August 6th, 2010 by Michel Gelobter

The topline energy story of July 2010 was undoubtedly the failure of the Senate to pass energy or climate legislation.  But right below the surface the Federal government continues to increase its role as a market maker for a low-carbon, energy efficient economy.

First, it’s trying to transform itself.  In early July, the US Government issued formal guidelines for how it and its agencies are to account for greenhouse gasses.  From nitrogen trifluoride to enteric digestion (don’t ask!)  the Federal Energy Management Program published for the first time the rules which all federal agencies will need to follow to report their emissions by the beginning of next year.

What this means is that by January 5^th, 2011, all Federal agencies will have to have compiled and reported a complete greenhouse gas inventory.  Soon thereafter, they will have to lay out a roadmap for how they will cut energy use by 28% or more in the next nine years.  Cabinet secretaries have joined the ranks of more than 1,800 Fortune 2000 CEOs in sweating out an annual greenhouse gas report.

A second, more far-reaching initiative is afoot.  The Government Services Agency (GSA)  oversees almost all Federal procurement.  In July, they also published new greenhouse gas reporting guidelines, but these apply to more than 95% of government suppliers of goods and services.  So no new climate laws, but, if you want to do business with the Federal government, you’re on the hook for reductions more aggressive than any climate bill would have mandated.  And I’d guess that, building on clear Federal guidance, states and localities can’t be far behind in giving preferential treatment to suppliers that can prove that they’re carbon and energy efficient.

Between the battle for energy legislation and wildcards like the BP spill, 2010 has been far and away the most interesting year for energy policy in over 20 years.  The Obama Administration’s recent moves promise to keep all of us who serve or sell into the Federal market on our toes for years to come.

May 20th, 2010 by Michel Gelobter

In February, I wrote about how Q1 of 2010 could well be the most significant quarter from an energy perspective for a decade forward or back.  I figured how are you going to beat $8 billion in nuclear subsidies, climate legislation moving in both Houses of Congress, Supreme-court backed climate regulations from EPA, and a freshly minted Copenhagen Climate Accord?

Just when you thought it couldn’t get any more interesting, we find ourselves halfway through Q2 with one new Senate bill and two more anticipated to follow, along with an oil spill of historic proportion. Issues like immigration reform are somehow mixing in with the timing of energy policy, EPA loosened their reporting thresholds, and the nation is set for a soup-to-nuts revamping of mining and mineral regulation. Oh, and according to economists, fiscal policy is artificially inflating the price of fuels and other natural resources.

In some sense, the Kerry-Lieberman clean energy bill represents a snapshot of the conflicting forces at play. It encourages nuclear power and offshore drilling but also increases regulatory oversight and even local veto powers. It sets aggressive greenhouse gas reduction strategies but also gives key industries more time to comply. It sets a price on carbon emissions but makes that price much more sector specific.

It has been and will continue to be a tumultuous time to plan for energy. Everyone who uses energy needs to find a path that optimally reduces their exposure to this volatility and sets them on course for sustainable growth. But interesting times means there just may not be  “one true way” through the thicket of costs and risks.

In uncertain times, companies thrive through understanding their current situation, planning their moves, driving their plans, and innovating, innovating, innovating. They don’t wait for certainty because those outcomes are always lower than future you choose, the fate you actually aim for.

At Hara, we call this process Discover, Plan, Act, Innovate, and we build solutions that help whole companies and whole communities make sense out of the confusion that often surrounds energy and resources. We know that innovation can be hard and we work to serve the new communities that are forming, inside and outside of companies, to share solutions and to make new sense for the new energy economy.

So it looks like the “most important quarter” may end up being the most important year or three, like we’ll be making sense out of the confusion for quite some time to come.  And in the face of confusion, innovation is the only solution.

April 1st, 2010 by Michel Gelobter

Last week saw the quiet release of bi-partisan draft legislation sponsored by Senators Kerry (D – Massachusetts), Graham (R – South Carolina), and Lieberman (Independent – Connecticut), a.k.a. KGL. With health care finally off the table, the legislative agenda is opening up and there is a sense that, once again, climate legislation is possible this year.

To recap…the EPA is already starting to regulate greenhouse gasses under the Clean Air Act, a blunt instrument mostly because the Act was built to stop pollutants measured in parts-per-million rather than tons-per-year.  Greenhouse gasses can be reduced at a profit, but only if the Federal Government has the power to bring economic tools and incentives to bear as well. The House of Representatives has also passed legislation to stop global warming that relies heavily on cap-and-trade, or the creation of a emission permit system that would encourage trading and market mechanisms.

The KGL draft’s most striking feature is its repudiation of cap-and-trade in favor of a straightforward price on carbon, or climate pollution. The bill also takes a more sectoral approach, preferring to regulate industry sectors than the economy as a whole. At the end of the day, the bill requires cuts of 80% by 2050, but it’s not clear yet that it will have the regulatory teeth to reach that goal.

Who’dathunk? Just two weeks ago, climate legislation was pronounced dead. Yet here we are with the Senate back to starting down a bi-partisan path toward comprehensive energy and climate change action. Interesting times indeed…

April 1st, 2010 by Michel Gelobter

The greenhouse gas reduction targets for California are aggressive – the State means business when it comes to addressing global warming. The other aggressive part of California’s climate agenda are the timelines.

First, under California law (enacted by Assembly Bill 32 or AB32) there are a number of “early actions” that are already in effect, and some of them affect everyday commerce:

• Over 40,000 auto shops will soon be required to ensure that tires on the vehicles they service are properly inflated – a policy that could increase fuel efficiency by up to 20%.
• A limited set of high-impact consumer goods (certain air fresheners, pressurized gas dusters, and the like) and emissions/sales of high-impact gasses (Sulfur Hexafluoride – SF6 – a greenhouse gas almost 30,000 times more potent than CO2)
• Retailers must comply with a sort of “bottle bill” for refrigerants which makes them responsible for safely collecting refrigerant containers
•  Heavy-duty trucks are required to meet new fuel efficiency standards and large cargo boats need to plug in when docked to reduce the use of diesel engines in ports.

See arb.ca.gov/cc/ccea/ccea.htm for more details on AB32’s existing provisions.

AB32 is not the only game in town that’s driving action today. A slew of additional renewable energy/conservation requirements are helping to ensure that California will play a leading role nationally for renewables and efficiency. An anti-sprawl measure passed in 2008 (SB375) sets clear guidelines by which urban development will help cut emissions, and 2010 is the year California must meet a requirement that 20% of its electricity be generated from renewable sources.

All told, California has a lot going on when it comes to regulating climate pollution and energy use. As I hinted above, there’s a strong tradition of 12-14 Northeastern states (nescaum.org) following suit on almost everything that California does. So, whether you do business in California or not, get ready, cause its regulations are coming to a government near you.

March 17th, 2010 by Michel Gelobter

The last few weeks, I’ve covered a range of federal actions that are driving energy and carbon onto the business agenda. For all that action though, the real action is in the states, starting with California.

I had the privilege in 2002, of helping California legislators craft what has become the world’s most aggressive climate change law, the California Global Warming Solutions Act. The law is aggressive because it essentially mandates compliance, by all of California, with the Kyoto Protocol. This means reducing emissions back to 1990 levels by 2020 (a more than 15% decrease from emissions levels today and a 30% decrease from what emissions were expected to be absent the law). Although the law gives the state significant time, it also mandates reductions of up to 80% of 1990 emissions by 2050.

Reporting under the law has already started for sources larger than 25,000 tons and anyone in the state generating more than 1 MW of electricity. The regs here, like EPA’s, embody a whole host of calculation methodologies for power generation, refineries, cement plants, biomass conversion, and fuel use. If you have to report, you usually know who you are, but watch that pretty low power threshold. A lot of co-generation facilities are being subsumed under this rule.

The law’s major provisions kick in in just 2 years (2012). They are sweeping and involve:

· Substantially stepping up building and appliance efficiency standards;

· Getting the overall mix of energy up to 33 percent renewables;

· Developing a state-level cap-and-trade system;

· Controlling transportation related emissions, including a Low Carbon Fuel Standard; and

· Creating lasting revenue streams from fees for water use and other systemically large sources of greenhouse gas (pumping water accounts for 20% of California’s electricity use!)

All told, these measures represent a set of near-term changes and opportunities for business-as-usual in almost every sector. And the nature of the California law means that the changes will keep rolling out for the foreseeable future.

And did I mention that over a dozen Northeastern states are trying to opt-in to essentially just follow suit and adopt California’s program?

March 5th, 2010 by Michel Gelobter

Climate regulations have been cropping up and even implemented for quite a while in Europe, California, and some Northeastern states.  But the US federal government has been catching up fast and with it comes the kind of detailed attention to regulation the world’s leading environmental agency is famous for.

Check out the EPA’s “Mandatory Reporting of Greenhouse Gas Rule” often referred to as MRR. 300 pages long, and almost half of that are detailed specifications for how to calculate emissions from ammonia manufacturing to aluminum smelting.  And those details aren’t just about compliance…they can be a roadmap to efficiency because, unlike toxic pollutants, when you figure out how to optimally reduce climate pollution you’re usually also saving a lot of energy, materials, and money.

These rules were effective January 1, 2010, but we’ll be learning a lot more about how companies use them, which of many alternative approaches to reporting allowed are most efficient, and how many of the specific rules apply to any one given company or facility.

One thing that’s clear now is that software is going to play a big role in keeping track of the diverse types of emissions sources out there and all the ways you can calculate an industrial carbon, and for that matter energy footprint, under the regulations.  As supply chain tracking deepens, we’ll need to know how to account for those emissions not just at the source, but down the chain in finished products.  Comprehensive, real-time analysis will make it possible to grow production while driving down emissions and energy costs.  The big wins will accrue to those who’ve learned how to find patterns in the details.

Climate change is a big picture business.  But as regulation becomes real, the details come fast and furious.  That’s why an enterprise solution that provides companies with a comprehensive environmental and energy system of record, like Hara, is so necessary – enabling visibility and control of the details across stakeholders so you can focus on the big picture.

February 19th, 2010 by Michel Gelobter

I want to take a break from the details this week to talk about the big picture. Since the end of last summer, we’ve seen an ever accelerating set of activities by companies and by governments on the energy and global warming front. These have a lot to do with what I called “pincer actions” last week. 

Taking a step back, I want to make the case that, when it comes to America’s energy future, this particular quarter is likely to be the most important one for a decade in either direction.

Why? Take a look at a sampling of what’s going on in the US and the world:

• We’ve just concluded the first global warming summit where all the world’s major emitters came up with the first joint plan since the 1992 summit in Rio.
• Tens of billions of energy-oriented stimulus dollars are finally hitting the street in real dollars to real businesses and households.
• This is the first quarter of mandatory reporting under Federal clean air regulations for major carbon emitters.
• President Obama just released $8 billion in loan guarantees for new nuclear plants.
• There are at least three versions of Senate legislation aimed at curbing global warming and stimulating clean tech investments.
• The Securities and Exchange Commission just issued guidance that climate change really matters to investors.

And there’s much more to come in the next few weeks. 

There is bi-partisan consensus that America needs a new energy policy, and rumors that up to a dozen Republican senators are willing to consider climate change legislation.  At the same time, the Democrats no longer have a filibuster-proof majority and a number of bills and lawsuits have been filed to slow the EPA’s momentum in regulating carbon.  More than anything else, this twelve week period will be distinguished by the new rules of the road for energy and climate that will be laid down, or not. 

Two milestones will mark the end of this quarter – the 40^th anniversary of Earth Day, and the beginning of the silly-season of mid-term congressional elections. In the midst of great turmoil and great progress, which of these powerful forces will we remember ten years from now?

February 12th, 2010 by Michel Gelobter

Yes, there are national climate laws already…

The first of what I referred to last week as “pincer actions” are the EPA’s new climate regulations, some already in force and more even proposed.

How can the EPA regulate greenhouse gasses (GHGs) when the Congress has yet to pass a climate bill?  Well, in early 2007, the Supreme Court simply ruled that climate pollution met the threshold of the Clean Air Act, one of our country’s earliest and most powerful environmental laws.  This is the law that communities use to stop urban development when a region’s air quality is bad, and it underpins many, if not most, environmental impact challenges to new construction.

Effective January 1, 2010, EPA took the first of many steps under this ruling…EPA mandated reporting of GHGs from large facilities emitting 25,000 tons of greenhouse gases or more.  But it’s the next two steps that really count… EPA followed this new reporting rule with both an endangerment finding and a proposed rule regulating large emitters.

Of these two, the endangerment finding is most fundamental.  It lays the groundwork for a broad regulatory agenda based on the facts it establishes that greenhouse gasses are a threat to human health and welfare.

What does this all mean for your climate and energy agenda?

• If you’re one of the estimated 10-15,000 facilities that burn coal or emit more than 25,000 tons of CO2, start counting now.  You have to report your emissions for this year by March, 2011.
• If you depend for energy or supplies on one of these facilities, it’s worth considering that their price is going nowhere but up until we’ve stabilized global carbon emissions.
• If neither category above applies to you, now’s a great time to start taking stock of when and how your greenhouse gas profile is going to intersect with shareholder value and your broader organizational values.  Are you at a competitive advantage because you buy your power from a greener source?  Can you deepen your relationships with employees, customers, or investors by getting ahead of the regulatory curve on global warming? Many leading organizations are already taking action to manage carbon and energy in order to improve business efficiency (reduce cost), maximize brand and shareholder value, and manage risks.

The Supreme Court’s 2007 decision started the ball rolling inexorably towards greenhouse gas regulation.  The speed and direction of that regulation is still pretty uncertain, but for some it’s here already.  For the rest of us, it’s around the corner.

February 4th, 2010 by Michel Gelobter

Last week I was excited to write about new SEC guidance on how every company should disclose the risks and opportunities from climate change to their bottom line. But this is just one strategy that the Federal Government can and will be taking to promote climate action and reduce energy use whether or not Congress passes legislation.

It turns out that, if you believe the science of climate change, the Federal  Government (and anybody running it) can claim a mandate to take action under existing laws. The National Environmental Policy Act pushes every agency to include important environmental impacts in their decisions and activities. The Supreme Court ruled in 2007 that greenhouse gasses were a pollutant under the Clean Air Act, and therefore could be regulated aggressively. Late last week, the President signed an Executive Order mandating that federal operations reduce their carbon footprint by 28% by 2020.

The Obama Administration appears to be serious about getting greenhouse gasses under control, and they don’t appear to be shy about using all the legal tools in their arsenal to do so. There is widespread consensus that a climate-specific law would be the best way to achieve deep change, but until the political climate for that is ripe, we can expect aggressive use of all the tools at the Executive Branch’s disposal.

I like to call these steps “pincer actions” because, rather than taking climate head-on, they represent a multitude of angles (SEC disclosure, health risks, procurement, etc…) for closing in on a policy. And, like military pincer actions, they evoke a sense of inevitability and sometimes panic. Perhaps Senators Graham and Kerry said it best in a New York Times op-ed piece a few months back…

“The message to those who have stalled for years is clear: killing a Senate bill is not success; indeed, given the threat of agency regulation, those who have been content to make the legislative process grind to a halt would later come running to Congress in a panic to secure the kinds of incentives and investments we can pass today.” (Read more)

So what’s a company to do? First, don’t panic. Hara’s solution can help any company get on top of voluntary and non-voluntary disclosure requirements.

Second, thrive. Hara goes far beyond measurement and accounting to empower you to plan and innovate your way to big savings and increases in productivity.

Third, stay tuned to this blog. Over the next few weeks, I’ll be covering the elements of the Administration’s pincer strategy on climate one by one and explaining what they may mean for you or your supply chain. There’s a lot going on and we’ll be making sense of it right here.

January 27th, 2010 by Michel Gelobter

It’s official – investors need to know.

Today, the SEC approved and issued an “interpretive guidance” on climate change – basically guidelines on what publicly-traded companies must disclose to investors about climate-related “material” effects on business operations.

What we’ve seen at Hara tracks closely with the SEC’s ruling. No matter what business you’re in, the ability to manage and optimize your organizational metabolism  (the sum of the collective resources consumed and expended) matters to you. Energy and greenhouse gas management can present significant business challenges, whether responding to new regulation or driving sustainability initiatives across your value chain. Energy use and climate performance also offer unprecedented opportunities for cost savings and new lines of business driven by more efficient production.

It seems natural that investors would want to know about these bottom-line issues. The SEC’s action this morning makes it clear that, to ensure a level investment playing field, investors must be able to get clear and consistent information about these risks and opportunities.

Just over two weeks ago, I attended a meeting at the UN of the Investors’ Network on Climate Risk. There, investors from all over the world (and representing over $13 trillion in investments) called for just this sort of action. It was gratifying to see the people who fund growth in our economy joining with the great companies and government agencies Hara works with to drive sustainable corporate performance.

Our customers already know the many reasons climate and energy are material to the bottom-line. Today, with the world’s first economy-wide climate risk disclosure requirement, the SEC is making it clear that other companies and the investment community as a whole have to join the game.