The House Passes Climate Change Legislation
Friday June 26 was an historic day as the US House of Representatives passed landmark legislation regulating the release of Greenhouse Gases (GHG). The US is the last industrialized, developed country to address regulating these gases and was only recently overtaken by China as the largest GHG emitter in the world. Though there is a long path for the bill to reach the President’s desk, the hand writing is on the wall and soon we will have Federal regulation of GHGs in the United States. This legislation may impact companies in three primary areas.
Power Prices/CO2e Emissions – Facilities that emit greater than 25,000 tonnes per year of carbon will be regulated. Typical companies impacted are electrical generators, refineries, chemical, metal, and cement plants. Companies below this level will be affected by increased costs for products produced by these facilities. Power is projected to increase between 7 – 15% based on the final signed legislation. Natural gas prices will likely increase as power utilities switch from coal and increase gas demand.
Energy Efficiency Incentives and Renewable Energy – New standards will be mandated to increase the efficiency of commercial facilities, appliances, and industrial facilities. Buildings will cost more to construct but be less expensive to operate. Power utilities must have 20% of their electricity demand met by a combination of energy efficiency and renewable energy by 2020. These utilities will look to energy efficiency improvements by their customers to meet their compliance requirements. There will be a greater emphasis on water conservation and promoting the use of ENERGY STAR® tools, standards, and programs. Potential opportunities for companies include capturing Federal and State level incentives for energy and water conservation and to garner and trade energy efficiency credits, known as White Tags. On the renewable energy front, there are potential opportunities for small-scale, on-site renewable energy projects for companies with utility, State and Federal incentives that will lower your annual power costs and provide you with the opportunity to supply “green” products to your customers.
Revenue Opportunities with Sellable Credits – A byproduct of the legislation will be the creation of a robust market for carbon offsets, energy efficiency credits (White Tags) and renewable energy certificates (RECs). Companies that are not required to reduce their carbon emissions will have the opportunity to reduce their carbon emissions, register and verify those reductions, and then sell those reductions into the market place to those companies who have a regulated requirement to reduce their emissions. As a result, an additional cash stream may become available to those companies reducing their emissions. This potential cash stream is also available to companies who undertake qualified energy efficiency improvements and then register and verify those reductions. In the renewable energy area, on-site projects will create tradable RECs, which can produce a cash stream to help offset the cost of the renewable energy project. These on-site projects have the opportunity to insulate owners from the rising cost of grid power while at the same time providing a known future cost of power.
Overall, the legislation is designed to reduce the US carbon emissions by 17% (from 2005 levels) by 2020. Some critics say this is not enough of a reduction while others say it’s too much. In either case, the legislation creates winners and losers, increased costs and cost saving opportunities. There will be companies who will do nothing to impact their position. Many companies will seize this as an opportunity to reduce costs and create a competitive advantage for themselves. What will you do?
Click here to review the details of the bill.
To speak with one of our Sustainability Product Managers call 1-800-791-7564.