arrived to Austin in 2006, I conducted an inventory of local cleantech companies. I found around 20 of what I considered viable cleantech start-ups in Austin and over the time I was there helped grow this to around 40 through starting, recruiting, or coaching companies into the community. When I arrived to Colorado, I found a very surprising thing. In the Front Range – the area stretching from Colorado Springs to Fort Collins – alone, I was able to inventory almost 200 cleantech companies (not including the many services companies that comprise almost 1,778 reported by the Pew Center / Cleantech Group in Colorado). After meeting with many of these companies and delving deeper, I found that there was an incredibly fertile environment for these companies in Colorado with only a few key limitations.

Let’s start with the strengths of Colorado that created this environment…

  • Energy and technology industry expertise – The Colorado Front Range boasts something that no other major population center does… A location where the technology industry and traditional energy industry coexist. This translates into one of the few centers where both talent for cleantech company development and project development can both be executed.

  • Ease of recruitment / low cost of doing business – Colorado is a state that carries significantly lower costs than other tech states such as California and Colorado. Colorado also boasts among the of the most highly-educated workforces. Because of the low cost of living, highly-educated workforce, and an environmentally-friendly culture that values outdoors and quality of life, it is not difficult to recruit people from all over the United States to move here.

  • State leadership – Colorado has had strong leadership at the state and national level for a number of years around renewable energy. By setting a 20% Renewable Portfolio Standard and a statewide solar rebate, the state has signaled that it is open for clean energy business. Bill Ritter, the Governor of Colorado, is one of the most progressive governors on renewable energy issues that I have met and has an excellent supporting executive team in its Governor’s Energy Office and Office of Economic Development. Because of their leadership and other factors above, Colorado has attracted major new renewable energy companies including Vestas, Siemens, ConocoPhillips, Abengoa Solar, and others to the state. They have also been successful in this despite the lack of other tools (see below) that other states have in place.

  • Thought leadership – In addition to research and state leadership, Colorado has a legacy of thought leadership in a number of areas such as green building, energy efficiency, smart grid, and energy analysis. Most already know the great work of Amory and Hunter Lovins and the Rocky Mountain Institute, but several other leading analyst firms exist. eSource, IDC Energy Insights, and Architectural Energy Corporation are all located in Boulder. NREL also maintains one of the largest renewable energy and energy efficiency analysts corps in the world in its Energy Analysis group.

  • City / community leadership – Boulder and several other communities have taken on leadership in vital areas such as its Smart Grid City efforts with Xcel Energy and in building efficiency standards and protection of open space. It is community and city leadership that are going to provide test beds for the integration of larger technologies at the city level. Denver, Fort Collins, Colorado Springs, and many smaller communities (including mountain communities that are seemingly off grid) each have their respective efforts around energy and environmental leadership.

It’s not all rosy in Colorado. One of the major complaints at the state level are that they have limited economic development funds to help attract or re-locate companies. In my conversations with leaders in the state, I have expressed that their leadership is much more important in creating markets for clean technologies than in providing cash incentives. Leadership, markets, and environment all combine to attract companies to the state; having a little bit more economic development funding could be helpful in rounding out that portfolio, but not a requirement in moving major companies to the state.

A further weakness in building early stage companies in the state is its lack of “domestic” venture capital. Given the ideaflow, creativity, and talent here, it is disappointing that there are no cleantech-focused investing professionals on the ground here to help build early-stage companies providing the coaching and governance necessary to move them to their next stage of development. Several local generalist firms have tipped their feet in the water, but have not made this a large portion of their portfolios. A leading energy technology fund in the state makes very few investments in the state and even fewer in early-stage clean technology companies. There is a robust angel community of former entrepreneurs in Colorado, and a few of them are ramping up their cleantech investments. But still, most of the cleantech venture capital in the state today still comes from coastal VCs.

Like Great Sand Dunes National Park, Colorado is a relatively unknown commodity in cleantech. Many investors on both coasts suspect it has tremendous potential and will occasionally make it to the state to look at opportunities. Unfortunately, unless the investor is on the ground or has native ties here, many of these opportunities will be overlooked.

After a year here, I can attest that this will become one of the best places to build clean technology companies in the United States as all the above conditions converge and successful role model companies emerge.

Joel Serface served as NREL’s first Entrepreneur in Residence with Kleiner Perkins Caufield & Byers. As an investor and entrepreneur, Joel has planted cleantech seeds in Massachusetts, California, Texas, and now Colorado. Since 2000, Joel has started or invested into more than 20 cleantech companies with 5 liquidity events so far and has catalyzed the formation of numerous supporting cleantech institutions and regional and national policy initiatives.

REDD – The Basis of a “Carbon Federal Reserve”?

Avoiding tropical deforestation – or REDD (Reducing Emissions from Deforestation and Degradation) in the parlance of the emerging policy dynamic – is the most mind twistingly complex endeavor in the carbon game. The fact is that REDD involves scientific uncertainties, technical challenges, heterogeneous non-contiguous asset classes, multi-decade performance guarantees, local land tenure issues, brutal potential for gaming and the fact that getting it wrong means that scam artists will get unimaginably rich while emissions don’t change a bit. You can understand why back in 1997 in Kyoto everybody threw their hands up and just decided this was too hard to try.

But the unfortunate failure to ascribe any economic value to living carbon storage means that forests – mainly tropical – still account for 20% of the world’s emissions annually, about the same as either the US or China. In other words, since Kyoto, tropical forests have fully contributed 2.5 years total of global emissions. That’s a tragedy of unspeakable dimension – and right now it seems the only thing that will slow it is when we actually run out of trees to cut down. Which is apparently not out of the question.

I’vehad the opportunity to think about REDD a lot in the last week. Last weekend, I got invited to the UN to participate in the Forest Dialogue’s (http://research.yale.edu/gisf/tfd) two-day session on REDD financing mechanisms, together with the breadth of interests that define the immensely complex issues around tropical forest resources. Sitting around a table with everybody from indigenous peoples groups, the World Bank, industrial foresters, Conservation International to some governments gives you a good view of how complex the issues and different perspectives really are.

At the Tribeca Film Festival a day later, I saw “The Burning Season” –www.theburningseasonmovie.com – a documentary that followed my friend Dorjee Sun and his start-up company Carbon Conservation on his year-long quixotic journey around an endless planet of boardrooms, plane rides and hotel banquets. All to save crucial forestlands in Aceh, Indonesia, through the sale of avoided deforestation carbon credits, which are currently unrecognized by the Kyoto world. It’s a moving and challenging piece juxtaposed against scenes from an orangutan rescue center overwhelmed with orphans from the forest carnage and the struggles of a local farmer seeking to feed and educate his family at ground zero of the controversy– I highly recommend it.

And then in Washington on Thursday, I was invited to celebrate the 10 year anniversary of one of the most effective and under the radar organizations you’ll ever come across – Forest Trends (www.forest-trends.org). If you don’t know who they are – you should. When Jonathan Lash and Al Gore drop by to give the keynote of thanks of your celebration dinner, you’re certainly doing something right.

When you look at the McKinsey climate wedges or the Stern Report on the needed forward curve for atmospheric stabilization, its blindingly obvious that REDD’s 20% of current GHG emissions has to be part of the solution. And the sooner the better- it’s an asset that is diminishing right in front of our eyes. At the same time, despite its immediate potential, REDD is not a panacea to the climate issue, getting to the required 80% global emissions reduction by 2050 is going to take multiple technology step-downs of heroic proportions. We need to transition major chunks of the global economy to CCS, hydrogen, plug-in hybrids running on next generation biofuels, hyper efficiency, new waves of renewables, nuclear and maybe even fusion. Who knows – but no matter what, it’s a big nut to crack. At best, REDD is only a fraction of that need. Which means we have to weigh our desire for immediate REDD and its ancillary benefits against our desire to accelerate technology development and uptake.

This is where REDD is potentially problematic. Given REDD’s 7 billion ton per year current emission baseline, a one percent shift in REDD emissions per year potentially puts 70M tones of emission credits into the system. To give some perspective, in the current supply and demand balance driven by the EU Trading scheme, that 70M tones per year alone would have dramatically impacted the price for a ton of emission rights. Approximately 4% per year of REDD would have equaled the entire production of the CDM in the Kyoto period. Now contrast against the goals of the Stern Report which sets out a target of reducing REDD by 50% within a decade.

If we were even fractionally successful with that goal, an enormous supply of emission rights might enter the market. If demand were not precisely calibrated to absorb that supply at the right time, the value of emissions would plummet, meaning that a fundamental driver for developing and implementing crucial low carbon technology would disappear.

The problem is that while there are long term aspiration goals for emission reduction (80% reduction by 2050 being a generally accepted target), the transition to that point involves a continually complex calculus of political will and gamesmanship. And with REDD’s potential range of supply ranging from zero to 3.5B tones per year, setting the short term demand curve exactly right is virtually impossible. Set it too high and if REDD underdelivers, we crater the economy. Set it too low and if REDD performs – we set back the economic drivers for emission technologies a decade or two.

Now, admittedly, that kind of runaway success is unlikely and if we truly succeed in rapidly halting deforestation’s advance, well, that is not a bad problem to have. However, one must always beware of policies with unintended consequences and this is one where I certainly see that potential, whatever its likelihood may be.

So, the irony is, we can neither afford to do – or not do – REDD under current thinking and parameters. But we need to be thinking about the future. Even after the US joins the carbon constrained world, emissions will be managed across fewer than 1 billion people. By 2050, it needs to be managed across virtually the entire global economy. Those transitions to greater carbon engagement will be an immense challenge. Every time a new country agrees to be capped – or a capped country ratchets its commitment downward – there is potential for market demand dislocation.

And that’s where I think near-term REDD may play a role. What if industrial governments and the private sector aggregated TARP-like funds – tens or hundreds of billions of dollars – to compensate developing countries and/or private groups within them for immediate and sustainable REDD on a cost-plus basis, as derived by the tonnage of carbon kept out of the atmosphere. We’ll pay a fixed, below market rate today but rather than dropping all that tonnage into the market immediately, it will be held in a global reserve that would enter the market at various points in the future (via a Board of Governors?) when demand/price for emission rights is undergoing a spike, due to new emitters join the cap or when major emission step downs occur (say when the US goes from 20% to 30% reductions). Private investors in such a fund would get a bond-like return – preferably tax free – and the differential between the price paid to the developing country per ton at the outset and its eventual price at release (after interest) into the market would be split in some fashion between the providers of the carbon and the providers of the capital. Seller countries might even get some kind of preferential access to their own credits, to incent them to come under a cap sooner rather than later.

The challenges around executing this are immense and it’s clearly not necessary if REDD only achieves a fraction of its potential. If it does not achieve that potential rapidly, we will have almost certainly lost the remainder of the world forests. It does seem to me that a “Federal Reserve” is one way to solve the conundrum of keeping as much forest carbon on the ground as possible while not allowing its potential market overhang to disincentivize technology development and implementation. But having started fifteen years ago in the forest carbon space and after seeing the same arguments reiterated again and again while the forests of the world have been felled and burned, the honest truth is that we have no time to waste.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. the views expressed in this blog are his own and do not necessarily represent the views of EcoSecurities


Waxman-Markey and REDD

By David Niebauer

In late March Congressmen Henry Waxman and Ed Markey released the first draft of a climate bill that presents three mechanisms designed to provide funding for reducing tropical deforestation: offsets, a supplemental pollution reduction program, and strategic reserve auctions. Full text of bill can be found at:

The bill would permit 2 billion tons of CO2e reductions to come from offsets, one half of which could be generated from international sources. The number (2 billion), while presumably not arbitrary, could be increased or decreased upon the President’s recommendation, allowing for adjustments due to market factors or where the cap is ultimately set. Of these international offsets, reduced emissions from deforestation and degradation (REDD) credits are specifically mentioned and permitted. A conversion would be applied of 1.25 offset credits in lieu of an emission allowance – the discount apparently designed to ensure that real reductions are achieved from the offsetting activity, and that the credits are accounted for in a conservative manner. The use of offsets will be increased and phased in such that a covered entity could satisfy 15% of its emission reduction obligation using offsets in 2012, progressively increasing to 33% by 2050. Certain relatively strict criteria would be applied to REDD credits, including agreements between the US and the developing country from which credits would be generated, monitoring and measurement capacity, and establishment of national deforestation baselines. The bill takes a “sector” approach, or country by country, as opposed to a strictly project-by-project approach.

The supplemental pollution reduction program would provide additional incentives for tropical forest preservation. From 2012 through 2025, EPA would set aside emission allowances to be used to support reduced deforestation in developing countries. The bill provides that EPA would transfer these allowances to countries that enter into and implement unilateral (with the US) or multilateral agreements or arrangements relating to reduced deforestation.

Finally, the Waxman Markey bill provides for what is termed strategic reserve auctions.
The reserve would be made up of allowances that are banked by the system and would be additional to regular emission allowances. Reserve allowances could be purchased at auction by covered entities to meet a small portion of their emission reduction obligations. The proceeds from this special auction would be used to purchase and retire international offset credits issued for reduced deforestation activities.

Size and Scope

To some extent, Waxman-Markey can be seen as a response to scientific data on the role of tropical forests in climate change. A recent report published in the journal Nature and reported in Science Daily provides some sense of the scope of the problem. The Intergovernmental Panel on Climate Change (IPCCC) reports that globally human activity emits 32 billion tonnes of CO2 each year – roughly half stays in the atmosphere; the other half is absorbed by the oceans and on land in vegetation and soils – mostly in tropical forests. Tropical forests remove approximately 4.8 billion tones of CO2 emissions from the atmosphere each year.

Tropical forests cover 17.8 million km2 worldwide. Approximately 50% of the world’s tropical forests are in South America, 30% in Africa and the rest elsewhere, mostly in SE Asia. The IPCC shows that land-use change, which is mostly tropical deforestation, emits 5.9 billion tonnes CO2 per year (20% of all human CO2 emissions).

A US cap-and-trade legislation that includes tropical avoided deforestation credits, despite its many methodological challenges, is critical in addressing global climate change. We will watch the progress of this bill with great interest.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

An Open Letter to Fred Krupp

“The Clean Development Mechanism [the offset part of the Kyoto Protocol], which provides about 95% of the offsets used in the European market, is clearly broken and should be quickly phased out.”

My first reaction to reading that parting statement in what was otherwise a very rational and cogent interview was unprintable in a family blog like this.

First of all, let’s get a few things straight. When it comes to protecting the environment and harnessing market forces to that end, Fred Krupp is a god. Maybe I should even capitalize that description. There is nobody who has done remotely as much for that particular cause—including our Nobel Prize winning inventor of the Internet—as Fred Krupp. I have been a regular and long-standing contributor to the Environmental Defense Fund (EDF), even during the unfortunate period when their abbreviated acronym likely confused a fair number of Viagra seekers on Google. The staff there is analytical, innovative and ferociously dedicated to their cause. They’ve gotten their viewpoint into the inner workings of many of the US’s mega corporations, generally at the CEO or Board level. They basically investment-banked the biggest private equity deal of all time—the KKR takeover of TXU – mainly to stop a massive planned expansion of coal-fired power. Calling EDF and Fred the father of environmental markets is not remotely an exaggeration.

While to my regret I don’t know Fred personally, we did actually once spend the better part of an afternoon together, though I doubt he would remember it. It was in the lovely city of Kyoto, Japan, on a Sunday in the middle of the 1997 namesake climate conference, and our Japanese hosts had arranged a series of different tours around that historic city. Coincidentally, I ended up on the same tour as Fred, and for at least one portion of the tour, we ended up chatting as we walked down a small winding street together with a multi-star admiral from the Defense Department who was part of the US delegation. At the time, EcoSecurities was less than a year old, still had a grand total of two employees and to say we (and therefore me) were nobodies would be a gross exaggeration; we had several steps to climb before we would even register at the “nobodies” level. Fred, on the other hand, was already a superstar.

At Kyoto, the CDM was hardly born of unanimous acclaim, and EDF had no small role in getting the negotiating buy-in on market based approaches that helped convince a number of skeptical countries. In 2001 when the US largely disappeared from the international climate world, it’s not an exaggeration to say that EDF also took a hiatus from the dialogue about the operational aspects of the CDM. Fair enough—EDF’s main constituency is the United States and US policy (though they also run an extensive China program). But to be frank, it was very unfortunate to lose their rationality and capability in the process, and I would argue that some of the maddening aspects of the current CDM—from a business perspective—are a direct consequence of losing the US (and by association, EDF) influence on its development in those crucial startup years.

So, when phrases like “should be quickly phased out” get bandied about, my first question (after my blood pressure settles) is: exactly how has the CDM has failed so much that the father of environmental markets believes it to be beyond saving? Let’s take a look at the results. The first CDM project was registered at the end of 2004, just a little more than 4 years ago. Today there are 1,500 projects registered (representing some 1.5 billion tons of emission reductions through 2012) and at least another 2,500 in the pipeline. Billions of dollars have been raised in the capital markets and there are methodologies covering at least 100 different project types. A sector dedicated to financing global environmental improvements has emerged. Projects are distributed across some 68 countries around the world. When you’ve tramped across a landfill in Brazil, a piggery in Mexico, a steelworks in China and a refinery in Ghana, all of which are linked by the single commonality that their management wants to become more climate friendly (and get paid for it), you know that a sea change in global business attitudes has occurred. Maybe Fred and the guys from EDF need to get a bit more mud on their boots and see what what’s actually happening out in the field at the micro-level.

There are many indisputable shortcomings of the CDM. First, far too many first-generation CERs came from HFC-23 reductions, rather than from changeovers to renewable energy and energy efficiency. Second, the process of assessing the “additionality” of certain clean energy assets that were at various stages of development has been deemed questionable by some outside observers. Third, an overwhelming preponderance of CDM capital flows have gone to China. And fourth, the regulatory process that oversees the CDM often seems to have been designed by Kafka, with a helping hand from Dante.

There are answers to all of these critiques, not the least of which is that we’ve barely passed the fourth year of what should be a many decade process of “learning by doing.” The main issue is that you cannot set up a legitimate market system that only lasts a few short years, sunsetting almost as soon as it starts. Of course in these conditions projects that paid the highest immediate returns were identified and executed first. Of course in these conditions clean energy projects that were at some stage along the development pipeline were the most likely to try to engage the CDM financing instrument. And of course China grabbed the lion’s share of projects—half the developing world’s emissions are there, they can be found in large concentrations, and the Chinese government has made a regulatory system that was rational and workable through which to tackle them.

We Americans who basically went offshore about eight years ago to actually buikd the CDM “business” that was vaguely envisioned by the US and EDF are now coming home. We think our experience to date has some relevance and should be heard in the US policy debates. Though it’s been a never ending challenge, I can’t think we didn’t succeed at some important levels. Just for one, that two person company I was half of at Kyoto now has some 300 employees, offices throughout the world and has registered more than 150 projects within the CDM system representing 100 million odd tons of potential reductions by 2012. Anybody who thinks this is so easy is welcome to join our staff on one of several exciting field trips—climbing a 200 foot smokestack to check the calibration on flow meters, negotiating coalmine gas royalty agreements with provincial officials over endless baijiu, or trying to dry clean the stench of pig feces from biogas plants out of your clothes are all popular options. It’s not easy, it’s not always fun, but if you want a market instrument that’s going to work in the developing world, this is where you have to go. Blithe statements about failure are frankly a bit insulting to those of us who actually followed up on the promise and trajectory that was laid out a dozen years ago.

The latest concept that EDF is promoting around global carbon market solutions has been dubbed “ClearPath.” Though sparse in detail, the basic idea involves developing countries taking on voluntary caps that are somewhat greater than their current emissions, so they can sell excess emission rights today and use the proceeds to finance transitional energy technologies to move their emissions downward. EDF estimates that this will raise some $250B to $1.5T over the first decade of operation—a fairly substantial range, to say the least. In principal, it’s an admirable concept, and it is undeniable that covering the broadest possible sweep of countries with hard caps is something to which we should aspire.

However, the idea that it’s going to be easy to come up with the “right” amount of extra emissions allocation for any sizable number of countries is ludicrous. A simple observation of developing country emissions profiles should immediately raise the question of how to construct something even remotely equitable. On a GHG per capita basis, South Africa is at 50% compared to the US, China is at 25%, Mexico is at 20% and India is at about 10%. It is already hard enough to get industrial countries to seriously talk about hard caps – now we need to layer this variable into the equation and create a reasonable supply and demand balance that will be both politically palatable and still incentivize serious reductions ? And this is assuming we can get the necessary monitoring, reporting and verification of GHG emissions data for developing countries in place to ensure that ClearPath could distribute credits accurately and appropriately.

I’m not against the ClearPath – far from it – and if EDF and its negotiator allies can convince a sweep of key developing countries to take this up (while not just flooding the market with a next generation of “Hot Air“), my hat is doffed with genuine admiration. But in my heart, I don’t think that’s realistic. And to be honest, I’d like to know what Plan B is, in case ClearPath is greeted with the skepticism I expect.

As far as I’m concerned, Plan B must involve fixing the CDM so that it can continue mobilizing capital, incentivize emissions entrepreneurs and technologies, and slowly push the global supertanker of emissions slightly away from its current trajectory. There are many ways to fix the CDM to keep it moving, and to make it more environmentally credible, transparent and predictable for capital allocation and project development. Perhaps we can indeed get a small handful of countries to experiment with ClearPath. But as a colleague is fond of saying, climate change will have no silver bullet; rather, will require multiple rounds of silver buckshot.

I guess my problem with a throwaway quote like Fred’s regarding the CDM is that it feeds a (very ironic) attitude encapsulated in the US policy debate about international offsets—the “not made in America” issue. Ironic, because the CDM, emissions trading—and the whole idea of environmental markets in general—sprouted from American soil. In coming back to the global negotiating table, the US can make a real difference by addressing the various shortcomings of the CDM, and by coming up with constructive solutions that actually learn from past experiences. The essentials would be to make the regulatory process simpler and more conservative (by endorsing real technology benchmarks across sectors, avoiding the project by project system of the CDM) and creating a longer time horizon for achieving emissions value, (so that the benefits of emissions savings can correlate with project finance timelines). To be frank, what we have accomplished—given those shortcomings of the Kyoto/Marrakech architecture—is to my mind remarkable.

In 2008, Fred wrote a book called “Earth: The Sequel.” Disappointingly, it was not a sci-fi thriller about moving to another, hipper, planet, but rather about how we fix our relationship with this one through emerging markets for new energy technology. I’d like to think the CDM deserves the same kind of consideration for a sequel, and I don’t think it’s unfair to ask exactly which particular shortcomings of the CDM have convinced Fred that we exclusively need to tread a radically different path. CDM is far from perfect—few have ever claimed otherwise – but it has indeed lit a wildfire of enthusiasm for emissions reductions that we will not rekindle easily if it is summarily doused with a bucket of “been there, done that” cold water. ClearPath is an admirable idea, but fraught with complexities that make the CDM look like a crayon maze on a kid’s meal menu at Denny’s. If we can get five or ten countries with different profiles to sign up and work out the kinks for the next decade, that’s a triumph right there. In the meantime for the other 150+ countries in the world, let’s discuss the strengths and weakness of CDM and international credit systems rationally, with some nuance and with aims of improvement—and not just pander to popular misconceptions.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

Counting Calories and Counting Carbon: The Role of Offsets in our Climate Diet

“To illustrate the difference [between carbon offsets and allowances], consider two people trying to lose weight. One person decides to meticulously count the calories of the foods he eats, with the goal of reducing his intake each day. The second person, however, counts the calories of the foods he thinks he would have eaten that day but did not because he was on a diet. You can imagine which of the two will be more likely to actually shed a few pounds.”

Emily Figdor
Global Warming Program Director of Environment America

By Aimee Barnes and Marc Stuart

The quotation above was spoken during the U.S. Congressional hearing on the “potential role of offsets as a cost-containment mechanism in a U.S. cap-and-trade program.” two weeks ago. Host to this meeting was the House Subcommittee on Energy and Environment, chaired by Rep. Ed Markey, and widely anticipated as playing a vital role in the future shaping of U.S. climate legislation. Like most good analogies, it’s catchy, is framed within an everyday issue that most people understand and seems easy to comprehend. Unlike most good analogies, it’s also dead wrong.

In the analogy quoted above, the first person described who attempts to lose weight by counting calories is parallel to a regulated source, where in theory it should be easy to take stock of the total emissions and simply reduce what is necessary to reach target levels. The second person described, who attempts to lose weight by establishing a counterfactual of what he would have eaten but did not because he was on a diet, is at least in theory, parallel to a carbon offset project. Obviously the ridiculousness of the setup is intended to persuade the listener that offsets are equally ridiculous and should be rejected from any cap-and-trade program. After all, they are based on a scenario that never actually happens! (The irony that climate change itself is a counterfactual is not lost on us… but that’s for another blog.)

Let’s take the analogy and rework it a bit. Consider two people trying to lose weight. Both weigh 150 pounds and each wants to weigh 140. The first decides to meticulously count the calories he eats. But how can we be sure this person knows exactly how many calories they must eat to reach their goal weight? Likewise, many emitters may not have as precise an understanding of how to achieve greenhouse gas reductions as we would like to think. Setting this uncertainty aside, let’s assume the person knows how many calories to eat to reach his goal weight. Aided by precision, this first person will lose exactly 10 pounds to reach their goal weight of 140. In a precise world, emitters could do the same to achieve exact reductions to meet their goals.

Now let’s look at the second person. Applying the metaphor of the offset project, when this second person establishes her counterfactual of how many calories she would have eaten in the absence of the diet, the real parallel here is the “baseline” of the offset project—in other words, what would have happened without the project (or the diet). In the weight loss scenario, the second person reasons how best to lose 10 pounds taking into account their calorie “baseline” and the absence of true precision. So the second person might say to herself:

“If I did not go on a diet, I would usually eat around 2,000 calories. However, since some days I am busy and only eat around 1,700 calories, I will use that conservative estimate as my “business-as-usual” scenario. I know I should eat around 1,500 calories daily to lose 10 pounds, but I can’t always measure the precise caloric value of the foods I eat. To be safe, I’ll aim to consume 1,400 calories a day and use conservative estimates for the caloric values of the foods I do eat. That way I can avoid overshooting my limit and be sure to meet my goal.”

Giving equal consideration to both approaches, the weight loss winner is not as clear as the original metaphor suggests. The first person may be more precise in their weight loss, while the second person may be more conservative to compensate for a lack of precision and thereby potentially lose even more than the first person. If all we focus on is the target of 140 pounds, then that second person might even not receive “credit” for losing additional pounds and surpassing the goal. True, the second approach is less precise, but conservativeness proves an equally effective strategy to reach the same goal. Contrary to what the original quotation implies, one cannot go around claiming that one’s forthcoming diet will consist solely of whipped cream pies. Similarly, great efforts are made to ensure that the baseline of future emissions behavior is appropriate and realistic to the situation for offsets projects.

Now let’s take the metaphor a step further. Assume that the two people are trying to lose weight because they must get into an elevator that can only hold 280 pounds. The weight limit in the elevator is similar to our planet’s capacity for safely absorbing greenhouse gas emissions. Assume one person weighs 150 pounds and cannot lose any weight. The only way she could do so is by cutting off her arm, which weighs 10 pounds. For obvious reasons, this would be very inconvenient and messy. The second person weighs 140 pounds, and could easily lose 10. This person is also holding a 10 pound briefcase, so effectively weighs 160 pounds total. The easiest solution would be for this person to lose 10 pounds and then simply toss the briefcase out of the elevator to reach the weight limit. However, by suggesting that offsets be excluded from a cap-and-trade program we are essentially asking the first person to cut off their arm rather than simply asking the second person to get rid of their briefcase.

Figdor’s diet metaphor isn’t entirely flawed though: counting calories and counting carbon are in some ways surprisingly similar. For example, we might assume that a 100 calorie Snack Pack contains 100 calories exactly. In reality, however, food science is not that precise. Acknowledging this, the FDA requires food companies to regularly test their product to make sure the calorie content is within an acceptable margin of error of what is claimed on the label. So while on average, Snack Packs have 100 calories, your particular Snack Pack could have 95 calories, but it might also be packing 110! Since we don’t quite know in each individual case, the basic scientific concept of conservativeness is applied, and Kraft errs on the side of more snack packs having 95 calories so those on a diet don’t go over their limit. FDA oversight exists to prevent producers from cutting corners and make sure that the calories in the packs are what the company says they are.

The same theory applies to calculating how many credits an offset project should receive. In most cases we have advanced technologies such as continuous flow meters on site – the calibration certifications alone for meter efficacy in our projects have driven some of our team to drink!! – that must be installed at a project to monitor and record the key data points that create emission reductions. In many cases, emission reductions at a project site are probably recorded with more rigor than the calories in your snack pack, and in cases where there is some uncertainty, project developers are generally required to pick the most conservative number, to which a haircut is then applied. To make sure that corners aren’t being cut, third party verifiers (essentially like tax auditors) review all the details of the project to make sure no one is bluffing. Moral of the story? If your 100 calorie Snack Packs were monitored as strictly as your offsets, you might shed a few pounds and reduce your carbon footprint.


Aimee Barnes is senior manager of U.S. regulatory affairs at EcoSecurities, a company working to mitigate climate change through projects that reduce greenhouse gas emissions globally. Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities. The views expressed are their own and do not necessarily represent the view of EcoSecurities.

Barking up the Wrong Tree: Forests vs the CDM in the US Climate Debate

This past week, the Energy and Environment Subcommittee of the new US Congress held its first hearing on the use of offsets within a future carbon regime, presumably within the cap and trade variety of such a regime. As anybody should be able to surmise from reading my byline, my past blogs, or doing a quick Google search, this topic has some degree of importance to me—kind of like oxygen is a bit important to me. I am definitely getting to that age where starting a new career would be a pain.

As I’ve written elsewhere, it’s my firm belief that the US holds the future of the CDM—the international offset regime—in the palm of its hand. So last week when we got wind of the E&E hearing, and the fairly negative testimonies that were planned on the subject of the CDM, my team who tracks and works on these things (okay, she’s just a hyper-accomplished whirlwind who SEEMS like a team) sprang into action and in about 24 hours, managed to work together with four major trade associations to write a letter on the benefits of offsets to Congressman Markey, the Chair of the Committee. Don’t get me wrong, there is plenty about the CDM that needs work, and I would suspect that at least a few folks on its Executive Board would get a laugh out of the fact that I am out there loudly defending it to Democrats and Republicans on the Hill. But there’s a difference between standing up for a concept and noting serious concerns about its execution and underlying architecture.

Anyway, the hearing went off and, on the whole, went OK, but a theme emerged that is worth noting. It’s the issue of deforestation, and in particular, international tropical deforestation. Quite quickly, this issue seems to be becoming a focal point of interest for the U.S.—and this is a really good thing. Congress seems to have begun to grasp the notion that smoking the world’s forests at the rate of 36 football fields a minute is a really bad idea. Tropical forests were utterly screwed in Kyoto – enormous amounts of work was done in establishing them as a cost effective carbon mitigation mechanism, and then they were traded away in the negotiations like an old shoe in a game of strip poker. Pedro Moura Costa, my co-founder at EcoSecurities, has been quoted saying that taking tropical forest conservation out of Kyoto was the greatest environmental crime of the 20th century. I don’t disagree. This is the world’s preeminent trove of biological heritage we are talking about—not Russia’s unknowable and absurdly inflated emissions profile circa 1988.

So on the one hand, I’m glad that the U.S. has decided to “invent” the idea of using carbon markets to save the forests (now operating under the new and improved rebranding of REDD—reduced emissions from deforestation and degradation). But I am also increasingly concerned at the virulent (and dare I say, uninformed) opinion swirling through the D.C. corridors that the U.S. should simply abandon the CDM. And most of all, I am concerned about the apparent trend of the CDM being thrown under the proverbial bus in the interests of differentiating international forest carbon markets as somehow better, more untainted, or more of a U.S. invention. Among others, the US diplomat who led our negotiating team at Kyoto a dozen years ago apparently pretty much suggested as much at the hearing, seemingly to a nodding bunch of Congressmen. Apparently there is now a sense that the U.S. can “own” this part of the emission solution (having abdicated our leadership for the last 8 years following the Florida recount).

Excuse me, but I’ve seen this movie. I got into the carbon field some 16 years ago (yes, really) on the back of international tropical forestry deal flows that morphed out of the original debt-for-nature swaps. I BELIEVE in both the intrinsic and carbon value of tropical forests. I’ve had my passport stamped and my malaria prescriptions filled for far off corners of primary woodlands in places like Papua, Brazil, Malaysia, Thailand and Costa Rica. And the ethical concerns and technical questions that drove the stake through the heart of tropical forests in Kyoto negotiations have not gone away a decade of deforestation later. It’s just become 12 years more urgent that we get our act together and find a path to saving these incomparable assets.

At the same time, developing country emissions have also skyrocketed. China’s emissions are more than double what they were in 1997 and other developing countries are following similar trajectories. The CDM is starting to make a dent in that trajectory – China will be the world’s largest wind power generator soon enough – in part thanks to CDM incentives. Every year that we don’t give China and other developing countries some sense of incentive to continue that kind of changeover will result in embedding billions of dollars of long term higher emitting assets into their infrastructure and our atmosphere. Which means that chasing the forests at the expense of the CDM or similar financing mechanisms –even today – also has very severe potential consequences

So, it is imperative that we influence both forests and developing country emissions—a solution set that excludes one or the other and even has a shot at addressing climate change simply does not exist. The simplistic idea that one is good and the other is bad needs to be tossed in the dustbin. For critics to look at certain CDM projects and blithely claim they are not additional while advocating crediting for tens of millions of sequestration tons from standing tropical forests (where the change of an assumed deforestation rate by a single percent could easily mean the difference of hundreds of millions of dollars of value) is the height of hypocrisy. Both are good. Neither will ever be sufficiently precise to satisfy their most vociferous critics. Accepting some imprecision is fine – providing we use policy adaptations to mitigate the potential excesses of both (via discounting and conservative overall benchmarks) and create real processes to do so pro-actively and in response to real data.

Right now, the US alone emits about 7 billion tons of CO2e per year, about the same as China’s and roughly similar to the annual emissions rate from deforestation as well. The Obama proposal of reducing emissions 80% by 2050 would drop US emissions by more than 5 billion tons per year from current numbers. America will then ostensibly operate an economy twice its current size (assuming a 2% annual economic growth rate) on the emissions profile of its current automobile fleet. In those kinds of numbers, there is plenty of justification to load the shotgun with as much silver buckshot as we can lay our hands on to find emissions mitigation and sequestration in every corner we can. Savings us more emissions now to give us greater flexibility in the trajectory in the future can only be a good thing. And both a revamped CDM and a massive global forest protection regime need to be part of that. The US should not trade one for the other when we need both.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

Ruminations on Vegas and NASCAR

I spent two days last week overlapping the two of the least sustainable parts of the American experience – Las Vegas and NASCAR. Now I like a good Vegas juxtaposition as much as the next guy – heck, Fear and Loathing in Las Vegas was pretty much my sophomore year bible. But attending a clean energy exhibition in our southwest desert Gomorrah while the 8000 rpm, 500 hp travelling road show is roaring into town for the Shelby 427 – an homage to the biggest and baddest V8 engine block in the history of Detroit – is even a bit much for me to handle. .

Vegas and NASCAR are both about over the top fantasy, wanton consumerism and conspicuous consumption. Combining sound, noise, adrenaline and a hermetically closed environment keeps you from noticing that the overall sustainability of what you are involved in is somewhat akin to living in a power plant at the mouth of a Chinese coalmine.

But let’s be honest, the environmental footprint of these things is just boggling. According to NASA, Vegas is The Brightest Spot of Earth. Those lights – burning in conjunction with air conditioning more appropriate for a meat locker – illuminates people that primarily flew there from all over North America and beyond. Las Vegas’s direct carbon footprint is not as bad as it might be (as they have proudly issued press releases on), because it gets a huge percentage of its power from 70 year old Hoover dam, just down the road. But all you have to do is fly by it once at night and you’ll know that there are a lot of megawatts working extra hard just to keep the masses entranced with Celine Dion and Cirque de Soleil.

NASCAR is a lot tougher to find a silver lining in. Just to give you a sense of the ethos, NASCAR just manage to switch to unleaded fuel in 2008. NASCAR vehicles get about 4 miles to the gallon. What that means is the racers who finished the good old Shelby 427 each emitted about a ton of CO2 in their wake. In about three hours. I’m far from a carbon saint, but it takes me some 3-4 months of driving to put a ton up in the atmosphere (my flying habit is a different story). At the average NASCAR race, a huge percentage of the fans drive long distances to get there – generally driving big American trucks and house-on-wheels American RV’s. It’s no coincidence that when Toyota finally decided to make a full size trucks for the American market, the first thing they did was get themselves a real NASCAR team

No, this blog is not going down the sackcloth and ashes. The reality is that it’s going to take some time, effort and thinking to get homo americanus to stop taking energy, fossil fuels and the atmosphere completely for granted. People LIKE the stuff of Vegas and NASCAR – just as they liked smoking, driving without seatbelts and the purr of an engine running on full leaded gasoline. Heck, it’s not my thing, but I could feel myself falling into the indulgent trance walking the casino floor . So, just hoping that people learn to turn the lights off and install low flow showerheads a fool’s hope – a changeover has to be driven by some innovative thinking, some policy nuance and the liberal use of the bully pulpit. And then competition and, ergo, markets.

Which is where Vegas and NASCAR can become part of the solution, rather than the problem. Everybody who has ever seen a Hong Kong martial arts film – or opened a fortune cookie – knows that the Chinese symbol for danger is also that for opportunity. President Obama talks about infrastructure investing and technology development as keystones to resuming long-term prosperity. And therein lays the rub – what BETTER place to attack the US’s incorrigibly wasteful ways than these dual beating hearts of self-indulgent capitalism. Let’s be honest with ourselves – is another happy initiative from holier-than-thou bastions of Boulder, Berkeley or Austin or going create anything more replicable than another soy ink, recycled paper, press release?

And frankly, in regard to NASCAR at least, the Government has the upper hand. Remember, the American taxpayer pretty much owns the US auto industry these days. And let’s not forget that auto racing began as a way to demonstrate technology. Around the turn of the century when the Indy 500 was in its early years, gasoline was just one of a couple technology options out there – electric, diesels and even exothermic Stirling engines all wanted a piece of the pie – to be the transport technology of choice. Things like Indy showed the nascent consumer that these newfangled cars were safe, efficient and reliable.

So, as we hit the next inflection point in auto technology, how about President Obama sending his car emissary (reputedly Steve Rattner, ex-Quadrangle Group) go on down to the France (family) NASCAR empire, point out quite correctly that the entire petro-advertising complex they live on is at the end of its era and come up with a set of new rules for 2010 that will start the process of moving to hybrids, electrics, mixed fuels, etc. Give every team the energy equivalent of 25 gallons of gas (I’m flexible on the numbers – maybe ratchet down over a couple years) to go five hundred miles at speed and see how innovation blooms. Teslas, Chevy Volts, Fiskers, souped-up Prius’ – let a thousand flowers bloom under the hot lights of Talladega and Daytona. There will still be plenty of speed – my hybrid goes 0-60 in about 5 seconds and I don’t even have the tires quite inflated right. Put the car companies and the pit crew wizards on the task and I’ll guarantee you we’ll push clean transport innovation faster. And instead of being a Ford or Chevy fan, you can go with electric, hydrogen or hybrid. OK, maybe that’s pushing it a bit.

Vegas is all about light and action – and casino’s competing with each other for the best show, the hottest entertainer, the coolest restaurant. What a laboratory for mass energy efficiency, especially in lighting – a place to bring in LEDs en masse. We’re on the cusp of a global revolution in lighting – how about finding a policy structure to have all the casino’s compete to show who can do most with the least. Most Vegas casinos don’t even have the standard European or Asian system where you need a room key card to turn on the lights. The spectacles around the Wynn, Mirage, Bellagio and Venetian – just to name a few – are all energy hogs of extraordinary degree. They’ve gotten away with it to date, because it hasn’t mattered – to their bottom lines, to their engagement with customers and in their relationships to policy and the government. But that’s all changing quickly.

The potential is just beyond enormous – and as tight and focused a target market as you’ll find anywhere on the planet. Eighteen of the world’s twenty five largest hotels (by room count) are on the Las Vegas Strip, with a total of over 67,000 rooms without having to even make a single turn off Las Vegas Boulevard. For the city, imagine the follow-on effects of becoming the center for hotel/resort energy efficiency expertise.

People don’t necessarily want to change their ways of life and the way they get entertainment – at least not too much and not too fast. People will still want to see racing and they still will want to be dazzled by the distractions of a place like Vegas. But that doesn’t mean that we just sit in the stasis of the past – if we can create the excitement and verve of these kinds of experiences, but with a fraction the energy signature – well, that can’t be a bad thing. And if that occurs – well, to paraphrase the famous saying – hopefully what happens in Vegas won’t just stay in Vegas.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities.

The Hub Lab Seeks Revolutionary New Energy Science

Last Spring, our friend and colleague Dr. Ed Beardsworth undertook a new assignment as the Technology Director of the Hub Lab (in parallel with his continuing role at Jane Capital). Given the Hub Lab’s mission, and Ed’s role in the cleantech industry as the consummate technology scout since the mid 1990s before cleantech was cleantech, it’s probably a perfect fit. I sat down with Ed recently to get the background and an update about “Hub Lab”. And had a chance to wrap up our discussion into a brief interview.

Ed, Can you share some of your background? You’ve probably seen as much of the cleantech sector as anyone.

I have a PhD in physics from Rutgers and started at Brookhaven National Labs, eventually moving into energy systems modeling. I have consulted for Nth Power, Jane Capital, and the Cleantech Group, among others. For about 10 years I ran a multi-client energy technology study reporting on new technologies at universities, national labs and later venture backed startups. For that UFTO study (which is about 600 research notes now available on Cleantech.org), I had a who’s who of the top 20 or 30 US and global utilities as clients mainly in their R&D and venture capital groups. Before that I spent a number of years at EPRI in a variety of roles.

What is the Hub Lab all about?

Hub Lab’s express purpose is to find and support very early stage – revolutionary – energy science and technology that has the potential to make a huge game-changing difference. It is motivated by a strong belief that the planet is headed for serious trouble, and that we need to look for dramatic and wholesale changes in ways to meet rapidly growing worldwide demand for energy and resources.

How revolutionary is revolutionary?

We mean really revolutionary. We have a very specific focus to find and support true breakthroughs. The great preponderance of investment and RD&D addresses incremental or evolutionary innovation. We look for opportunities to improve the chances of finding “new physics”. We sometimes talk about looking for “the next nuclear”. Imagine, in the year 1900, someone talking about a nuclear power plant. We haven’t reached the “end of physics”, so it’s practically a given that there are big new things around the corner, whether it’s in 5 years or 50. Hub Lab simply wants to speed up the search. And we’re comfortable looking outside currently accepted thinking in science and engineering.

There can’t be much hope of a return on investment, at least in a traditional sense. What’s the thinking?

Hub Lab’s backers have extensive holdings in energy and cleantech through standard investment vehicles. Hub Lab is a special set-aside, not focused on financial return, but on trying to make a difference. We look for situations where some initial funding has the potential to advance work on a new idea to a point where a better decision can be made about further support. The only strings attached to our initial grants are there to give us a fair shot at participating in those later stages if we want to.

So who exactly is the funding behind Hub Lab, and what sizes of investments are you making?

We’re discreet about identifying Hub Lab’s backers until we start the conversation with someone we’d consider funding. It’s a high net worth /family office in Asia. Our approach is to start with a small R&D grant. This gives us a chance to get to know our grantee, and for them to make some technical progress.

What areas are you considering, or not considering?

As long as an idea addresses primary, base-load, power or electricity generation, we’re ready to listen. We’re open to cold fusion, ‘over-unity’ devices, vacuum or zero-point energy — I can see your eyes rolling — but we did say “new physics”. I should clarify that the term ‘over-unity’ is a misnomer. Any extra energy has to come from somewhere, but it may be from a process we weren’t previously aware of or taking into account.

A bit less far out, we also look at what we’re calling “warm” fusion. Note that there are already two venture backed companies in that category. The problem here is that the hot fusion establishment has been far too good at blocking competition for research funding. But I digress.

OK, I’ll bite – digress.

Well, we could have a whole separate discussion about fusion. “Warm” fusion is reasonably respectable in scientific circles but it just hasn’t been able to get support. As for cold fusion, just about everyone snickers at the mention of it, but they shouldn’t. Something very real is going on, even though is still unexplained and still hard to replicate. It should’ve gotten a much better reception from the scientific and government community than it did, and we’ll see who has the last word. Watch for some new developments very soon.

What other areas are fair game for Hub Lab?

A bit closer to the ground, we like storage, but it has to be “something completely different”, where the cost and performance can leapfrog existing or near term technology. Likewise, any kind of solid state heat to power technology, but again, it would have to promise of an order of magnitude improvement over existing thermoelectric devices.

I understand you’ve also identified areas that aren’t of interest?

We’re leaving all things biological (biomass, biofuels, etc.) to others. Also solar and wind — the intermittency issue– unless it’s an amazing breakthrough. Most things fossil are not for us, nor CO2 separation, unless it ends up other than as a gas to be piped underground.

What kind of deal flow are you seeing?

It’s been amazing. Just by putting out the word and networking quietly with the research and cleantech investor community, we’re seeing a great many opportunities. We ask VCs to send us those deals they wish they could pursue but can’t. Our quick introduction often includes the comment that we’re one group you can talk to about your perpetual motion story. (“We will listen!”) At the same time, there’s a sizable fringe population of folks with grandiose ideas, visions and paranoid delusions, and we try to avoid them by keeping a low profile (no web presence, for example). Separating wheat from chaff is the main challenge. We are finding serious established scientists who are pushing the boundaries–those are our best candidates. We’d also like to broaden our reach around the world, particularly in Eastern Europe.

You’ve funded several deals already. What can you tell us about them?

Our first one is a challenge to the second law of thermodynamics. It turns out, that while no violations have ever been observed (such claims thus far aren’t generally accepted), the second law is a bit murky theoretically, and one can imagine situations where it might not hold. Our scientists think they may be able to demonstrate the harvesting of useful work from ambient heat, but without a temperature difference. An experimental observation like that would be truly revolutionary.

Another project takes as a starting point the well established concepts of the energy in the vacuum, aka zero point energy, and the Casimir effect. An alternative formulation of quantum mechanics predicts that an atom placed in a nano-cavity will have its atomic properties altered, which further suggests a possible way to harvest zero point energy.

We can’t say much about two more projects. They both are completely different ways to do solar power conversion — with no semiconductors.

Are you having fun yet?

Nobody should be allowed to have this much fun, but I’m OK with it.

You can contact Ed at beardsworth@janecapital.com.

Neal Dikeman is Chairman & CEO of Carbonflow, a Partner at Jane Capital Partners, and Chairman of Cleantech.org. He is an Aggie, and resides in California.

Tree Planting as Carbon Offsets – Does Latitude Matter?

By David Niebauer

It’s hard to argue against any program that advocates the replanting of forests, or the avoidance of destroying forests in the first place. We all know from grade school science that, through a process called photosynthesis, trees “breathe in” carbon dioxide and “exhale” oxygen, generating the energy they need to grow from the sun. It is almost a miracle of symbiosis that human beings do just the opposite – we breathe in oxygen and exhale carbon dioxide. Humans and trees have evolved together since the dawn of man. We are inextricably linked in the web of life on earth.

As it turns out, though, we humans do more than just breathe. We excavate the compressed and fossilized remains of early carbon life forms and burn it for fuel and for other purposes, we domesticate large numbers of animals for food who expel tremendous amounts of methane gas, a potent hydrocarbon, and we manufacture other carbon-based gasses – all of which throw the earth’s carbon balance out of whack, causing our planet to warm “unnaturally”.

Carbon offsets are one way to begin to reverse this process, with the intent of gradually bringing the carbon cycle back into balance. A reduced carbon emission on one end of the scale “offsets” a continued carbon emission on the other end of the scale. It’s a little crude, and will certainly take time, but I believe it is a step in the right direction.

But should trees be eligible for this carbon-offsetting scheme? And in particular, should planting new trees (called reforestation or afforestation) be accounted for to offset global carbon emissions?

A study published some time ago by the Lawrence Livermore National Laboratory suggests that trees may not make the best offsets, or at least planting trees in certain locations on the planet may not achieve the desired global cooling. See Climate Effects of Global Land Cover Change, published September 6, 2005.

In the study, researchers from Lawrence Livermore National Laboratory and the Carnegie Institution Department of Global Ecology show that a phenomenon known as “albedo” will actually result in the warming of the planet if more trees are planted in non-equatorial latitudes. Albedo is a term used to describe the reflection of light (and heat) from the sun. As it turns out, the difference between open grassland and forest cover is significant when taking albedo into account. This difference is magnified when snow-cover is considered. A snowy field reflects the sun’s heat while a forest absorbs the heat. Planting trees in mid to high latitudes may actually speed up global warming.

As stated by the report’s authors in its conclusion: “ In terms of the absolute potential for temperature modification by land cover change, there appears to be much more potential for heating by reforestation (planting new trees) than cooling by carbon storage. This has important policy implications, since incentives for tree plantations in non-equatorial regions may produce the opposite effect to that desired.” [Emphasis added].

A more recent study by the same authors published in the Proceedings of the National Academy of Sciences (April 2007) analyzes the impact of their earlier findings on three latitude bands: 20 degrees South to 20 degrees North (“Tropical”); 20 – 50 degrees in both Northern and Southern Hemispheres (“Temperate”) and 50 – 90 degrees in the Northern Hemisphere (“Boreal”). Their conclusions are consistent with the earlier study: “Latitude-specific deforestation experiments indicate that afforestation projects in the tropics would be clearly beneficial in mitigating global-scale warming, but would be counterproductive if implemented at high latitudes and would offer only marginal benefits in temperate regions.”

Why do the voluntary forestry standards currently under development ignore this important research? I have reviewed the four most prominent voluntary forestry standards (Climate, Community and Biodiversity Standard (CCBS), CarbonFix Standard (CFS), Plan Vivo Systems and Standard, and the Voluntary Carbon Standard (VCS) Agriculture, Forestry and Other Land Use (AFOLU)), as well as the California Climate Action Registry’s Forest Project Protocol and, as best as I can tell, none makes a distinction for latitude zones. Am I missing something?

More on this later.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

An Address I’d Like to Hear

The Address on Climate Policy I’d Like from President Obama
July 2009

My fellow Americans:

When I took office six months ago, I made it clear that my highest priority would be addressing the financial crisis that overcame us in 2008. As you well know, all indicators now point to the beginning of a slow—but hopefully steady—return to a solid growth economy.

As complex as it has been to unravel the financial crisis, global climate and energy issues present an equal, if not greater challenge. For more than a century, our economy—like most economies around the world—has relied on fossil fuels to power our homes, our cars, and our livelihoods. Remember that our awareness of the issue has only truly crystallized over the past two decades, as scientists began to suspect that these activities might have long-term ramifications for our climate system here on Planet Earth. And after decades of intensive scientific research using increasingly sophisticated climate metrics, models, monitoring systems, and computing power, we know that there is a scientific consensus about our warming world, and we know that the debate is over.

We also know that we run a grave risk of making our planet a very different place from the one we know today, and in the worst of scenarios, one that is virtually uninhabitable by our children, and our children’s children. This is not something we can continue to speak about in the future tense—it is a present tense problem with immediate impacts that are already being felt by a growing percentage of species, including our own. Humankind, because of our remarkable ability to adapt and control our environment, may be able to stave off the worst of these impacts for some time. But some day in the not too distant future, we will inevitably begin to witness those changes already being felt by our fellow Americans in extreme environments like Alaska, at an unprecedented scope, scale, and speed.

This is an issue of staggering moral, political, technical and economic complexity. Our economy is predicated upon trillions of dollars of assets that emit fossil fuels—our cars, our power plants, our factories, and our homes. It will take decades to transform these carbon-based assets to the low and zero carbon equivalents that science tells us we need. My predecessors in the White House who faced this web of complexities appeared to hope that either a change in scientific consensus, or the emergence of miraculous technological solutions, would solve the problem. Unfortunately, the path will not be that easy.

That is why in the early days of my presidency, I ordered a full interagency review of what we could do as a country and a world leader to stabilize the global climate as a matter a national urgency. I am here to give the American people my first report on the direction I will set as President for the future, based on the results of that review.

For far too long, we have treated the atmosphere as an unlimited dumping ground for global warming pollution. Carbon dioxide from the use of fossil fuels—oil, coal and natural gas—has increased in the atmosphere more than 70% since the beginning of the industrial age and the growth is accelerating, not slowing. Therefore, as a first step, we need to find ways to limit this dumping. A strong first step is assigning a cost on this activity.

The two ways of doing that are to tax fuel according to its carbon content, or creating a market whereby companies must obtain a permit to emit and therefore have incentives to make reductions. We will use both taxes and markets, but we will do so in ways that are revenue neutral to the country. What people and companies pay to emit carbon will be adjusted for in incomes, taxes, and other costs. However, as we tighten our overall emission cap over the decades to come, it will be those that are the most carbon efficient who will flourish.

For markets, I propose a comprehensive cap-and-trade system on large scale emitters. At the program’s outset, we will distribute allowances to industry based on average historical emissions. Each year through 2030, the total amount of allowances provided by the program will decrease by one percent. After three years, we will begin auctioning a portion of the allowances each year—with that portion ratcheting up every year until we reach 100% auctioning in 2025.

Because we must also start pushing the technology curve of what is possible, the government will be supporting the development of a series of new climate friendly technologies. Just as the government helped incubate the internet for more than 20 years before it became a fixture of the American household, so must the government lead the charge in supporting clean coal technology, whereby the greenhouse gas pollutants are captured and piped back underground. The Department of Energy will also be ordered to fast-track approval for so-called small-scale “pebble” nuclear reactors, which can provide bountiful clean energy while avoiding the safety and waste disposal issues that plague our current nuclear fleet which was designed more than half a century ago. For our renewable energy development efforts, I am proposing to make the production tax credit for clean energy refundable, and to extend it for 20 years, so that manufacturers and developers can feel safe that this vital support is not going to be cut back at the whim of some future Congress.

And because the solutions are not “one-size-fits-all,” we must create incentives for small scale, distributed renewable energy resources that will make energy self-sufficiency and independence accessible for every American. Therefore, I propose a federal net metering law that would ensure small scale renewables like residential solar installations under 1MW receive retail prices from utilities for all the excess electricity they generate. Doing so will transform our rooftops from empty space to a useful source of power generation, and in so doing will alleviate the potential pressure being put on desert and other expansive landscapes from utility scale solar and wind installations.

As the transport of the future will be plug-in electric hybrids, we will need much more electricity—not less. This means that all our new electricity will need an electric grid that is built for the 21st century, not the 19th. My administration will build out new transmission lines that will bring the great wind resources of the upper Midwest and the tremendous solar power of the Southwest to markets where demand for energy is the greatest.I am ordering the Federal Electrical Regulatory Commission to work expediently to fast track smart grid development for zero-carbon energy resources – whether they are renewable, nuclear or clean coal.

Even with these changes, the process of progress will be a long one. Changing over the US infrastructure to a low carbon economy will take decades, not years. Understanding this, I am committed to taking those decades and to doing it right. Along the way, there are opportunities to reduce emissions beyond our borders that are comparatively cost-effective and which in many cases provide local benefits and export opportunities for our American products and technologies. Over the past five years, other countries have picked up on an idea pioneered by the United States, and created an investment process—the Clean Development Mechanism—to generate emission reductions in developing countries. It is possible to reduce emissions in certain developing countries for just a fraction of what it might cost in the United States, Europe or Japan, and these emissions have no different impact on the climate whether they are emitted in my father’s home country of Kenya, or my mother’s home state of Kansas.

Six months ago, I asked Secretary Clinton and Secretary Geithner to co-chair a task force on how the Clean Development Mechanism has worked, both for the environment and for business. Based on their findings, I am endorsing the use of this system to supplement our country’s emissions reduction commitment. Our endorsement is not a blank check – we believe that the system can be improved, and our negotiators to the global climate conference in Copenhagen in 6 months will be tasked to agree to its continuation on the condition that several significant reforms are agreed upon.

However, to support our position in the global discussions, I am pleased to announce today that we have reached a framework agreement with the government of China in this regard. China, as we all know, has become the world’s largest emitter of greenhouse gases, though on a per capita basis, it still take four Chinese to emit as much as a single American.

As part of this accord – negotiated by Secretary of State Clinton – the US and China will work together to jointly manage our future emissions trajectories. We will jointly remove all tariffs on greenhouse friendly technologies between our countries and China has agreed to protect American intellectual property on key technology developments that we export. China and the US will then jointly promote a global regime of zero tariffs of greenhouse friendly technologies, working through the WTO. China has agreed to take on initial caps in certain heavy emitting sectors in the next several years, while the US and China will jointly develop efficient protocols for creating large scale emission reductions though a revamped Clean Development Mechanism.

Deforestation in tropical countries contributes 20% of the carbon to the atmosphere that is currently contributing to global warming. Around the world, 36 football fields of untouched tropical forest are chopped down or burned every minute of the day. Many of these forests are felled for reasons that are economically irrational, particularly in light of the devastating amounts of carbon their destruction puts into the atmosphere. I am therefore supporting the protection of threatened tropical forests as a mechanism for the United States and other industrial countries to help meet aggressive emission reduction targets.

As a first step in this regard, I am pleased to announce that the United States has signed an agreement with the Government of Indonesia to try out some initial solutions to this problem. We are also actively engaging other governments in Asia, Latin America and Africa to make similar agreements. While these types of arrangements are not a substitute for transitioning to a low carbon economy, they can help buy us more time for the changeover and accomplish another enormous good at the same time. We are therefore strongly encouraging our counterparts in Europe, Japan, Canada, Korea and Australia to do the same.

The climate question is the defining challenge of not just our generation, but that of our children, grandchildren and great grandchildren. It is my hope that when my daughters Sasha and Malia are grandparents, they will be able to look around and realize that the thousands of changes that seemed so challenging today – both large and small – have built the engine of a new economy that put our species in greater harmony with God’s greatest creation.

Former Vice President Gore has often called the climate crisis a planetary emergency. America has never shied from a challenge and had always been best when leading the world with ideals behind which all countries rally. This is more than an ideal – it is an opportunity to create new businesses, to innovate around brilliant new ideas and to reorder the way that we do nearly everything. It will again be a time that we will be proud to say that we are Americans and we indeed changed the world for the better yet again.

Thank you, and God Bless America.

Marc Stuart is the Co-Founder and Director of New Business Development for EcoSecurities, a global carbon trading firm. The views expressed are his own and do not necessarily represent the view of EcoSecurities

San Francisco City Carbon Collobarative 18th and 19th February

Written by Karla BellgravatarcloseAuthor: Karla Bell Name: Karla Bell
Site: http://www.carbonflow.com
About: Pragmatic Environmentalist and Entrepreneur

A long time pragmatic environmentalist, Karla is probably best known as the driving force behind developing the Green aspect of the Olympics starting with the first Green Olympic Games in Sydney, while working for Greenpeace in the Atmosphere and Energy campaign. She has since been an advisor to both the public and private sector on green infrastructure and emissions trading, and has been a proponent of the need to bring transparency and automation to help scale emissions trading markets.

Born in Fiji, Karla holds an undergraduate degree from Macquarie University in Sydney and is a Senior Research Fellow at the Royal College of Art in London on Sustainable Development. Karla is a co-founder of Carbonflow, Inc dedicated to reducing the transaction costs and ensuring the transparency and environmental integrity of the global carbon credit market. Karla Bell is the Opinion writer and editor of The Greenhouse Gas Blog on GHGblog.com.See Authors Posts (57) on Sunday, 8 February 2009

The Office of Economic and Workforce Development for the city of San Francisco is sponsoring a Carbon Collaborative on February 18/19th 2009. The Carbon Collaborative will explore opportunities to accelerate local economic activity within emerging environmental markets. Key areas of focus for this initiative include
emissions trading, emissions reduction project development, project verification and certification, and climate policy. The purpose of this exploration is to identify opportunities that will further establish San Francisco as a dominant center of activity within the coming low-carbon economy.

For Further Information contact the City of San Francisco,

Office of Economic & Workforce
Development
City Hall, Room 436
1 Dr. Carlton B. Goodlett Place
San Francisco CA 94102

Review of Forestry Carbon Standards 2008

By David Niebauer

In an earlier article, I reviewed the issues and obstacles to generating carbon offsets through reducing emissions from deforestation and degradation (REDD) in a post 2012 global climate regime.

A recently published research paper written by Eduard Merger titled Forestry Carbon Standards 2008 (November 2008) reviews standards for forestry projects in the voluntary carbon market.

Merger compares four voluntary carbon offset standards for forestry projects that have emerged in the last few years and provides valuable information for both project developers and CO2 offset purchasers on the variations in the four standards. The standards compared are Climate, Community and Biodiversity Standard (CCBS), CarbonFix Standard (CFS), Plan Vivo Systems and Standard, and the Voluntary Carbon Standard (VCS) Agriculture, Forestry and Other Land Use (AFOLU).

As with the controversy surrounding REDD, significant issues exist affecting the forestry sector in general relating to the complexity of conducting carbon sink or sequestration activities on the land. The entire program has been beset with doubts over the integrity of carbon emissions reductions being generated, particularly over permanence, additionality and adverse non-carbon environmental impacts.

And while forestry projects have been met with skepticism in the European Union, legislators in the US appear to be more favorably disposed. The reason for this may be that, being the world’s largest polluter, the US will need a substantial supply of cheap credits – and forestry credits may be one of the few options available. See US Open to Forestry Offsets in Climate Fight.

Be that as it may, offsets from forestry projects appear likely to be included in any future global warming agreement. The voluntary standards being developed provide some guidance for legislators grappling with the complexities of making such a system work.

The Standards and What They Apply

Any buyer of CO2 offsets from a forestry project will want assurances that the project generating the offsets is additional (it goes beyond “business as usual”), that it is verified and monitored by an independent third party, that it is permanent and that the methodologies applied to the project are transparent. In addition, many buyers want to know that the project provides significant socio-economic and environmental benefits. Finally, a buyer will want the offset credits accounted for on a recognized registry and will want to pay a fair price. We will review these criteria by comparing how the various new voluntary standards address them.

Additionality

Additionality is a fundamental concept in all carbon offset projects. Essentially, for a project to be additional, funds from the sale of offsets generated by the project must be essential for the project to move forward. If this is not the case, the sale of offsets is merely providing enhanced financial return to the project developer.

All of the standards reviewed by Merger accept the A/R CDM additionality tool, a methodology adopted by the UNFCCC’s Clean Development Mechanism for afforestation and reforestation projects. Each standard also permits other methodologies developed by the standard body itself. Due to the importance of additionality, the methodology applied if not the A/R CDM additionality tool should be scrutinized carefully.

Verification

Verification actually encompasses a range of functions including validating the project (review of essential documents), validation, monitoring, accreditation of validating parties, issuance of carbon credits and registration. All of the standards apply a verification process that includes independent third-party verifiers. Such verifiers generally need to be approved, or accredited, by the standard body itself. Verifications also need to be conducted at regular intervals, usually between two and five years. The entire verification process through issuance of a carbon offset certificate can take anywhere from two to eighteen months.

The cost of verification ranges from $5,000 to $40,000, depending on the standard and the project being verified. In addition, most of the standards apply a charge per ton in the $0.30 – $0.50 range.

Socio-economic and Environmental Benefits

A claim made by forestry project developers is that forestry projects are able to generate carbon offsets with far more socio-economic and environmental co-benefits than other types of offset projects. This may well be the case. A project that regenerates a forest will provide jobs, biodiversity, recreational use and other benefits associated with living, growing trees. The same cannot be said for a methane capture project, for example, or the destruction of industrial gases – projects that also generate carbon offsets.

Of the four standards reviewed by Merger, only the VCS did not require a strong showing of socio-economic and environmental benefits. The VCS does require that project developers demonstrate that the project will not have negative impacts. The CCBS provides the highest co-benefit standard of the four standards reviewed.

Permanence

A forestry project’s permanence is arguably the most important factor in determining the climate potential of the project. Should a forest be damaged or destroyed, either by natural or human causes, not only does the forest cease to act as a carbon sink, it actually becomes a carbon source. Fire and tree rotting release CO2 into the atmosphere. A failure to ensure that a forest is permanent turns a climate change positive into a serious negative.

The primary means to address the risk of impermanence of all four standards is to mandate a risk buffer – a certain percentage of the offsets generated that are held back and subsequently retired in the event that a portion of the forest is damaged or destroyed. The percentage of offsets from a project that are required to be “held back” in a risk buffer vary from up to 60%, depending on the standard. The credits held in the risk buffer would be retired in the event the forest is damaged or destroyed.

None of the standards require insurance, per se, although the insurance industry has been reviewing forestry projects for some time. See Insurance industry on carbon stored in forests: “It’s a regulatory asset.” In the REDD Monitor. At least one insurance broker in London, ForestRE, formed in early 2008, will sell Lloyd’s policies insuring the permanence of forest projects. Should the number of credits generated from forestry projects increase, and especially if (when) they move into the regulated market, you can be sure a large percentage will carry financial insurance of some form.

Price Forecasts

Each standard provided Merger with 2009 price forecasts. The results are interesting (although certainly these estimates were provided prior to the global financial meltdown). The CCBS reported an expectation of “premium prices”; CFS, $14-27; Plan Vivo, $8-30 and VCS AFOLU $12-18 (per ton of carbon).

These prices look wildly optimistic given the battering taken by the European carbon markets of late. The price of a certified emission reduction (CER) credit dropped below 10 euros per ton in early February 2009. Voluntary credits tend to cost significantly less, although VERs generally seem to be fairing well, perhaps due to the new Obama presidency. See Global downturn hits carbon credits.

Conclusion

My prediction is that forestry projects will increase in number and significance in the coming years and will be included in a post 2012 climate regime. Although ensuring carbon sequestration in trees posses a number of significant issues, the importance of saving forests, especially in tropical jungles, combined with the large number of projects and credits that can be generated, point to increased attention on forestry projects. The voluntary forestry standards being promulgated will provide “best practices” guidance for regulators in a future global cap and trade scheme.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on clean energy and environmental technologies. www.niebauer.net.

A New "Green" Deal…Direction for the economic recovery plan

By Lisa Jacobson

President Barack Obama took office in January amid the worst economic crisis this nation has faced since the Great Depression. As unemployment rises and businesses struggle, Congress and the Administration must enact bold solutions suited to our times—not a New Deal, but a Green Deal.

A Green Deal would revive the economy by directing massive new investment into cleaner, more efficient and reliable energy infrastructure. It would call for the rapid and aggressive deployment of renewable energy, energy efficiency investments, a smarter energy grid and effective use of clean fossil fuels, such as natural gas.

In the short run, such investments would generate large numbers of high quality jobs in the clean energy sector, bolstering business suppliers, boosting consumer spending and lifting consumer confidence. Research conducted by the Apollo Alliance in conjunction with the non-partisan Perryman Group confirms that large but feasible investments in renewable energy and energy efficiency would add several million jobs over the next decade.

Long term, a Green Deal would help our nation meet growing demands for energy, reduce energy costs, and address the challenge of global warming by reducing greenhouse gas emissions.

Their analysis found that investments of $50 billion in renewable energy technologies could result in nearly 1 million new jobs; $76 billion invested in manufacturing of energy efficient durable goods would create over 900,000 new jobs; $90 billion directed to building energy efficiency would yield over 800,000 jobs; and $100 billion invested in public transit and transportation infrastructure would create over 650,000 new jobs.

In order to spawn additional jobs and stabilize the economy, Congress must support funding and incentives for:

· Building and business owners to invest in energy efficiency, renewable energy and efficient distributed generation systems
· Manufacturing facilities to re-tool using clean energy products and components
· States to invest in clean energy infrastructure and efficient transportation
· Investment in an improved, expanded and “smart” electricity transmission system
· Greater use of low emission vehicles, more efficient temperature control equipment and auxiliary power technologies to reduce idling in the transportation sector
· Workforce training and education relating to clean energy industries
· Improvements to the renewable energy tax incentives so they are able drive new renewable energy generation, given current economic conditions

In ordinary times, such a dramatic program to shift national priorities in favor of cleaner energy and a sustainable environment would face legitimate complaints about budget constraints and unwelcome deficits. But economists of almost every persuasion agree that now is the time to get the economy moving. Let’s turn this economic crisis into an opportunity to make a Green Deal with sustainable investments in a healthier, energy independent and more competitive nation.


Lisa Jacobson is the Executive Director of the Business Council for Sustainable Energy, a coalition of clean energy business and trade associations representing the energy efficiency, renewable energy and natural gas industries in the United States.

Peak Phosphorus – Commence Urine Recyling on Space Station Earth

First there was “Peak Oil’, then there was talk of ‘Peak Water’, but ‘Peak Phosphorus’, may trump them all as a sustainability issue without rival.

Fact: Phosphorus is a non-renewable resource for which there is no substitute.

Phosphorus is the currency of energy in every living cell. Our ability to provide enough food to feed the human population is dependent on the use of artificial fertilizers, which contain phosphorus. While nitrogen is abundant in the atmosphere (- it just takes lots of energy to capture it!), phosphorus is mined at just a handful of locations worldwide.

You can substitute renewable energy for oil and gas. But no other mineral can take the place of phosphorus. There is no substitute for water either, but the water cycle constantly provides us with ‘new’ fresh water, granted not always where we want it, when we want it and in the quantities in which we would like, but there is a fundamental recycling system there. And if you have enough energy, two thirds of the planet is covered in it and you can take the salt out of it. There is no such ‘re-cycling system’ with phosphorus and the natural resources which are limited are being depleted. The timing for Peak phosphorus may be 50 years out, or a hundred and fifty years, but as with peak oil, it’s not a question of if, but when. There has already been considerable volatility in Phosphorus markets in the past year, possibly related more to volatility in the energy market and this has trickled through into food prices.

Currently we mine it, use it and disperse it widely across the planet, much of it ending up in our rivers, lakes and oceans. Large portions of the earth’s oceans are now ‘dead zones’ and this is largely due to nutrient enrichment. It’s the classic example of too much of a good thing. When you see green lakes and algal blooms, this is nutrient enrichment.

Phosphorus was discovered in the 17th century by Alchemist’s trying to find the ‘Philosophers Stone, applied under peoples finger nails as a form of medieval torture, used in matches and explosives, and Post World War II its use in both pesticides and fertilizers has been hugely important in increasing global agricultural output. For an interesting treatise on the topic check out The 13th Element: The Sordid Tale of Murder, Fire, and Phosphorus.

The Clean Tech Opportunity
So where is the Clean Tech angle on this? It’s in Phosphorus recycling and phosphorus recovery technologies. There are a number of companies focused on developing technologies to extract phosphorus and produce fertilizer products. Sweden and Germany are leading the way on promoting phosphorus recycling. Sweden for example has mandated that 60% of phosphorus must be recovered at its wastewater treatment plants by 2015 and the UK is also promoting phosphorus recycling. Every municipal wastewater treatment plant is potentially a ‘phosphorus mine’. Agricultural and industrial waste streams are also potential ‘mines’.

The mining may also start in your own home with source separation of urine and solids. The basic idea is simple: urine accounts for only 1% of the total volume of wastewater, but it contains up to 80% of all the nutrients. If it is processed separately, wastewater treatment plants can be reduced in size, water protection can be improved, and nutrients can be recycled. The Europeans are certainly leading the way in this area, in Switzerland trials with NoMix toilets have been quite successful. Apparently the majority of the Swiss people interviewed said they had no problem with it, even the men, who had to sit down to spend a penny! It may sound more like something more likely to be used on the NASA Space Station, but then again, we’re all on a Space Station, just a slightly bigger more populated one.
Paul O’Callaghan is the founding CEO of the Clean Tech development consultancy O2 Environmental. Paul lectures on Sustainable Energy at the BC Institute of Technology. He is a Director with Ionic Water Technologies and an industry expert reviewer for Sustainable Development Technology Canada.

Being Dean Kamen

by Richard T. Stuebi

For a long time, I hadn’t heard much about Dean Kamen. He was last in the news, a lot, in 2001 when he unveiled the Segway.

You probably remember the Segway. Kamen was quoted in an article in Time upon the Segway’s release that it “will be to the car what the car was to the horse-and-buggy.” No less a force than Kleiner Perkins bought into the hype, making Segway one of its portfolio companies. The Segway hardly revolutionized transportation, and Kamen faded from view (at least from my view) for quite awhile. But, as recent reportage shows, Kamen clearly continues to think big, and is becoming increasingly visible again.

Kamen’s company DEKA Research and Development is now reported to be working on a car called the Revolt, a Think car modified to employ a hybrid-electric vehicle with a Stirling (in lieu of internal combustion) engine that can theoretically be powered by virtually anything that burns.

Meanwhile, Kamen is reported to be hosting visitors to North Dumpling Island, an island he owns off the coast of Connecticut, which he is turning into a showcase of how it’s possible to create a self-sufficient, zero-carbon economy.

Kamen must have tremendous self-confidence, to rebound from what surely must have been painfully discouraging — maybe even humiliating — in the Segway’s failure to achieve its claims, to now sticking his neck out yet again in such exposed ways.

If we are to make real progress on our energy and environmental challenges, especially in a world whose economies are in disarray, we will need courage — some might even say recklessness — from many bold thinkers and doers to overcome long odds and formidable obstacles.

So today, I offer a tip of the hat to Mr. Kamen. I admire his strength of vision. I don’t know that I’d necessarily invest my ever-dwindling personal capital in his ventures, but I hope for his sake and for the planet’s that he’s onto something more substantial this time than he was with the Segway seven years ago.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.