California’s Greenhouse Gas Emissions Legislation (AB 32)

Compliance Strategies

JSEM Conference & ExhibitionColumbus, OH

Todd Haurin

24 – May - 2007

Greenhouse Gas (GHG) Greenhouse Gas (GHG) Regulations are hereRegulations are here

Bad News: You don’t have a choiceBad News: You don’t have a choice

Good News: Compliance will create coGood News: Compliance will create co--benefits…benefits…–– reduce waste (energy, materials & resources)reduce waste (energy, materials & resources)–– save money by lowering energy costs save money by lowering energy costs –– encourage technology improvements (energy efficiency encourage technology improvements (energy efficiency

& renewable energy) & renewable energy) →→ energy securityenergy security–– help sustain the DoD mission of protecting America.help sustain the DoD mission of protecting America.

The Science of The Science of Global Climate ChangeGlobal Climate Change

The 6 Greenhouse GasesThe 6 Greenhouse GasesCarbon Dioxide (COCarbon Dioxide (CO22))

–– Energy Sector, Fossil Fuel CombustionEnergy Sector, Fossil Fuel CombustionMethane (CHMethane (CH44) )

–– GWP = 23; agriculture, landfills,GWP = 23; agriculture, landfills,Nitrous Oxide(NNitrous Oxide(N22O) O)

–– GWP = 296; propellant, racing fuel, anesthetic GWP = 296; propellant, racing fuel, anesthetic Fluorinated GasesFluorinated Gases

–– Hydrofluorocarbons (HFC’s), Perfluorocarbons (PFC’s); Hydrofluorocarbons (HFC’s), Perfluorocarbons (PFC’s); GWP = 12 GWP = 12 –– 12,00012,000

Refrigerants, fire extinguishersRefrigerants, fire extinguishers–– Sulfur Hexafluoride (SFSulfur Hexafluoride (SF66) )

GWP = 22,2000; electrical industry circuit breakers, GWP = 22,2000; electrical industry circuit breakers, switch gear,switch gear,

The Science of The Science of Global Climate ChangeGlobal Climate Change

International Panel on Climate Change (IPCC) 4International Panel on Climate Change (IPCC) 4thth

Assessment ReportAssessment Report–– Atmospheric Carbon Dioxide (COAtmospheric Carbon Dioxide (CO22)) concentration concentration

280 parts per million (ppm) in 1750280 parts per million (ppm) in 1750379 ppm in 2005 379 ppm in 2005 2005 level exceeds the natural range over the last 650,000 2005 level exceeds the natural range over the last 650,000 years (180 to 300 ppm) years (180 to 300 ppm) Annual C02 increase ~ 3 ppm/yearAnnual C02 increase ~ 3 ppm/year

–– Overall GHG emissions have increased by 70% Overall GHG emissions have increased by 70% between 1970 and 2004. between 1970 and 2004.

–– 145% increase in GHG emissions from the energy supply 145% increase in GHG emissions from the energy supply sectorsector

A new global threatA new global threat

Warmer temperatures are melting the polar ice caps

Resulting in higher sea levels

More severe storms and floods

Action Taken Action Taken –– WorldwideWorldwide

Kyoto Protocol Kyoto Protocol –– 5.2% below 1990 levels 5.2% below 1990 levels from 2008 from 2008 -- 20122012

Action Taken Action Taken –– Regional U.S.Regional U.S.

Regional Greenhouse Regional Greenhouse Gas Initiative (RGGI) Gas Initiative (RGGI) ––••MultiMulti--state cap and trade state cap and trade program.program.

••Stabilize emissions from Stabilize emissions from 2009 to 20152009 to 2015••10% reduction from 2015 10% reduction from 2015 –– 2019 baseline2019 baseline

What is CA doing about Climate What is CA doing about Climate Change? Change?

AB 32 AB 32 -- The CA Global Warming The CA Global Warming Solutions Act of 2006Solutions Act of 2006

Regulated by CARB Regulated by CARB Target to reduce the state’s GHG emissions to 1990 Target to reduce the state’s GHG emissions to 1990 levels by 2020levels by 2020Market Based Strategies (Cap and Trade System)Market Based Strategies (Cap and Trade System)–– CA’s 1990 GHG baseline in Million Metric Tons of Carbon CA’s 1990 GHG baseline in Million Metric Tons of Carbon

Dioxide equivalent (MMTCODioxide equivalent (MMTCO22e) = 145 MMTCOe) = 145 MMTCO22ee–– ~ 25% reduction from current state levels~ 25% reduction from current state levels

The real world equivalent of taking over 26 M cars off the The real world equivalent of taking over 26 M cars off the road!road!

California Air Resources Board California Air Resources Board Timeline for AB 32Timeline for AB 32

Adopt regulations requiring annual Adopt regulations requiring annual reporting and verification of statewide reporting and verification of statewide greenhouse gas emissionsgreenhouse gas emissions

Approve plan to achieve maximum emission reductions Approve plan to achieve maximum emission reductions by 2020 via regulations, market mechanisms, and other by 2020 via regulations, market mechanisms, and other actions, including a actions, including a dede minimusminimus exemptionexemption

Adopt greenhouse gas emissions Adopt greenhouse gas emissions limits and reduction measureslimits and reduction measures

Mandatory greenhouse gas emissions Mandatory greenhouse gas emissions reductions become operative reductions become operative

1 / 1 / 081 / 1 / 08 1 / 1 / 091 / 1 / 09 1 / 1 / 111 / 1 / 11 1 / 1 / 121 / 1 / 12

Significant sources Significant sources potentially regulated under AB 32:potentially regulated under AB 32:

Power PlantsPower PlantsLandfillsOil Extraction Oil Extraction

and Refineriesand Refineries

AB 32 Discrete AB 32 Discrete EarlyEarly Action AreasAction Areas

Low Carbon Fuels – UC Davis ITS Study

Landfill Methane Capture

HFC Automobile Refrigerant Ban

GHG’s can be Assets GHG’s can be Assets not not LiabilitiesLiabilities

MarketMarket--based: Carbon capital based: Carbon capital is the new marketis the new market

European Union European Union →→ ETS ~ ETS ~ €1.2/ metric tonne of CO€1.2/ metric tonne of CO2 2 as of March 2007as of March 2007–– Has fluctuated greatly; opened at Has fluctuated greatly; opened at €30/ metric tonne €30/ metric tonne –– Current low price blamed on allowance market floodingCurrent low price blamed on allowance market floodingU.S. U.S. →→ CCX ~$4/Carbon Financial Instrument CCX ~$4/Carbon Financial Instrument as of April 2007as of April 2007

1 CFI = 1 metric ton of CO1 CFI = 1 metric ton of CO22Historically ranged b/t $5 Historically ranged b/t $5 -- $1/CFI$1/CFIExpected to rise if integrated with pending regional and Expected to rise if integrated with pending regional and state cap and trade programsstate cap and trade programs

AB 32 Reduction Targets vs. other GHG AB 32 Reduction Targets vs. other GHG Emissions Reduction ProgramsEmissions Reduction Programs

Kyoto Protocol: 162 countriesKyoto Protocol: 162 countries–– Scope: All emission sources from all sectors Scope: All emission sources from all sectors –– Voluntary Action (U.S. & Australia never ratified) Voluntary Action (U.S. & Australia never ratified) –– 5.2% below 1990 levels from 2008 5.2% below 1990 levels from 2008 –– 20122012

RGGI: 10 StatesRGGI: 10 States–– Scope: Only targeting Power PlantsScope: Only targeting Power Plants–– Mandatory requirementMandatory requirement–– Stabilize emissions from 2009 to 2015Stabilize emissions from 2009 to 2015–– 10% reduction from 2009 10% reduction from 2009 -- 2015 stabilized levels by 20192015 stabilized levels by 2019

How will AB 32 affect DoD How will AB 32 affect DoD Installations in CA?Installations in CA?

Region IX Region IX DoDDoD Regional Environmental Regional Environmental Coordinator is attending all public hearings in Coordinator is attending all public hearings in Sacramento to participate in the Rule Making Sacramento to participate in the Rule Making ProcessProcess–– Technical Working GroupsTechnical Working Groups–– Market Advisory BoardMarket Advisory Board–– Baseline Inventory ReviewsBaseline Inventory Reviews

GHG Emission Sources on DoD Installations GHG Emission Sources on DoD Installations Potentially Regulated by AB 32Potentially Regulated by AB 32

Boilers

Generator Sets

Portable Generators

Power Plants

AB 32 Compliance: AB 32 Compliance: Strategies to reduce GHG’sStrategies to reduce GHG’s

An effective GHG reduction plan will adhere to the An effective GHG reduction plan will adhere to the following: following: –– Low Cost to High Cost ProjectsLow Cost to High Cost Projects–– Reinvestment of cash flow from past and current Reinvestment of cash flow from past and current

projects into future higher capital cost projectsprojects into future higher capital cost projects–– Phase out of old equipment and vehicles with new more Phase out of old equipment and vehicles with new more

efficient and alternative fuel technologyefficient and alternative fuel technology–– Utilizing Green Building Design for future constructionUtilizing Green Building Design for future construction–– Lighting retrofits and HVAC upgradesLighting retrofits and HVAC upgrades

UCSB UCSB -- AB 32 Compliance ScheduleAB 32 Compliance ScheduleYearYearStageStage

MechanismsMechanisms PotentialPotentialMT/yearMT/year

Capital CostCapital Cost NPV/MTNPV/MT AnnualAnnualSavingSaving

ASAPASAPStage Stage

AA

Energy star computer settingsEnergy star computer settingsFleet smaller vehiclesFleet smaller vehiclesFleet ethanolFleet ethanol

3103103333

11

$0$0$0$0$0$0

196196215215

$94,000$94,000$9,545$9,545

245245241241196196156156127127

1251259797

42421111

--1111

$0$0

20112011Stage Stage

BB

HVAC Upgrade HVAC Upgrade –– Air Handlers 1Air Handlers 1HVAC CommissioningHVAC CommissioningHVAC Upgrade HVAC Upgrade –– Filters Filters EE EE –– Fume HoodsFume HoodsBuilding baseline awardsBuilding baseline awards

57357334034060760755551414

$200,000$200,000$120,000$120,000$372,323$372,323$80,000$80,000$15,000$15,000

$112,000$112,000$71,159$71,159

$184,053$184,053$14,298$14,298

$4385$4385

20122012Stage Stage

CC

HVAC Upgrade HVAC Upgrade –– Fans Fans Lighting UpgradesLighting Upgrades

914914835835

$1,574,464$1,574,464$1,797,762$1,797,762

$277,048$277,048$252,919$252,919

20132013Stage Stage

D D

HVAC Upgrade HVAC Upgrade –– Air Handlers 2Air Handlers 2Reduce fleet driving Reduce fleet driving –– bikesbikesBegin purchasing offsetsBegin purchasing offsets

17417411

763763

$550,000$550,000$2500$2500$8,091$8,091

$45,328$45,328$27$27$0$0

Cash Flow Analysis - California Targets

-$4

-$3

-$2

-$1

$0

$1

$2

$3

$4

$5

$6

2005 2007 2009 2011 2013 2015 2017 2019

Mill

ions

Year Cumulative Cash Flow Annual Costs Annual Savings

Energy Star Ethanol

HVAC Upgrade – Air Handlers (1)HVAC CommissioningHVAC Upgrade – Filters EE – Fume HoodsBuilding baseline awards HVAC Upgrade – Fans

Lighting Upgrades

HVAC Upgrade – Air Handlers (2)Reduce fleet driving – bikesBegin purchasing offsetsOffset Remaining Emissions

$5 Million Saved by 2020

Policy to Reach California Targets Policy to Reach California Targets –– Cash FlowCash Flow

A

BC

D

USAF Space and Missile USAF Space and Missile Systems CenterSystems Center

11stst and only DoD Installation in CA to join the and only DoD Installation in CA to join the CA Climate Action Registry (2005)CA Climate Action Registry (2005)Eligible for early adoption status under AB 32Eligible for early adoption status under AB 32Currently looking at many GHG Mitigation Currently looking at many GHG Mitigation StrategiesStrategies–– Alternative FuelsAlternative Fuels–– On site renewable sources On site renewable sources –– Energy ConservationEnergy Conservation

Possible Federal GHG RegulationPossible Federal GHG Regulation

Supreme Court Ruling Supreme Court Ruling –– Mass v. EPAMass v. EPA–– EPA has the right to regulate carbon dioxide as EPA has the right to regulate carbon dioxide as

a pollutant under the Clean Air Act.a pollutant under the Clean Air Act.–– CO2 may be regulated just the like the other CO2 may be regulated just the like the other

criteria pollutants of the Federal Clean Air Actcriteria pollutants of the Federal Clean Air ActNOxNOxSOxSOx

U.S. Air Pollution Legislation U.S. Air Pollution Legislation --Who Regulates Whom?Who Regulates Whom?

Congress, Congress, Washington DCWashington DC

U.S. EnvironmentalU.S. EnvironmentalProtection Agency Protection Agency (U.S. EPA)(U.S. EPA)

California Air Resources Board (CARB)California Air Resources Board (CARB)

Federal Air Quality Act of 1967Federal Air Quality Act of 1967 (CA CA waiver for more stringent controls)waiver for more stringent controls)CA Clean Air Act Amendments of 1988CA Clean Air Act Amendments of 1988

California Environmental California Environmental Protection Agency (Cal/EPA)Protection Agency (Cal/EPA)Sacramento, CASacramento, CA

California State LegislatureCalifornia State LegislatureSacramento, CASacramento, CA

FederalFederal--Air Pollution Air Pollution Control Act [1955]Control Act [1955]--Clean Air Act (CAA) Clean Air Act (CAA) --[1963; 1970; 1990][1963; 1970; 1990]

The Bottom LineThe Bottom LineCompliance Strategies for DoDCompliance Strategies for DoD–– Baseline Inventory by end of 2007Baseline Inventory by end of 2007

Attain Early Adoption Status Attain Early Adoption Status

–– Energy AuditEnergy Audit–– Develop GHG Emissions Reduction ScheduleDevelop GHG Emissions Reduction Schedule

No Cost/Low Cost No Cost/Low Cost →→ High Cost ProjectsHigh Cost Projects–– Identify “Low Hanging Fruit “ Identify “Low Hanging Fruit “ –– Options will include a mix of high & low tech strategiesOptions will include a mix of high & low tech strategies

Purchase Offset Allowance for Remaining EmissionsPurchase Offset Allowance for Remaining Emissions

→→

Greenhouse Gas emissions Greenhouse Gas emissions reductions make $ense!!reductions make $ense!!

Compliance = Energy + Money Saving ActionsCompliance = Energy + Money Saving Actions

Infrastructure retrofits and efficiency upgradesInfrastructure retrofits and efficiency upgradesConservation Measures Conservation Measures New and better Technology ImprovementsNew and better Technology ImprovementsSustains the missionSustains the missionLessened Dependency on Foreign FuelLessened Dependency on Foreign Fuel

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Questions?Questions?Todd HaurinTodd HaurinGHG Compliance SpecialistGHG Compliance SpecialistTodd.haurin@mTodd.haurin@m--e.aecom.come.aecom.com805805--938938--83818381